New year won't be so rosy

An asset sale, high power prices and record heating demand boosted profits in the year just passed but are most unlikely to occur again this year, says Contact chairman Grant King.

Low lake levels at the start of this year and the coldest June in 24 years increased Contact's sales last year and almost doubled the prices its power stations received in the second half.

Earnings were also boosted by one-time items of $42 million, including profit from the sale of a power station in Australia and gains on the value of financial contracts.

But earnings this year would be lower than last year's record net profit of $280.9 million. Shares in Contact closed down 16c at $7.19 yesterday.

King, also chief executive of Contact's majority shareholder Origin, said one of the biggest challenges this year is to get competitive supplies of gas as cheaper supplies wane at Maui, the nation's largest field.

Contact was considering building a new station at Otahuhu that could double output from the site.

Contact built a 390MW power station in Auckland in 1999, but a lack of long-term gas supplies delayed the company's plan to build a similar-sized generator at the site.

It is now seeking tenders for a new plant at the Otahuhu site and may proceed with an investment next year.

Contact is the second-largest power retailer in New Zealand and typically makes more than 60 per cent of its power from dams and rivers. The company tries to ensure stable earnings and cash flow in dry and wet years by producing electricity from dams, geothermal bores and gas-fired power stations.