Contact Energy posts $276m profit on back of asset sales

Contact Energy has pulled in a big profit, following the asset sales. Photo/Getty Images.

Contact Energy, the country's second-largest electricity retailer, increased first-half profit five-fold on the sale of its Ahuroa gas storage and LPG business last year.

Net profit rose to $276 million for the six months ended December 31, from $58 million a year earlier, boosted by a $172 million gain from the asset sales.

Earnings before interest, tax, depreciation, amortisation and changes in financial instruments from Contact's remaining businesses rose to $278 million, from $217 million a year earlier.

The company, which has simplified its business to improve its retail and generation margins, generated 4,532 GWh of electricity in the six months, almost 5 per cent more than a year earlier.

A 25 per cent jump in hydro output from its Clyde and Roxburgh dams enabled the firm to benefit from record wholesale prices in October and November when gas supplies were tight and storage was low in the Waitaki hydro catchment of rival Meridian Energy. That saw generation ebitdaf increase by $58 million to $243 million.

"In addition, as gas supply reduced, Contact supported the market by accessing gas stored in AGS and offering additional thermal generation above our contracted sales to meet wholesale spot demand," chief executive Dennis Barnes said.

Customer ebitdaf increased by $3 million to $48 million.

Wellington-based Contact is working hard to maximise the value of its activities as new retailers chip away at the customer bases of the major players.

It sold its Ahuroa gas storage facility and its Rockgas LPG distribution business to free up capital, simplify its operations and reduce its retail exposure to international LPG prices.

It has reduced its operating and stay-in-business capital costs by almost $50 million during the past two years and is aiming for a further $18 million reduction in the current year.

Today, Contact said its spending on stay-in-business capital fell by $6 million in the latest period, while other operating costs were down by $4 million.

The company said its confidence in its renewable asset base and the strength of its balance sheet has allowed it to change its distribution policy to 100 per cent of operating free cash flow.

It now expects to pay a full-year dividend of 39 cents per share, up from 32 cents a year earlier. It will pay a 16 cent interim dividend on April 9, up from 13 cents a year earlier.

Contact shares ended last week at $6.22 and have gained about 16 per cent in the last 12 months.

- BusinessDesk