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Empower Integration Close To Completion

5 July 2003


Empower Integration Close To Completion

Contact Energy Ltd confirmed that the absorption of its marketing subsidiary, Empower Ltd, into Contact had occurred on July 1, and that the processes associated with its integration under Contact’s direct management were largely complete.

“Empower is a powerful brand in its own right and has helped to drive very strong growth in the retail customer base supplied by Contact,” said Contact’s chief executive, Mr Steve Barrett. “Since the May 19 confirmation that Contact would assume direct control for the management of Empower, some 40,000 additional customers have been added to the company’s retail portfolio.”

“The majority of these new customers have been gained under the Empower brand as a consequence of TrustPower’s decision to withdraw from the Wellington and Christchurch markets,” said Mr Barrett. Empower acquired rights to approach TrustPower’s customers in those markets and offer them the choice of service by Empower.

Contact’s total retail customer base is expected to stand at approximately 620,000 gas and electricity customers once these additional customers are switched to Empower. This makes Contact New Zealand’s largest retail provider of gas and electricity and represents growth of 60% in customer numbers over the last two years.

“The latest significant additions to our retail base are likely to add between three and four per cent to Contact’s average annual level of hedge.

“We need to make sure that we manage that growth appropriately in order to maintain high service levels and an appropriate balance between our retail and generation portfolios.

“With the assumption of Empower’s management and after such a sustained period of strong growth, Contact will be taking this opportunity to assess its retail acquisition and marketing strategies going forward.”

Mr Barrett also signalled that the acquisition cost associated with Empower’s most recent retail growth surge would be reflected as an increased level of expense, in addition to a range of other one-off costs that would affect results in the current financial reporting period.

These included:

- the costs associated with Contact’s contribution to the recent national campaign to conserve electricity and its own campaigns directed at its customers to conserve power, estimated to have a pre-tax impact of approximately $6 million. Reflecting its market share, Contact contributed 35% of the budget of the national “Target 10” campaign, and also ran its own advertising to encourage conservation efforts. In addition Contact pledged up to $3.5 million to local causes in return for power savings;
- the reduction in wholesale prices as storage levels have moved back closer to mean conditions. National hydro storage is now around 100 per cent of mean for this time of year with inflows reaching 200% of mean in recent days;
- the write-off of costs associated with the unsuccessful drilling results at Ohaaki, with a post-tax impact of $3.7 million.



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