22 Feb 2011

Contact Energy half-year profit takes hit

12:48 pm on 22 February 2011

The listed power company Contact Energy has reported a decline in its first half-year profit, due to unfavourable weather and higher costs.

The energy retailer made a profit of $83.7 million in the six months to December, a drop of 4% on the same period a year earlier.

Contact, which is 51%-owned by Australia's Origin Energy, declared an unchanged interim dividend of 11c a share.

But the company says it's a good result, given the tough market conditions, and it's pushing ahead with construction of a geothermal plant near Taupo.

Revenue rose 12 percent to 1 point 2 billion, as it sold more power, at higher prices.

But that has been offset by higher network and gas costs, and the start of the emissions trading scheme.

Contact's managing director, David Baldwin, says competition for customers continues to intensify, with 30-thousand homes switching retailers each month.

Mr Baldwin says customers think energy companies are making huge profits, but in reality retail margins fell from seven percent to five percent.

Nevertheless, he says Contact is performing well in challenging conditions.

Meanwhile, Contact will build its Te Mihi geothermal power plant, near Taupo - a 623-million dollar project that it plans to fund by a mix of debt and new shares.

Mr Baldwin says once it's completed by mid-2013, the 166 megawatt plant will reduce generation costs, and provide enough electricity to meet growing demand.

Contact Energy shares have falen 9 cents to $6.10 each.