Energy firm makes changes to help lower carbon footprint

Contact Energy chief executive Dennis Barnes.

Contact Energy has restructured its retail operations to tie commercial and industrial sales closer to its generation activities.

The firm, which also yesterday presented new corporate branding, says the change reflects its desire to drive decarbonisation in the energy sector and will help time future generation development.

"To achieve this we will need to work with partners and suppliers to assist the conversion of business customers with a high carbon footprint to renewable energy. Contact has the largest commercial and industrial customer base and is best placed to lead this transition," chief executive Dennis Barnes said in a statement.

"This will enable demand-backed development of our consented geothermal resources, in preparation we are working hard to reduce the cost of our consented renewable development options. While the market fundamentals don't currently support new renewable investment, it is something we will be ready for, especially as New Zealand looks to achieve its carbon reduction ambitions," Barnes said.

Earlier Contact, the country's second-largest gas and power retailer, reported a 13 per cent decline in full-year profit after low hydro storage increased its energy costs and tough competition kept pressure on retail margins.

Contact is the biggest supplier to the commercial and industrial sector where it is facing increased competition. The tighter focus on that business is part of a broader strategy aimed at simplifying its operations and freeing up capital to accelerate the use of automated processes to help lower cost-to-serve.

Last month the firm agreed to sell its LPG distribution assets to First Gas for $260 million to shed exposure to international LPG prices and domestic supply issues. In December it agreed to sell its Ahuroa gas storage facility to First Gas for $200m.

Barnes said that while the asset sales appear simple, they will provide "significant flexibility" to the firm and reduce debt while still providing access to both gas storage and LPG volumes for customers.

Net profit fell to $132m in the year ended June 30, from $151m a year earlier. Earnings before interest, tax, depreciation and changes in financial instruments fell to $481m, down 4 per cent from a revised $501m a year earlier. Underlying profit, which excludes changes in financial instruments, fell to $130m, down 9 per cent from $142m a year earlier. Prior year earnings were restated to reflect a change in accounting standards.

Contact noted that a $9m reduction in operating earnings from its retail business was driven by lower volumes and margins on its sales to commercial and industrial users. Higher LPG prices, reflecting higher oil prices, were not all passed on, resulting in reduced earnings there.

Operating earnings on mass-market power and gas sales rose by $3m, reflecting an $11m reduction in the firm's cost to serve its customers.