Contact warns of weak second-half earnings; stock drops

Photo / Brett Phibbs

Contact Energy Ltd.'s second-half results will probably miss analyst estimates because abundant water in the country's hydro storage lakes and weak electricity demand caused by the Christchurch earthquakes are keeping wholesale power prices low.

Average North Island wholesale prices from May 1 to mid-June were low at $36 per megawatt hour, and retail customer churn was continuing at high levels, chief executive Dennis Barnes told investors at an offsite presentation focusing on the company's geothermal energy developments in Taupo.

"Conditions in the second half of the year have accordingly limited the earnings from exposed generation," Barnes said in notes for the presentation. "Most analysts' forecasts appear not to have been updated for these conditions."

The presentation notes give no specific guidance for full-year earnings. Contact shares fell 2.1% to $5.63 on the NZX.

Contact lost a further 3,000 electricity customers in the month of May, according to operational data also released today.

A Reuters survey picks earnings before interest, tax, depreciation and amortisation for the year of $467 million, compared with $444.1 million last year. However, the Reuters consensus forecast figures are compiled on a different basis to the company's own earnings statements, which showed an EBITDA result, including the impact of changes in fair value of financial instruments, of $427 million for the 2010 year.

Operational data released today by Contact also shows the company continues to lose retail electricity customers at a dramatic rate, falling a further 3,000 in May to 454,500, while average temperatures in May were 2.2 degrees warmer than usual, also pushing down demand. Natural gas and LPG customer numbers remained steady.

South Island electricity demand, excluding the Tiwai Point aluminium smelter, fell by 6.5% in May, compared to the same year last year, while North Island demand was off 2% on the same basis.

(BusinessDesk)