Contact Energy, which has hydro assets on the Clutha River, produced a result which was a ''little disappointing'', in the six months ended December, Forsyth Barr broker Andrew Rooney said yesterday.
Operating profit was up 4.3% to $264 million in the period but Mr Rooney was expecting operating earnings of $269 million.
The energy business segment of the earnings was $9 million lower at $244 million, less than expected but partially offset by the ''other segment'' product a $20 million operating earnings result - $4 million better than expected.
''We are somewhat surprised at the underperformance of the energy business segment as Contact's monthly operating statistics effectively provide the monthly operating result. It appears there has been a late adjustment which has not been explained in the materials provided,'' he said.
Although the result was disappointing, there did not appear to be any issues affecting long-term thinking on the company, Mr Rooney said.
''Our full-year forecast is likely to be pulled back slightly but we do not expect a material change to our target price following further analysis of the result.''
The interim dividend was unchanged at 11 cents per share, or 83% of earnings after tax of $92 million. While Contact had talked in the past about increased capital returns, it was silent yesterday.
Mr Rooney said he expected Contact to delay increasing capital returns until after the election. The Labour and Green parties were proposing to establish a single pricing authority for the electricity energy if they formed the next government.
Contact chief executive Dennis Barnes said it was important Contact operated in a stable regulatory environment, given the long-term nature of the industry.
''Consumers are seeing clear evidence the current market is working with high levels of competition leading to lower prices. In the past six months alone we have seen customers continue to take up a range of discounted products in the market with overall savings of up to 22% on their electricity bill.''
Contact had committed to not increasing the energy component of its customers bills and believed the existing market structure, with improvements and transparency, would continue to serve New Zealand well, Mr Barnes said.
The company's earnings had become more predictable with the reduction in gas take-or-pay commitments, the upgrade of the interisland transmission link and investment in thermal plant flexibility.
Higher-than-normal inflows to hydro schemes avoided the need to run expensive thermal generation and reduced energy costs.
''With more customers on discounted prices, Contact maintained sales volumes and customer numbers in what remains a highly competitive retail market.''
Contact was continuing to hold market share in one of the most competitive retail electricity markets in the world, Mr Barnes said.
Strong competition and lower wholesale prices increased the number of electricity and gas customers on discounted products, resulting in reduced margins.
Warmer weather and lower usage per customer resulted in a reduction in residential demand but that was more than offset by increased sales in the commercial and industrial business.
Contact yesterday registered a five-year retail bond offer expected to raise up to $250 million with an interest rate of between 5.8% and 6%, based on investor demand, he said.
Contact was approaching the end of its refinancing programme with new funding secured through a wholesale bond, a private placement with United States institutional investors and additional bank facilities.
The refinancing programme aimed to increase the duration and maintain the diversity of Contact's funding sources.
In an environment of low growth, Contact would target further efficiencies, while significantly reduced capital expenditure would generate greater free cash flow, Mr Barnes said.
For the remainder of the financial year, Contact would focus on completing the Te Mihi geothermal power station and implementing the retail transformation programme.
Those two projects would provide lower cost generation and new capabilities to offer products and solutions that better met customer needs, he said.
Meridian Energy reports its interim result this morning.
