Situation a little less rosy for Contact

Takeover target Contact Energy says revised profit projections have come out lower than initially predicted.

Independent directors said yesterday that company performance was "tracking close to, but slightly below" the draft business plan projection included in its Target Company Statement.

US energy giant Edison Mission is in the final throes of what is likely to be a doomed attempt to take over the 49 per cent of Contact that it does not already own.

Contact's independent directors made an announcement yesterday, saying things may not be quite as rosy as indicated on November 2.

"The primary reasons for the slight deterioration in trading performance are the softer than expected spot prices and lower thermal generation volumes that prevailed in the three months to December 2001."

Though these factors meant a drop in revenue, the shortfall had largely been offset by a reduction in expenses, said Contact chairman Phil Pryke.

Contact tended to earn most of its income in the second half of the financial year, said Mr Pryke, and there was nothing to suggest recent market conditions would persist into the winter.

Recent heavy rainfall in the South Island's hydro storage lakes have led to a big reduction in the wholesale price of electricity.

Mainly thermal generators like Contact make most of their money when hydro stations cannot run at full capacity.