Contact Energy's Clyde power station. Photo / Grant Bradley
Contact Energy's Clyde power station. Photo / Grant Bradley
Contact Energy chief executive Mike Fuge has pushed back on claims that the big power companies are paying out big dividends at the expense of investment in renewable energy projects.
A report out this week said the power companies have been paying out billions more in dividends than they’ve beenmaking in profits, driving up electricity prices.
The report - co-authored by First Union, the Council of Trade Unions, and climate group 350 - calls for the payouts to instead be channelled into building renewable generating capacity.
The paper also recommended a windfall tax. From 2014 to 2021, Contact, Genesis, Mercury and Meridian paid shareholders $8.7 billion in dividends, despite recording a total profit of just $5.35b over that period.
Fuge, speaking to the Herald after the company’s annual meeting, said: “My response to that is (Contact’s) $1.7 billion of renewable development that is underway right now.
Fuge said a stable market was needed to give investors confidence to invest.
“The price signals coming through at the moment are strong and we are responding to those, and I think that that is the right thing to do.
“What you don’t want to do is to send a chill wind through investor confidence, which stops that investment in its tracks.
“What people need to recognise is that in a functioning market, the temptation to grab hold of the tiller will have completely the opposite effect.
“It will not make the boat go faster - it could tip the boat right over.”
Commenting on a Herald editorial suggesting a review of what partial privatisation of electricity had delivered, Fuge the sector is already well scrutinised.
“In fact, it was not long ago that we had the Electricity Price Review.
“In addition, we have had various Commerce Commission reviews and we have the Electricity Authority, which provides continuous oversight.
“So there is very adequate and comprehensive oversight of the market as it is at the moment.
“If there is seen to be too much interference, too much change of the direction, then it just scares away investment,” Fuge said.
“And it is investment that we need at the moment in reliable energy to decarbonise our economy and to bring prices down.”
Contact Energy chief executive Mike Fuge. Photo / Supplied
In his speech to shareholders, Fuge said wholesale prices are likely to remain elevated for several years.
“This reflects the reality that firmed electricity in a renewable transition is more expensive.
“Significant investment in renewables on the scale Contact is committed to will address this over the longer term, as New Zealand’s reliance on thermal energy reduces.”
In early 2021, Contact’s dividend policy was revised to target a payout ratio of between 80 and 100 per cent of the average operating free cash flow of the proceeding four financial years. This saw the board approve a final dividend that brought the annual dividend to 35 cents per share, in line with the previous year.
Chairman Robert McDonald told the meeting the first four months of this current year had reflected the significant rainfall resulting in softer wholesale spot electricity prices.
“We expect wholesale prices for the remaining seven months of this year to firm, with fuel also secured for next year when the market is expected to be tighter,” he said.
In August, Contact Energy reported a 2.6 per cent dip in annual net profit to $182m.
