Contact Energy hit by discounting

Contact Energy’s customer numbers have fallen in the face of increased competition and discounts from large competitors.

But the Wellington-based electricity generator’s earnings ‘‘modestly’’ increased in a ‘‘fairly uneventful’’ six months, chief executive Dennis Barnes said.

Contact Energy said its aftertax profit for the six months ended December 31 was $82 million, up 12 per cent from last year.

Revenue fell to $1.04 billion from $1.12b, as mass market electricity sales dropped because of above-average temperatures and new business customers using less energy than those they replaced.

Average customer numbers were also down 1100, which Contact said was due to increased competition including price discounting by large competitors, as well as conditions that supported offerings by new businesses.

The company said the reduction in mass market customers was mostly offset by an increase in commercial and industrial sales.

‘‘The first half of the 2017 financial year saw Contact modestly grow earnings, with continued improvements in retail operating performance and an increase in the proportion of renewable generation,’’ Barnes said.

‘‘In a competitive market, delivering strong operational performance and providing value for customers and remains the focus.’’

Barnes said it had been a good performance by the company, given the earnings increased despite subdued demand.

National electricity demand had dropped 2 per cent in the first half of the financial year.

Barnes said the low demand was caused by wet, warm weather, and was ‘‘significantly down’’ in the last quarter.

Above average rainfall had also led to higher hydro generation, lower wholesale electricity prices and limited price volatility.

Decreasing demand had been the trend of the past two or three years, but was mostly a function of the climate, he said. ‘‘It’s too early to call that a shift.’’ shareholders

Barnes said households were using less energy, with half of the population, or about 950,000 households, classified as ‘‘low users’’ – using less than 8000 kilowatt hours (kwh) a year.

The average use was closer to about 7000kwh, he said, which was caused by new houses and appliances being energy efficient, as well as smaller households.

Barnes owned a decade-old television which gave off heat, but new televisions did not do that, for instance. ‘‘They’ve all come together to drive that.’’

Contact saw in its future a business that had shifted from a focus on focus to ‘‘living services’’. The company had already moved its IT systems to the cloud, which made it cheaper to deliver services through mobile and online.

‘‘We have also embedded data and analytics capability to better understand our customers’ needs, with real-time customer insight improving the customer experience as well as lowering future operating costs.’’

Barnes said households of the future would have a mixture of smart appliances, electric vehicles, some form of energy storage, and perhaps a local generator such as solar power.

As such, Contact would eventually become a technology company that sold energy, he said.

‘‘We see ourselves as the service company that manages all that complexity.’’

The company declared a dividend of 11 cents a share.