Diverse portfolio delivers strong result
20 February 2006
Diverse generation portfolio delivers strong half year result
Contact Energy today reported Operating Profit (earnings before interest, tax, depreciation and amortisation - EBITDA) for the six month period ended 31 December 2005 of $284.7 million, up from $250.7 million for the same period in 2004. This excludes the gain on disposal of Contact’s interest in Valley Power.
This result is Contact’s first since adopting the New Zealand equivalents to International Financial Reporting Standards (NZIFRS). As an NZIFRS comparison for the six month period to December 2004 is not available, information for this period is provided under NZ Generally Agreed Accounting Practices (NZ GAAP).
Contact’s profit for the six month period to 31 December 2005 was $146.6 million, up $61.9 million from the same period in 2004 reported under NZ GAAP. The 2005 net surplus was boosted by a one-off $33.4 million gain through the sale of Contact’s 40 percent stake in the Valley Power peaking plant in Australia. A gain on the fair value of financial derivatives now reported under NZIFRS also contributed to the result.
The board has declared a fully imputed interim dividend of 10 cents per share.
Contact Energy Chief Executive, David Hunt, said Contact’s strong financial performance for the six month period reflected a combination of higher wholesale electricity prices, strong thermal generation output and a good balance between Contact’s generation and retail businesses.
Mr Hunt said the result was particularly pleasing given that Contact’s large thermal station at Otahuhu was out of service for seven weeks during the period as it was undergoing a planned major overhaul.
Low hydro lake inflows combined with outages of key thermal generation in the market resulted in higher wholesale electricity prices. The average electricity price received for generation for the six month period to 31 December 2005 was $81.70 per MWh, up 148 percent from the average of $32.95 per MWh in the same period in 2004.
Contact’s total electricity generation for the six months ending 31 December 2005 was 5,591GWh, up 11 per cent from the same period in 2004.
While Contact’s generation from its hydro assets was down 30 percent due to lower hydro inflows, this created opportunities for Contact to utilise its thermal generation assets. Electricity production for the six month period to 31 December 2005 from Contact’s thermal plant was up 58 percent from the same period in 2004.
Higher wholesale electricity prices had an adverse effect on purchase costs for Contact’s retail business. Electricity purchase costs were up 162 percent from the six months to 31 December 2004, at $355.4 million.
Contact’s gas revenue from wholesale customers was $41.5 million for the six months to 31 December 2005, up 51 percent from the same period in 2004. This increase was driven by a 2.6 petajoule increase in wholesale gas sales.
Gas revenue from retail customers reduced from $70.3 million for the six months ended 31 December 2004 to $64.7 million to the six months ending 31 December 2005. Gas customer numbers decreased slightly as Contact adjusted retail gas tariffs to reflect the increased opportunity cost of gas. Contact’s retail gas customer base decreased from 88,000 as at 31 December 2004 to 81,000 as at 31 December 2005.
Contact’s total retail electricity customer base increased to 512,000 in the six months to 31 December 2005, up from 509,000 as at 31 December 2004.
“This six month result again underlines the flexibility and diversity of Contact’s generation portfolio, and the natural hedge created through the integration of Contact’s retail and generation business,” said Mr Hunt.