KEY POINTS:
Contact Energy is signalling a flat result for the next financial year as it continues to take a hit in the South Island where wholesale prices are running hot due to drought and transmission constraints.
The electricity generator and retailer yesterday reported a June year net profit of $237 million, down 1 per cent on a year ago. Stripping out one-offs, including the cost of removing asbestos from its New Plymouth power station and a gain on the sale of geothermal assets, underlying profit came in at $232.8 million, up 1 per cent on a year ago.
The company's operating profit was up 4 per cent at $567.2 million, although its composition was remarkably different from the the previous year.
Due to the average wholesale electricity price more than doubling to $112 per megawatt hour, operating revenue rose by 38 per cent to $2.76 billion while operating expenses rose 51 per cent to $2.19 billion.
Chief executive David Baldwin said the result was a good one given a number of issues including an $87 million increase in gas costs and a $34 million increase in electricity transmission related charges.
The increase in operating earnings was a positive outcome for the company given the "challenging conditions toward the end of the financial year in the form of drought in the south and transmission constraints from the north to the south".
Contact sells more electricity in the South Island than it generates, requiring it to buy power on wholesale markets.
South Island power prices, usually in sync with those in the North Island, began to edge ahead after the capacity of the Cook Strait HVDC link was halved earlier this year. The difference widened as North Island hydro lakes began to fill while drought conditions continued in the south.
Baldwin estimated the net effect cost his company $60 million in the last two months of the year, and the negative effect was continuing.
The company said its performance over July and August so far was "well below expectations". While it was too early to accurately assess the impact of the conditions on the 2009 financial year results, the company did not expect to significantly outperform the 2008 financial year result.
Baldwin said Contact was making progress on plans to invest heavily in renewables and thermal generation.
The company's capital expenditure will more than double this year to about $630 million and Baldwin confirmed Contact would seek to raise more than $250 million from the markets in the next six months.
Contact declared a 17c fully imputed final dividend taking total dividends for the year to 28c. Shares closed 9c higher at $8.40.
Contact Energy - year to June 30:
Operating revenue - $2.76b (2008) / $1.99b (2007)
Operating expenses - $2.19b (2008) / $1.45b (2007)
Ebitdaf - $567.2m (2008) / $543.7m (2007)
Net profit - $237.1m (2008) / $239.6m (2007)
