Lake levels drain profit at Contact
Dry weather will create headwinds for Contact Energy, the power company has warned.
The electricity generator and retailer reported a statutory profit of $58 million for the latter six months of last year, which was $38m lower than the prior corresponding period.
It said that was because of more reliance on thermal power stations to supply electricity.
That reliance will continue if lake levels remain low.
Total renewable generation in the six months was 7 per cent lower than the prior corresponding period as lower hydro inflows resulted in a 21 per cent decline in hydro generation.
Contact said that while the extent of the current dry period remained unknown, it would continue to focus on operating freecashflow growth by working on the aspects of the business it could control.
It said it had achieved cost efficiency gains over the six months, with cash spent on capital projects for $26m or 40 per cent.
Just over 19 per cent of Contact’s customers moved to a new supplier in the year, which it said was 1.8 per cent below the market average.
‘‘Contact is competing well by providing customers with choice, certainty and control while improving the customer experience through systems-enabled operational improvements,’’ chief executive Dennis Barnes said.
‘‘As a result, we continue to experience lower churn rates than the market, and our customers are increasingly advocating for us in greater numbers.
‘‘Wholesale market conditions in the first half of the financial year were book-ended by record low inflows into our Clutha catchment. Our flexible thermal fuel supply and diverse assets ensured a reliable supply to customers through these dry periods, but the additional fuel and carbon costs incurred adversely impact financial performance.
‘‘Major maintenance at the Taranaki Combined Cycle plant and Te Mihi was completed safely and on budget with both these plants now available for many years without major works.’’
National demand was more than 1 per cent higher in the period, in part due to more irrigation demand.
Contact said it saw opportunities as the Government’s policy focus shifted towards decarbonising the economy and establishing 100 per cent renewableenergy targets.
‘‘The dry period will provide some headwinds and the Government’s electricity pricing review has the potential to be distracting in the short term, but equally there are a number of exciting prospects ahead of us,’’ Barnes said.
‘‘As a leader in geothermal generation, with an increasingly loyal customer base, we are wellpositioned to help businesses and consumers adapt to a lower-carbon future.’’