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Contact Energy Announces Third Quarter Result

Contact Energy Announces Third Quarter Result

High inflows to hydro catchments were the primary factor in Contact Energy reporting a slight fall in adjusted earnings for the three months to 30 June 2004.

After excluding one-off factors, Contact’s tax-paid adjusted earnings for the three months to June 2004 were $41.7 million, compared with $42.2 million in the same period the previous year.

“The June 2004 quarter further demonstrates the benefits of integration between generation and retail operations during periods of marked electricity spot price volatility.” said Contact’s chief executive, Mr Steve Barrett.

In the latest quarter, wholesale electricity revenues totalled $131.0 million, compared with $323.5 million in the June 2003 quarter, reflecting very high spot prices during the early winter months last year when low rainfall into hydro catchments coincided with uncertainty about the availability of thermal fuels.

“By comparison, the early months of winter 2004 were characterised by very high rainfall into hydro catchments, resulting in national hydro storage standing at 148 per cent of the historical average at the end of June – the highest level ever recorded for that time of the year,” said Mr Barrett.

“Given continuing high water storage levels, we expect that wholesale electricity prices are likely to remain below their average levels for the next few months” said Mr Barrett.

“However, looking beyond these weather induced effects, we expect that the longer term dynamics will predominate. Demand for electricity is growing steadily, while uncertainty about future fuel and technology choices for new investment in generation mean that current total generation capacity is becoming increasingly constrained.”

“In addition, we know that almost all choices for future generation will produce electricity at higher costs than in the past, putting upward pressure on electricity prices,” said Mr Barrett.

Reflecting ongoing competitive activity in the retail electricity market, Contact’s retail customer base was down slightly on the previous quarter. Contact had just over 600,000 customers as at 30 June 2004 (508,000 electricity and 92,000 gas).

“As previously announced, Contact is expanding retail coverage nationwide and this quarter launched retail offers into three new regions: Waipa, Marlborough and Central Hawkes Bay,” said Mr Barrett.

“We will be rolling out into remaining areas over the next few months,” said Mr Barrett. “Contact continues to remain active in customer acquisition with expansion of our retail electricity service nationwide and has an active customer retention programme in place.”
Earlier in the year, Contact signalled that it would consider a special dividend to distribute imputation credits to shareholders prior to any sale by Edison Mission Energy of its majority stake in the company. On 21 July 2004, Edison Mission announced the conditional sale of its stake in Contact to Origin Energy.

In light of this announcement, Contact’s Board has determined that the company will pay a fully imputed special dividend of 10 cents per share. The record date for the dividend will be 18 August 2004. This special dividend can be viewed as an advance on the final dividend which would otherwise be declared in November, and is designed to ensure that Contact holds negligible imputation credits at the time of the expected change in majority ownership.

Shareholders who are participants in Contact’s share top up plan will receive additional shares in lieu of the special dividend, and the close off date for shareholders not already registered in the scheme but who wish to participate will be 4 August 2004.

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