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

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news