The electricity generator and retailer yesterday reported a statutory loss for the year ended June 30 following $204 million of impairments relating to the closure of the Otahuhu power station, an assessment the Taheke geothermal resource was unlikely to be developed in the foreseeable future and a write-down of inventory gas.
The company reported an operating profit of $523 million for the year, down slightly from the $525 million reported in the previous corresponding period.
The underlying profit, which more companies are using to exclude items that do not reflect their ongoing performance, was down 2% to $157 million. Underlying earnings per share were 21.7c. Free cash flow was up 17% to $403 million. The declared dividend was 26 cents per share, down 66% from 76cps in the pcp.
Mr Foster said the majority of the financial year was conducted with Contact as a newly independent company.
``The big positive for Contact is the continued improvements in retail operating statistics, indicating it is getting on top of its retail issues. However, translating positive retail operating statistics into earnings is another matter.''
Contact had some positive commentary around demand growth, although Mr Foster said he was struggling to see underlying demand growth, notwithstanding the warm winter.
Overall, the result was in line with expectations but a slightly muted commentary meant there were unlikely to be material changes to Forsyth Barr's numbers. The current target price was $5.40 and the rating was neutral, he said.
Contact chief executive Dennis Barnes said the company's focus on offering customers the products and services they valued continued throughout the financial year and many customer-related performance measures were at historical-best levels.
``Ultimately, the value of these improvements is judged by our customers, so it was very pleasing to gain customers in 19 of the last 20 weeks of the financial year and to see our customer switching rates fall to 1.3% below the market average for the last six months. We still have a long way to go but I am encouraged by the progress we are making and believe we are now positioned to compete.''
Contact's cost of energy improved by $4 per megawatt hour in the financial year as lower purchase volumes and improved gas costs were supported by an increase in geothermal generation, he said.
In the 2016 financial year, 82% of Contact's generation came from renewable resources, up from 76% in the previous year.
The closure of Contact's Otahuhu and Mercury's Southdown power stations, combined with signs of continued demand growth, had reduced the amount of surplus supply in the market, Mr Barnes said.
Contact had continued to position its generation portfolio for an increasingly renewable future where the requirements for thermal plants were moving from larger generation units to flexible fast-start peaking generation.
In the past six months there had been some signs of volatility returning to the market, which Mr Barnes expected would increase and provide greater returns for fast-start peaking capacity. He expected Contact's operational performance to keep improving.
The expected cost savings would be largely offset by increased carbon costs and the start of Contact's 80MW Tiwai supply contract,
``With new products in market and retail price changes we expect to see increasing value in our retail offering but, ultimately, our performance will be influenced by our need to be competitive.''
