Mighty River Power to pay Contact $69m to close contracts

1.00pm

Contact Energy said today it would be paid $69 million by state-owned Mighty River Power to close out some long-term hedging contracts between the two.

The payment is compensation for the termination of the contracts, which originated from when Contact purchased the Taranaki Combined Cycle power station last year.

The two contracts were written at different times and effectively offset each other in all respects, except that they contain different hedge prices and Mighty River ended up paying Contact a monthly amount.

Because they offset each other, the contracts (and their termination) do not have any impact on the market for hedges, Contact said.

The termination reduced administrative costs and eliminated any future uncertainty over the interpretation of the contracts, it said.

In a separate arrangement, Contact has also agreed to sell two surplus 24MW geothermal generator units to Mighty River for an undisclosed price.

The units were acquired as part of Contact's purchase of the Poihipi Rd power station and were surplus to requirements. Contact has been trying to sell these for some time and they are understood to be worth about $1 million each.

Contact shares closed yesterday at $5.72.

- NZPA