Contact Announces Red Energy Sale
12 November 2004
Contact Announces Red Energy Sale To Snowy Hydro Limited
Contact Energy Ltd has sold its Victorian retail business, Red Energy, to the New South Wales-based Snowy Hydro Limited, Contact’s chief executive, Mr Steve Barrett, announced today.
“Contact has recently reappraised its Australian investment strategy, and concluded that the commercial logic for pursuing an integrated energy business in Australia has changed fundamentally,” Mr Barrett said.
“For a variety of reasons, including the recent change in majority shareholder and the emergence of new opportunities in New Zealand, we have determined that Contact’s focus should be concentrated in the New Zealand market,” Mr Barrett said.
“This does not rule out investment in Australia if particular opportunities arise. However, we will no longer be pursuing a stand-alone integrated energy business model in Australia.
“Red Energy was launched earlier this year as a start-up retailer in Victoria. While it has met or exceeded targets for its first five months of operations, we are conscious that Red is still in its early development phase.
“We are naturally delighted that Snowy Hydro has recognised the potential in Red Energy,” said Mr Barrett.
The sale terms reflect Red Energy’s start-up status, and there is a nominal up-front payment from Snowy Hydro to Contact, with the balance of the sale price being paid over three years, subject to Red Energy achieving certain targets over the period.
As a result of the sale, Contact will write off its net investment in Red Energy. This is not expected to have a material impact on Contact’s annual earnings. Future sale payments based on Red Energy’s performance will be booked as income by Contact at the time they are received.
In conclusion, Mr Barrett paid tribute to the Red Energy team, led by Contact’s former Chief Information Officer, Iain Graham.
“The Red Energy team have done a great job and overcome many hurdles. I particularly want to compliment Iain Graham for his leadership during the challenging start-up phase, and through the recent sale process.”
“While the creation of a start-up Australian retail business no longer fits with Contact’s strategy, we are pleased that Snowy Hydro has seen the potential in Red Energy, and chosen to pursue this development.”