Contact result exceeds forecasts

By RICHARD BRADDELL

WELLINGTON - Contact Energy has eclipsed prospectus forecasts with a net surplus of $155.4 million for the September year.

That is 94 per cent higher than the $80.3 million reported in 1998 and more than double the $68.5 million forecast when the Government sold the company in May.

The latest result came with some help from a net $40.5 million one-off gain from the recognition of prepaid gas as an asset after the company sold 130 petajoules to Methanex.

Also included is $59.5 million in compensation from the late commissioning of the 390MW Otahuhu B power station, which is to serve Auckland from this month.

Contact's chief executive, Paul Anthony, justified the inclusion of the $59.5 million in operating profit on the basis that it replicated earnings lost and costs avoidable had Otahuhu been running, rather than forcing Contact to rely on its New Plymouth power plant.

A further $26 million was taken from the capital payment to Otahuhu B's contractor, Siemens.

After a fully imputed final dividend of 11c a share, shareholders are being rewarded with a 100 per cent payout of net earnings less abnormals for the year. The total dividend of $95.3 million for the year includes $28.9 million paid to the Government before the sale in May and is 82 per cent higher than forecast in the prospectus.

Mr Anthony and Contact chairman Phil Pryke said yesterday that the company's success could be measured by its ability to generate cash (earnings before interest, tax, depreciation and amortisation), which at $267 million was up from $211 million in 1998 and from $191 million forecast in the prospectus.

While competitive pressures in the wholesale generation market drove margins down $104.4 million, that had been compensated for by earnings from its gas business and expanded retail operations.

Following a $673 million revaluation of fixed assets, to $2.14 billion, total assets stood at $2.57 billion. Equity was $1.61 billion.

Scope to leverage the balance sheet to fund future acquisitions was considerable, particularly since new assets - Otahuhu B, Te Rapa and the 17 per cent stake in a Queensland generator - had not been revalued.