Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Contact Energy profit up 17.6% on new plant and hydro gains

Contact Energy profit up 17.6% on new plant and hydro gains

By Pattrick Smellie

Aug. 18 (BusinessDesk) - The stars aligned for Contact Energy in the year to June 30, producing a 17.6 percent increase in net profit at $234 million and a second dividend increase for shareholders in two years, as a new geothermal power station came on stream and the upgraded Cook Strait cable allowed plentiful water in South Island hydro-electricity catchments to be used to best effect.

The profit includes a $43 million payment from the contractors who built the company's brand new Te Mihi geothermal power station, officially opened last week but which was late to be commissioned, and reflects greater production of lower cost hydro-electricity during the period.

Stripped of that one-off factor, net profit rose 12.4 percent to $227 million, although the company expects the revenue covered by the compensation payment to show up in operating revenue in the current financial year as Contact increasingly reduces its use of gas-fired power stations in favour of its fleet of renewable hydro and geothermal plants.

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments were up 9 percent to $587 million. Directors declared a 1 cent per share increase in the final dividend to 15cps, raising total distributions for the year by 4 percent to 26cps, after being raised 9 percent to 25cps in the previous year.

The result was earned on revenues of $2.446 billion, 3 percent lower than in the previous financial year, reflecting weak demand, partly caused by warm winter weather, and ongoing competition for customers.

Despite weak ongoing electricity demand, the result reflects Contact's completion of a multi-year $2 billion series of new plant builds, including a gas-fired peaker station at Stratford, as well as Te Mihi, and upgrades at other geothermal stations.

"Our diverse and flexible generation portfolio, supported by a reduction in gas take-or-pay commitments and the upgrade of the inter-island transmission link, allowed Contact to benefit from higher than normal inflows to hydro schemes," said chief executive Dennis Barnes in a statement to the NZX. The company also used bought more electricity from other generators to meet demand rather than cranking up its own gas-fired plant.

Generation from its two combined cycle gas turbine units, once the powerhouse of the Contact fleet, fell by 1,027 Gigawatt hours to 2,332GWh, with excess gas injected into the company's Ahuroa gas storage facility, which created a negative impact to working capital, along with a $50 million hit created by delayed billings caused by the company's switch-over to a new billing system.

Hydro generation was 14 percent higher at 497GWh.

Growth in demand for electricity remained weak, affected by the withdrawal of 50 Megawatts of industrial demand after the closure of the Tasman pulp and paper mill at Kawerau, although demand from the Tiwai Point aluminium smelter was up 175GWh and other industrial demand rose by 38GWh during the year.

On its new SAP-based customer relationship management system, Contact says it is moving out of transition phase and into "future mode", with customer segmentation completed using the new system and "SAP-enabled pricing plans being prepared" with a view to delivering "improved margins without compromising competitiveness."

Barnes said Contact's "competitive pricing strategy has seen (customer) loss rates move closer to market", although the company reported heavy customer losses in June, which company spokespeople say was the result of suspending customer acquisition activity to led the new retail system bed down.

"It will take time to fully realise the benefits of the new systems and processes and provide a positive contribution to profits above the increase in interest and depreciation costs" associated with the SAP upgrade, said Barnes.

Slides accompanying the profit announcement confirm "no significant capital investment in the future immediate future", with focus moving to "managing for cashflow", although its planned geothermal power station at Tauhara ranks as the "next most competitive generation development in New Zealand.

Barnes insisted the New Zealand retail electricity market was among the most competitive in the world, with official statistics showing "the annual rate of increase in the energy component of tariffs was 0.5 percent over the past three years and was only 0.3 percent in the past year."

The company continues to hold a very short gas book into the future, as it anticipates running gas-fired plant far less than in the past, has access to as much as 17 Petajoules from the Ahuroa storage facility, and has signed for 27PJ's over six years, which represents "a significant step in contracting with a secondary supplier," the company says.

The shares rose 0.7 percent to $5.51.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news