Contact Energy Releases 2002 Annual Report

Contact Energy Releases 2002 Annual Report

Timely development of known gas reserves needs to be the energy industry’s most pressing priority in the year ahead, Contact Energy’s chairman, Phil Pryke, and chief executive and managing director, Steve Barrett, say in the company’s 2002 annual report, released today.

Security of energy supply as the Maui gas field runs down is the major theme of the report’s commentary for shareholders on market conditions going forward.

“New Zealand faces a challenging period of transition over the next few years from the abundant energy supplies enjoyed over the last generation to a new era in which security of supply will be less certain,” said Mr Pryke and Mr Barrett. “Recent supply constraints, when scheduled maintenance at Maui and Otahuhu-B has reduced both available gas and generating capacity, provide a foretaste of the conditions that might reasonably be expected at times during this transition.”

Maui gas has been the backbone of the country’s gas supply for the best part of a generation, and the country’s gas needs will in future need to come from a variety of smaller gas fields, the annual report says.

However, insufficient gas has so far been discovered to cover the shortfall left by the Maui rundown.

“Moreover, there is in our view far too little urgency or focus going into the commercial development of the only two major known gas reserves – Kupe and Pohokura,” said Mr Pryke. “Their timely development will help to close the gap created by the rundown of Maui. We urge the gas industry and Government to give this issue the priority it deserves.”

Contact Energy has put on hold any plans to build new generation until uncertainty over gas supply is resolved, but is planning incremental upgrades in capacity at geothermal and hydro sites, and investigating the use of liquid fuels at its New Plymouth power station as a back up fuel.

Meanwhile, Contact Energy shareholders will be asked to confirm the appointment of Ernst & Young at the company’s annual meeting on 11 February 2003. Mr Pryke said the Board was recommending Ernst & Young’s appointment for shareholder approval at the annual meeting, following a competitive tendering process for the company’s audit work.

Under the terms of the appointment, Ernst and Young cannot undertake any work for Contact other than audit services. This is consistent with Contact’s announced policy of maintaining a clear separation between audit and advisory work.

Exceptional circumstances created by the collapse of Contact’s former auditors, Andersen, meant that Contact Energy was unable to achieve a full separation between audit and advisory work last year.

The Andersen collapse meant Andersen’s senior partners in New Zealand moved to Ernst & Young. The Contact Board decided to engage Ernst & Young as auditors to preserve continuity of service during the year.

At that time, Ernst & Young were already engaged to advise the company on possible investments in Australia.

Accordingly, the company took the extra step of having an independent review of Ernst & Young’s financial advice. Details are contained in the annual report.

The report is being mailed to shareholders from today and is available on the Contact Energy website, http:// http://www.mycontact.co.nz. The Notice of Meeting for the February 11 Annual Meeting will be mailed separately early in the New Year.

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