18 Feb 2014

Contact Energy lifts first-half profit 27%

7:09 pm on 18 February 2014

Contact Energy has reported a 27 percent jump in first-half net profit after it managed to reduce generation costs and maintained market share.

The listed electricity generator and retailer reported a $112 million net profit for the six months ended December, compared with $88 million last year.

Contact Energy says higher than normal inflows to hydro schemes meant it avoided using more expensive thermal generation and reduced energy procurement costs.

Operating profit rose 4 percent to $264 million, while operating expenses reduced nearly 8 percent to $884 million.

The company says its margins came under pressure due to strong competition and lower wholesale prices, which resulted in more customers opting for discounts.

However, Contact says it continues to hold market share in what it calls one of the most competitive retail markets in the world.

Retail electricity demand fell in the six months, largely due to warmer than average winter weather, but Contact says this was more than offset by increased commercial and industrial sales.

Contact has benefited from the upgrade of the inter-island transmission link, which means a rise in the level of hydro generated electricity flowing from the South to the North Island.

It says the completion of its Te Mihi geothermal power station, expected to be running at full capacity by the June quarter, will further reduce generation costs.

The company will pay a steady dividend of 11 cents per share.

Contact Energy shares fell 2 cents to $5.17 in Tuesday trading.