19 Feb 2014

Contact copes with flat demand

8:23 am on 19 February 2014

Contact Energy expects the market to remain competitive and demand to be reasonably flat because retail, commercial and industrial customers are using energy more efficiently.

The company reported on Tuesday for the six months to December, highlighting a 27 percent jump in net profit to $112 million, compared with $88 million last year.

Stripping out one-offs, underlying profit rose 5 percent.

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

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.

But Contact's chief executive, Dennis Barnes, says he doesn't expect commercial and industrial revenue to grow.

There had been continued revenue reduction from an oversupplied market, but strategic investment in flexible generation plants meant Contact's generation costs had fallen.

A lift in the propertion of generation coming from renewable sources - from 63 percent to 68 percent - was the biggest driver of the company's improvement in earnings.

Mr Barnes says Contact expects Te Mihi power station to be running at full capacity by the June quarter, and the company won't bear the cost of any overrun in the project because the contract is on a fixed-price basis.

The largest power company, government-controlled Meridian Energy, will report its results on Wednesday.