Contact Energy shares down despite profit jump

12.40pm

UPDATE - Contact Energy's share price fell this morning, despite the energy retailer and generator announcing a 63 per cent boost to net profit.

Contact's shares were down 11 cents at 11.30am to $5.80. The shares have traded between $4.22 and $5.91 over the past 12 months.

The company posted a half year net profit of $55.3 million, up 63 per cent from the $34 million npat for the same period the previous year.

Earnings before interest, taxation, depreciation and amortisation (ebitda) for the first half was up 36 per cent to $190.2 million.

The result translated to earnings per share of 9.59 cents.

Shareholders will receive a fully imputed interim dividend of 7 cents per share, up from 5.5cps, on May 28.

ABN Amro Craig's Matt Willis said Contact's result was in line with market expectations and said the share price fall seemed to be a case of bad timing.

"It's probably just unfortunate that it's coincided with an interest rate review, because at the long end of the curve it is a stock that is sensitive to interest rates, there's no two ways about it," Mr Willis said.

The Reserve Bank of New Zealand today raised rates by 0.25 percentage point to 5.5 per cent.

Mr Willis said the latest rate hike was not likely to have a material impact on the company's earnings in the medium to long term.

Contact also announced plans to expand its retail electricity services to cover the entire country, up from its current 90 per cent coverage.

Chief executive Steve Barrett said the company was looking to roll out services to the King Country, Bay of Plenty, Marlborough, Waipa, Wairoa, Buller Westland and southern and central Hawke's Bay over the coming months.

"We feel there is an interest in ensuring there is competition around New Zealand and we would like to contribute to ensuring that all New Zealanders do have a choice," Mr Barrett said.

Contact's electricity customers fell to 513,000 during the half year, from 522,000 customers at the start of the period.

But levels were up from the 479,000 customers recorded during the same period the year earlier.

Contact is also moving forward with plans to launch a retail electricity business in Victoria, Australia.

Contact now has a licence to operate as an electricity retailer in Victoria and plans to launch its new business within the next six months.

Although reiterating Contact's interest in further expanding in Australia, Mr Barrett ruled out chasing any potential acquisition opportunities that could arise from Edison Mission Energy (EME) divesting its Asia-Pacific assets.

Mr Barrett was not able to shed any light on how EME plans to proceed with the sale of its 51 per cent stake in Contact.

"We don't know who EME is working with in terms of their potential bidders. That's confidential to EME and they have not shared that information with us, so we are on about business as usual," Mr Barrett said.

Contact is one of the country's largest gas users. Mr Barrett said that discussions between Maui Mining Companies, the government and contracted gas users are continuing, in an effort to define arrangements for the sale of the remaining Maui gas reserves, which are tipped to run out around 2007.

In an effort to source future supplies, Contact is also to contribute $20 million to establish a fund with Mighty River Power to accelerate gas exploration in New Zealand.

Total electricity revenue rose to $491.5 million, up from $387.7 million.

Contact's wholesale gas revenue fell from $43.6 million for the first half of 2003 to $11.1 million.

Mr Barrett said much of the loss was due to the acquisition of Taranaki Combined Cycle on March 4.

TCC's gas consumption is now classified as internal use rather than an external sale.

- NZPA