Contact Energy profits fall 50pc to $117m

Contact Energy's Clyde Dam on the Clutha River. Photo / Stephen Russell.

Contact Energy has reported a 50.4 per cent fall in full year net profit to $117.5 million, hurt by transmission constraints and the need to buy electricity at high wholesale prices in last winter's drought.

Underlying earnings after tax for the 12 months to the end of June were down 31 per cent to $160.6m, while earnings before net interest expense, income tax, depreciation, amortisation, financial instruments and other significant items (ebitdaf) fell 21.5 per cent to $445.3m.

Operating revenue was down 19.4 per cent to $2.22 billion.

Contact managing director David Baldwin today said the extreme weather events which affected the business in July and August 2008 were not expected to recur in the 2010 financial year, given current hydrological conditions.

"However, wholesale prices are currently below both the variable costs of operating thermal plant, and the price required to support investment in new generation," he said.

"In addition, current economic conditions are expected to continue to dampen demand growth and, consequently, tariff movements."

With the range of market and operating uncertainties, it was not appropriate to provide quantitative guidance for the 2010 full year financial performance now.

An unchanged final dividend of 17c per share is to be paid, with Mr Baldwin saying the decision to maintain the distribution level was based on the expectation that the company's financial performance would return to normal trends.

But he also warned, "any reoccurrence of extreme hydrology, transmission constraints, adverse government policy changes, or a prolonging of the recession could impact Contact's financial performance in the near-to-medium term".

"To the extent such impacts do occur, the company would be unlikely to maintain distributions at this year's level."

- NZPA