Contact Energy profit rises
Contact Energy says it expects to keep up a healthy dividend flow now that nearly $2 billion of capital works have been completed.
The energy generator and retailer's results for the year to June 30 were this morning released. They showed a 17.6 per cent increase in its after-tax profit to $234 million.
The profit rise is almost entirely due to $43m in compensation payments from the construction firm responsible for building Contact's delayed Te Mihi power station, near Taupo's long-established Wairakei power station.
The $623m station was commissioned in May, 10 months late, chief executive Dennis Barnes said in a briefing this morning.
"The contractor had a couple of issues with a dirty pipe and lubricant, and we had some pumps that were defective," he said.
"The contract protected us. Although it was physically late, it's not economically late for us."
The profit increase also masked a 3.2 per cent decline in revenues to $2.45 billion.
Retail sales were up 1 per cent despite overall mass market electricity sales being down 5 per cent due to retail competition, warmer temperatures and improved home-efficiency measures, Barnes said.
With the Te Mihi station now operational, Barnes said the company was focused on returning its cashflow to shareholders.
The company said it would pay a final dividend of 15 cent, up 1c on the year prior.
Contact Energy chief financial officer Graham Cockroft said dividend payment represented 95 per cent of free cashflow for the year.
Barnes said trends for electricity demand were either flat or declining, leading the business to focus on dividend payments.
"We're very much a business focused on cashflow. Capital expenditure has been decreasing over time. We don't expect to be spending more than $100m on our assets, which will create cashflow for distribution to shareholders in due course."
Contact said it offset lower mass-market volumes with increased commercial and industrial sales.
In a nod to electricity prices, and the market structure, possibly becoming an election issue, Barnes said he believed the status quo was working.
"I believe the current market structure is delivering competition. It's delivering flat to declining prices, and it's delivering new renewable generation," he said.