16 Oct 2013

Contact predicts subdued year

9:47 am on 16 October 2013

Contact Energy expects a subdued outlook for the year, predicting little growth in demand for electricity and the retirement of older and less-efficient plants when demand does increase.

The electricity generator and retailer told its annual shareholders' meeting it expects to benefit from transmission upgrades and the reduction in its gas take-or-pay commitments.

Chief executive Dennis Barnes said that, in the absence of growth in demand, the company was looking at other ways of increasing profits this year.

"Electricity demand in New Zealand hasn't grown for about five and there's been a fair degree of new generation capacity added to the market," he said.

"We're seeing that bear out now, with lots of strong competition and largely prices not going anywhere, in fact reducing in most places.

"So when a business is in that cycle you get efficient, you get closer to your customers and, really, that's what we're planning for the next few years."

Contact's business cycle was coming to an end so, as a business, it would earn more money because the value of those investments would be realised, Mr Barnes said.

He concluded there were two real themes for the coming year - a limited outlook for increased demand and an oversupply - and said the company had to manage its costs as well as it could.