It's been a gas, but Contact feels chill

Several years of healthy profit growth may be over for Contact Energy as high fuel prices bite.

Just two months after unveiling a 37 per cent nine-month net profit increase, the company said at its annual meeting in Auckland yesterday that such good times were unlikely over the next few years.

Contact has increased profits recently by selling electricity to retail customers and into the wholesale spot market.

Chairman Grant King said the company's financial performance over recent years had been marked by strong earnings growth thanks to rising energy prices.

"Contact expects this dynamic to support continued earnings growth this financial year, albeit with some flattening off in momentum."

The company faced a major challenge in the next three to four years as contracts for the giant Maui gasfield were used up and a bigger share of Contact's fuel came from more expensive sources, such as the new Pohokura field in Taranaki.

Wholesale electricity prices were likely to keep rising over this period, but King said they were not expected to keep pace with Contact's higher fuel costs "and there will be significant pressure on the company's trading margins".

"While the near-term outlook is for constraints on earnings, looking toward the end of the decade, there are larger-scale opportunities further ahead, particularly within Contact's thermal business."

Contact shares fell 9c yesterday, finishing the day at $7.28. This year, it has risen 14 per cent in price, touching a high of $8 in early July.

Yesterday's annual meeting was the first with David Hunt as chief executive.

This month, he replaced Steven Barrett, who has returned to the United States. Barrett was a representative of former 51 per cent shareholder Edison Mission, which sold its stake to Australian company Origin Energy last year.

Hunt, who has worked with Contact since its spin-off from the Government-owned ECNZ in the late 1990s, said: "We are now well and truly in the post-Maui era."