Contact Energy Announces Third Quarter Result

Contact Energy Announces Third Quarter Result

Contact Energy Ltd today announced an after-tax profit for the nine months to June 30, 2003 of $74.2 million, five per cent above that achieved in the same period last year. On an adjusted basis the result was 9 per cent below the adjusted result of $81.7 million for the nine month period ended 30 June 2002.

The result for the nine month period ended 30 June 2003 includes an increased level of depreciation charges, reflecting asset revaluation at the end of financial year ended 30 September 2002 and the addition of the Taranaki Combined Cycle power plant to the Contact asset base in the current financial year.

“The result again shows the value of Contact’s integrated business which seeks a degree of balance between the company’s wholesale and retail electricity market exposures,” said Contact’s chief executive, Mr Steve Barrett.

Earnings before interest, tax, depreciation and amortisation (ebitda) for the nine months under review was up 15 per cent for the same period last year, at $251.7 million ($219.5 million in the previous period).

“Contact has continued to grow its electricity revenue, underpinned by volume increases through retail growth and increased forward sales through hedging ,” said Mr Barrett. Contact was relatively highly hedged during the entire period, and did not benefit significantly from the high wholesale prices which prevailed through most of the period.

The company’s expanded retail base and forward sales of contracts into the hedge market took average hedge levels to 94 per cent for the nine months ended 30 June 2003 (from 77 per cent for the nine months to 30 June 2002).

As previously announced, there were one-off costs in the June 2003 quarter associated with advertising and community sponsorships for winter 2003-related power savings campaigns, writing off costs associated with Ohaaki deep drilling, and the costs incurred by Empower in its customer acquisition campaigns to June 30.

Contact’s retail customer base continued to grow strongly during the June 2003 quarter, with total gas and electricity customers now totaling over 617,000 (519,000 electricity and 98,500 gas).

“This customer growth particularly reflected Empower’s efforts to attract customers in Wellington and Christchurch, following TrustPower’s withdrawal from those markets in the course of the third quarter,” Mr Barrett said.

This 15 per cent increase in total customer numbers between June 2002 and June 2003 was the primary cause for a 34 per cent increase in retail electricity sales, with new customers including a substantial number of small and medium-sized businesses with larger average consumption than household customers.

As previously announced, Empower’s marketing operations have been absorbed into Contact since the end of the quarter. The company is now consolidating the retail business following the increases in customer numbers over the past couple of years before determining its future marketing strategy.

Revenue from Contact’s gas business was 24 per cent lower, reflecting increased internal use of gas with the absorption of TCC into Contact’s portfolio and reduced retail gas sales as Contact continues to lose large volume, low margin gas customers.

The gas result was somewhat offset by increased sales to Genesis Power Ltd in the June 2003 quarter.

Since the end of the quarter, Contact has announced an arrangement to lease to the Crown its Whirinaki site for up to 11 years to enable the Crown to build a 155MW diesel fired power station. The plant is intended for use as a dry year reserve station.

Details of this arrangement were announced earlier this week.

“The Whirinaki site leasing arrangement has a relatively small impact on Contact over time, attracting only project management and operation and maintenance fees and a payment to compensate Contact for making the site and consents available for the life of the project,” said Mr Barrett.

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