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

 


Contact Energy mulling capital return to shareholders

Contact Energy mulling capital return to shareholders

By Pattrick Smellie

Aug. 18 (BusinessDesk) - Contact Energy directors are actively considering a capital return to shareholders as the company emerges from a five year, $2 billion programme of investment in new power stations and IT systems and enters a period of increasingly strong positive cash flow.

The company's chief financial officer, Graham Cockcroft, confirmed at a media briefing on today's announcement of a 17.6 percent increase in profit to $234 million for the year ended June 30 that "the board is considering it (a capital return) at the moment."

"We see that cash flow will continue to grow at a rate faster than profit will grow and therefore there will be questions about what to do with the cash."

However, there is no timetable for a decision, said Cockcroft.

Contact's balance sheet shows gearing of about 28 percent, in line with credit rating agency requirements for retaining its current BBB rating with Standard & Poor's.

"So there's not a lot of capacity sitting there to suddenly distribute a lot of cash but if you look forward, yes, we do expect to generate more cash," Cockcroft said, with the primary reason for growing free cash flow being the dramatic reduction in capital expenditure forecast in coming years.

Between the 2010 and 2012 financial years, Contact averaged annual capex of around $500 million, falling to around $270 million in 2013 and $230 million in the current financial year, according to charts supplied for today's briefing. In the next financial year, that falls to just $100 million and is projected to be below that for the following three financial years, when Contact does not expect to be building any new power stations.

The company has increased its final dividend by one cent per share to 15 cps, making total payout for the last financial year of 26 cps. That was the second dividend lift in two years, for a total payout value for 2013/14 of $191 million, roughly equivalent to free cash flow of $200 million.

"The dynamic in the business is that 'stay in business' capital is lower than the depreciation charge so naturally that will improve cash flows over time," said chief executive Dennis Barnes.

Grant King, Contact's chairman and managing director of its 52.3 percent Australian shareholder, Origin Energy, first hinted at the potential for capital returns at the annual meeting in October 2012 but gave no update last year.

Origin became the controlling shareholder in Contact in 2003, failed to effect a merger between the two companies in 2006, and wants higher returns from Contact than it has managed to achieve so far.

Barnes also gave detail on $50 million of delayed billing to both residential and industrial customers, relating to glitches in the implementation of its new customer management and billing system in April. While the company expects to recoup most of the delayed billing in the current financial year, an additional $1 million to $2 million has been added to bad debt provisioning in the expectation that some customers will not pay amounts billed in arrears.

Contact shares moved down one cent in trading on the NZX this morning to sit at $5.46 at 1pm local time.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Gongs Got: Canon Media Awards & NZ Radio Awards Happen

Radio NZ: RNZ website The Wireless, which is co-funded by NZ On Air, was named best website, while Toby Manhire and Toby Morris won the best opinion general writing section for their weekly column on rnz.co.nz and Tess McClure won the best junior feature writer section. More>>

ALSO:

Pre-Budget: Debt Focus Risks Losing Opportunity To Stoke Economy

The Treasury is likely to upgrade its forecasts for economic growth in Budget 2016 next week but Finance Minister Bill English has already signalled that more of his focus is on debt repayment than on fiscal stimulus or tax cuts... More>>

ALSO:

Fulton Hogan's Heroes: Managing Director Nick Miller Resigns

Fulton Hogan managing director Nick Miller will leave the privately owned construction company after seven years in charge. The Dunedin-based company has kicked off a search for a replacement, and Miller will stay on at the helm until March next year, or until a successor has been appointed and a transition period completed. More>>

ALSO:

Gordon Campbell: On Electricity, Executions, And Bob Dylan

The Electricity Authority has unveiled the final version of its pricing plan for electricity transmission. This will change the way transmission prices (which comprise about 10% of the average power bill) are computed, and will add hundreds of dollars a year to power bills for many ordinary consumers. More>>

ALSO:

Half Empty: Fonterra NZ, Australia Milk Collection Drops In Season

Fonterra Cooperative Group says milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news