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Source: Reuters -
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Contact Energy reported a 31% fall in half-year underlying earnings after tax to $79.9 million, as the company was battered by winter drought, summer deluge, and transmission constraints.
The underlying figure for the six months to the end of December excludes significant one-off items and a non-cash change in fair value of financial instruments net of tax.
Profit for the period was down 79% to $25.1 million, while operating revenue rose 10.9% to $1.24 billion.
Contact chief executive David Baldwin said on Tuesday that at the heart of the financial performance was the fact that the mix of generation which had historically largely insulated Contact's earnings from weather-driven volatility was stymied.
That was due to limitations arising from transmission constraints, primarily due to the loss of pole one of the HVDC inter-island link.
For example, in the first quarter of the financial year, the South Island had one of the worst droughts in recorded history, Baldwin said.
During that period Contact's South Island generation was limited to about 80% of the company's South Island demand.
Contact was required to buy the extra electricity from the wholesale market at an average price that was around 250% of the average purchase price during the prior corresponding period - when two poles were in operation - mainly due to transmission constraints.
But the average price Contact received for its North Island generation in the first quarter of the current financial year was just 65% of the cost of South Island electricity purchases, Baldwin said.
Towards the end of 2008, the winter drought had reversed with some of the highest recorded inflows into the South Island's hydro lakes.
In addition to the deluge, the removal of around 180 megawatts of Southland electricity demand following the unexpected closure of an aluminium production line at the Tiwai Point aluminium smelter in November further limited generation from Contact's Clutha power stations.
As a consequence of transmission constraints in the lower South Island, and an excess of energy, Contact and other South Island hydro generators were forced to spill significant volumes of water during summer.
An interim dividend of 11 cents per share was to be paid.
Contact shares closed at $6.05 on Monday, the lowest level during the past year after having been as high as $10.15 in April.
