Contact profit up 22 per cent

8.45am

Australian controlled energy generation and retail giant Contact Energy's higher charges to consumers have helped lift its full year profit by 22 per cent.

The company today announced a net profit after tax of $144.04 million for the 12 months to September 30, up from $118.26m last year.

The company's average prices across its 508,000 electricity customers increased by 12 per cent in the September 2004 year.

The company also announced a fully imputed final dividend of 8 cents per share bringing its total dividend for the year to 25cps, up from 23cps last year.

Today's result, in line with forecasts, was achieved on operating revenue of $1.28 billion, up 6 per cent on last year.

Contact's chief executive Steve Barrett said while the "solid financial result" was pleasing, the company's most significant achievement was its successful refuelling most of its generation assets.

Mr Barrett said the company had been granted resource consents for continued operation of the Clutha hydro and Wairakei geothermal facilities.

"Meanwhile, over the last 15 months, Contact has entered into contracts involving total new expenditures of almost $1 billion before the end of the decade. Much of this is for the acquisition of additional gas supply."

That total also included long-term maintenance contracts for Contact's key gas-fired stations, and the construction of improvements to its Wairakei plant.

Meanwhile, Mr Barrett reiterated the company's warnings that further retail price increases were yet to come.

The increases were necessary "to achieve pricing levels that reflect rising medium term electricity costs, and will allow Contact and other energy sector players to invest in new sources of fuel and technologies to meet future electricity demand," Mr Barrett said in a statement.

"While some further tariff increases will be necessary, they are now within striking distance of the level needed to underpin the development of new generation plant and fuel sources.

"Indeed, some of that development has already begun in expectation that prices will continue to adjust to economic levels."

Shares in Contact, which generates close to a third of New Zealand's electricity, closed at $6.27 having hit a fresh high during the session of $6.30.

Earlier this year Australian company Origin secured about 51.22 per cent of Contact shares from US power giant Edison mission for $5.67 a share in a deal worth $1.67 billion.

Mr Barrett said the 2003/2004 year was characterised by high hydro inflows and subdued wholesale electricity prices.

The company said it chose to reduce generation and buy electricity on the wholesale market at times when it was more cost-effective than running its gas-fired power stations.

That translated into a fall in gas consumption to 50.6 petajoules (PJ) from 71.6 PJ last year.

During the period under review, Contact's forward contracts and retail sales volume were equivalent to 93 per cent of its generation output.

Contact said that after four years of strong growth, its retail electricity customer base had fallen from a peak of 522,000 at the end of the previous financial year to 508,000 at the end of September this year.

"This reflected retail competition and the change in focus to retention and increased volume sales to existing customers," the company said.

Total retail electricity sales rose to 7415 gigawatt hours (GWh) from 7042 GWh last year.

- NZPA