21 Aug 2013

Contact aiming to keep customers, reduce costs

7:14 am on 21 August 2013

Two of Contact Energy's major projects are expected to be completed by the end of this year, which the company says will help retain customers and reduce costs.

Contact's after-tax profit rose 5% to $199 million in the 12 months to the end of June.

The company said it worked hard at keeping its retail customers during the last financial year, when customer numbers fell 1% to 435,500, and retail sales dropped 3%.

Contact increased its discount levels by 1% during the period to 15% to help retain customers and a new IT system, which focuses on the retail side, will go live by the end of 2013.

The SAP system is the most widely used customer service and billing system in the world and chief executive Dennis Barnes said it will mean the company will have fewer issues with customers in the future.

"In a production sense and in a consumption sense we have about a quarter of the market but in customer numbers we have 23% market share, so let's say round numbers that's half a million customers," he said.

"We've churn levels at 20%. That means we lose 100,000 customers a year and have to gain 100,000 customers a year. That's a lot of transactions and that's a lot of cost."

The easiest way to maintain market share is not to lose them in the first place, so a lot of the company's initiative is around retaining customers, Mr Barnes said.

"Sometimes it's quite simple - give people a lower price and they stay with you - sometimes it's more sophisticated than that."

The Te Mihi power station should also be completed during the year, which will provide Contact with additional lower cost generation.

The company has written off $67 million relating to its exploration of wind energy development, and is focussing on cheaper geothermal developments.

Mr Barnes said he expects stronger earning growth and and is not ruling out further increases to the dividend payout.