Contact stung in contract dispute

Contact Energy has taken the unusual step of announcing it is involved in an NZ$8 million contractual dispute, but declining to name the other party.
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The Wellington-headquartered gas and electricity company last night said it had received a decision from an un-named arbitrator who had heard a dispute between Contact and a contractual counterparty. "Contact is not able to name the other party due to confidentiality restrictions," it said.

However, Contact was able to say the dispute related to conflicting interpretations over agreements between the parties, and that the other party had sought substantial damages from Contact.

The arbitrator's decision was released to the parties concerned yesterday, with the arbitrator awarding NZ$8 million in favour of the other party, and reserving his judgement on costs.

Company chief executive Stephen Barrett said Contact was "obviously disappointed" with the determination, which it would carefully study before deciding whether to appeal.

"Whenever contractual disputes arise, there is always a degree of litigation risk to take into account."

Though Contact believed it could have successfully defended the claim, it made a provision of NZ$5 million for disputes with this party in the financial statements for the year to September 30, to reflect this litigation risk.

Company spokesman Pattrick Smellie today said he expected Contact to decide before Christmas whether to appeal. "There is little else I can say as all aspects are subject to confidentiality; however we made a statement because this matter is pertinent to our shareholders."

US giant Edison Mission Energy currently holds a 51% stake in listed company Contact, which is New Zealand's largest wholesaler and retailer of natural gas.

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