8 Jun 2009

Contact's profits tipped to fall by a third

4:53 pm on 8 June 2009

Contact Energy has issued another profit warning, saying it expects full-year earnings to drop by about a third.

The largest listed energy company in New Zealand blames lower-than-expected wholesale electricity prices for the fall.

Contact Energy made $237.1 million in the year to June 2008. In January it warned this year's full-year profit could be a fifth below that. On Monday, it lowered that forecast again.

Managing director David Baldwin says after-tax earnings are now likely to be a third lower than those achieved last year.

High inflows in the South Island hydro lakes, combined with lower electricity demand, have resulted in lower-than-expected wholesale electricity prices.

Mr Baldwin says Contact has been frequently spilling water during the past three months, which has led to low wholesale prices and limited the need for thermal generation.

He expects wholesale prices to remain low for the rest of the financial year.

Contact's share price was down 10 cents to $5.70 after the announcement on Monday.