Contact Energy lifts dividends as profits rise

Contact Energy's Clyde Dam. The company, controlled by Australia's Origin Energy - has just reported good earnings and an increased dividend. Photo / NZ Herald

Contact Energy, the power company controlled by Origin Energy, increased annual profit before one-time items as it reduced reliance on contracted gas, allowing it to increase its dividend.

Earnings before interest, tax, depreciation, amortisation and changes in fair value instruments were $541 million in the year ended June 30, up 6 per cent on the previous year, the Wellington-based company said in a statement.

Net profit of $199 million was slightly above First NZ Capital's expectation of $191.7 million.

"Contact's performance for the year has been characterised by the continued reduction in energy procurement costs and focus on retail operating performance in what remains an oversupplied and highly competitive market," chief executive Dennis Barnes said.

The company increased its final dividend by two cents a share to 14 cents a share to be paid on September 16. It is paying out 92 per cent of underlying earnings after tax. The total dividend for the year is 25 cents a share.

The company said investment in a flexible generation portfolio has reduced its reliance on large volumes of contracted gas.

It is driving on with a strategy of reducing energy procurement costs and says the completion of the Te Mihi power station will help.

"The investments in gas storage and flexible generation, coupled with the reduction in gas purchase obligations, have enabled Contact to better manage and respond to the inherent volatility of hydro generation output in New Zealand," Barnes said.

Commenting on the outlook, Barnes said the company will continue to progress in its transition from a focus on asset delivery to increasing value to customers.

Contact's revenue fell to $2.5 billion from $2.68 billion.

The shares gained 1.9 per cent today to $5.30., and have gained 1.9 per cent in the past 12 months, lagging behind the NZX 50 Index's 11 per cent gain. The stock is rated a 'buy' based on a Reuters survey.