Contact lost steam

Contact Energy’s first-half earnings dropped 11 per cent as the electricity generator-retailer dealt with a dry spell which sapped its hydro generation in what it described as a “highly competitive” market. Earnings before tax, depreciation, amortisation and changes in the value of financial instruments, a measure in the electricity sector to demonstrate performance shorn of one-off factors, dropped to $236 million in the six months ended December 31 from $264m a year earlier, it said yesterday. Net profit sank 40 per cent to $58m, which it said was due to a greater reliance on thermal power supply. Revenue rose 15 per cent to $1.19 billion. “Wholesale market conditions in the first half of the financial year were book-ended by record low inflows into our Clutha catchment”, chief executive Dennis Barnes said. “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.” Dry spells in the South Island left its hydro lakes operating below average. The electricity generator-retailer didn’t provide annual earnings guidance, saying “the extent of the dry period remains unknown” and it would focus on growing operating free cash flow by clamping down on controllable costs. Contact plans to pay 80-to-90 per cent of operating cash flow in dividends once it reduces its net debt to ebitdaf ratio. Operating cash flow rose 5 per cent to $141m. The shares closed at $5.34 on Friday and gained 11 per cent in the past 12 months.