KEY POINTS:
Contact Energy has reported a 4 per cent drop in half-year net profit after tax to $117.4 million, with the company saying it continued to absorb increases in natural gas costs.
After adjusting the reported profit for one-off items, Contact said its underlying earnings after-tax for the six months ended December 31 were $116.1m, down 1 per cent from $117.2m for the previous corresponding period.
Among the one-off items were a $21.3m gain from the sale of land and rights in the Mokai geothermal field, and a $20.4m provision associated with the closure of its New Plymouth power station.
Earnings before net interest expense, tax, depreciation, amortisation and financial instruments (ebitdaf) were up 2 per cent to $281.9m. Total operating revenue was up 12 per cent to $1.12 billion.
A fully imputed interim dividend of 11 cents per share is to be paid.
Contact's electricity generation during the period was up 5 per cent compared to the six months ended December 2006. That included a 9 per cent increase in geothermal generation, driven by Contact's drilling programme.
Chief executive David Baldwin said the increase in generation output, particularly in renewables, helped to offset lower wholesale prices during the period.
That reinforced the value of Contact's integrated generation and retail business, and the flexibility and diversity of the company's portfolio, he said.
Ongoing increases in natural gas costs continued to be absorbed into the business, with per unit gas costs increasing by 20 per cent during the latest half year from the corresponding 2006 period.
With market conditions favouring the company's geographic and fuel diversity, Contact expected to deliver a full year ebitdaf about 4 per cent higher than in 2007.
Contact said its total retail customer numbers increased from 587,000 at December 31 2006 to 621,000, excluding LPG franchise customers, a year later. Most of the increase resulted from Contact's
acquisition of the Rockgas LPG business in April 2007.
The purchase of Swift Energy's New Zealand oil and gas assets by Contact and its 51 per cent owner Origin Energy secured Contact a gas storage option. The acquisition was expected to be completed by April.
Contact would pay about $54m of the $115m total purchase price to own and develop the onshore Ahuroa gas field in Taranaki as a storage facility, and buy the remaining recoverable gas and LPG reserves in the Ahuroa reservoir.
"With the decline of the Maui gas field, the flexibility Contact once had in gas supply contracts has been replaced with obligations which require customers to take gas at high and fixed rates each day, or which impose adverse financial consequences if the gas is not taken," Mr Baldwin said.
"This creates a situation where natural gas is being used when there may be more cost effective forms of energy."
Gas storage would enable Contact to store the gas at times when it had access to lower cost generation alternatives. It would allow the company to use its gas-fired power stations when market conditions justified.
It would also provide the flexibility needed to operate new fast-start peaking plants once those plants were operational.
Contact was aiming to have the underground gas storage facility fully operational in 2010.
Contact shares closed yesterday at $7.55, having ranged between $9.70 and $6.91 in the past year.
- NZPA
