Contact Energy to cut more than 100 jobs

Last updated 20:00 13/02/2013
Fairfax NZ

Prime Minister John Key discusses job cuts at Contact Energy.

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Contact Energy, New Zealand's largest listed electricity company, plans to cut more than 100 jobs as part of a push to save more than $40 million.

The Wellington-based company is reported to have told staff it aimed to cut 10 per cent of its 1100 work force across the board by the middle of the year. Job losses would be felt across all sectors of the business.

Along with the job losses, Contact also plans to save money through upgrading its IT systems.

The layoffs come just days ahead of Contact’s half year financial results which are expected to be good, with operating profits up 8 per cent.

Contact chief executive Dennis Barnes is due to report its half year result to the end of December next Tuesday.

Analysts were expecting a “good result” with operating profit expected to be up 8 per cent to almost $250 million for the half year. The result was expected to be especially good, given a planned outage at the company’s Auckland power station at Otahuhu and an unplanned outage at a Stratford power station at the same time, according to a Forsyth Barr preview.

Contact has made no formal announcement to the stock exchange about the planned job cuts.

Contact shares closed at $5.17 today, down 1c.

About half Contact’s generation is thermal, with the balance from hydro power and growing geothermal generation.

Its big new 166 megawatt Te Mihi geothermal station near Taupo is due to be running by the middle of the year.

Late last year, Barnes signalled returns to shareholders were likely to be ramped up once the company’s big investment programme ended in the current financial year.

Contact has spent at least $350m a year on capital investment recently but that would drop to $100m from 2014. The policy of paying 80 per cent of underlying earnings would be reviewed in light of the higher cashflow, Barnes said.

Contact’s new Ahuroa gas storage facility and the Stratford ‘‘peaker'' power plant, as well as Te Mihi, should have a positive impact on cashflow, which should allow Contact to increase dividend payments.

Contact also has power stations at Clyde in Central Otago, Taranaki, and Auckland as well as its geothermal generation at Taupo.

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