A consumer backlash against Contact Energy has prompted an estimate that the company will lose 5% of its customers - and its share target value has been downgraded by brokerage firm Forsyth Barr.
Thousands of householders have inundated Contact's competitors to inquire about switching suppliers, following Contact's decision to raise electricity charges in the South Island by 10%-15%, and its proposal to double directors' fees.
Forsyth Barr financial adviser Ken Lister said the negative sentiment surrounding Contact's price hike and proposed increase of directors' fees had reached a "crescendo" at its annual general meeting on Thursday and he expected 5% of customers to go elsewhere. He described the announcement, just before an election, as "ill-timed".
Contact has 650,000 retail electricity, gas and lpg customers.
"Anecdotal evidence indicates that the negative sentiment has translated into customers switching to alternative supplies. We are now forecasting that Contact will lose 5% of its retail customer base by the end of 2009," he said in a statement.
However, he noted Contact would still sell all the electricity it generated, about 28% of national output, with the increased availability taken up by commercial clients.
Forsyth Barr downgraded Contact's target 12-month share valuations by 3%, to $9.88, but maintained a "buy" recommendation on the stock because Contact was building gas storage facilities and more power generation was becoming operational soon. Contact has been trading about $7.12.
Mr Lister's financial disclosure document is available on request.
