Contact to woo Aussie customers

By CHRIS DANIELS

Contact Energy, the trophy business in a likely takeover offer, has spread its wings across the Tasman, opening its first foreign power retail operation in Melbourne yesterday.

Its new subsidiary, Red Energy, has begun taking on customers in Victoria, promising to shake up the state's power market.

Contact is 51 per cent owned by United States energy giant Edison Mission, which is trying to sell all its non-US investments.

Any buyer of the Contact stake will have to launch a full takeover offer, which could be difficult, given the company's large number of small New Zealand shareholders.

An attempt by Edison Mission to buy all Contact shares in 2002 failed, despite being endorsed by Contact chairman Phil Pryke.

Final bids for Edison's Contact stake are reported to have now been lodged, with Melbourne-based AGL likely to be in the running.

As one of Victoria's leading power retailers, it may find itself also owning one of its rivals, with yesterday's opening of Contact's new retail operation.

Marketing tactics employed by Contact in Victoria include prize draws for cars and holidays and a $50 bonus for new customers

Another feature it is pushing is the lack of long-term contracts. Other Australian power retailers require new customers to sign up for one- or two-year contracts if they want to get the cheapest deal for power.

Red Energy chief executive Iain Graham said the company was looking to build up a significant share of the market, which is dominated by three big retailers: TXU, AGL and Origin.

Asked if the future of Red Energy was in peril because of the possible change in Contact's ownership, Graham, a longtime Contact executive, said the new company was "an asset for any company that was to take ownership - I would even say we were a valuable asset for any company that would take over".

Red Energy employs 50 staff and plans to double the size of its operation in Victoria within a year.

Contact already owns part-shares in two power stations in Australia, with a 40 per cent stake in Victoria's Valley Power station, and a 25 per cent stake in Oakey Power, a plant in Queensland.

Although Contact New Zealand is a "vertically integrated" company, generating and retailing roughly the same amount of electricity, this is not the case in Victoria, where Red Energy will buy all its electricity from the wholesale market.