Contact targets Aussie market for growth

Contact Energy is crossing the Tasman and entering the Aussie retail electricity market.

Contact targets Aussie market for growth

The company announced the plan today at its annual general meeting in Dunedin, with chief executive Steve Barrett saying the move into the Victorian retail sector was in line with Contact’s long-held strategic intentions for investment in Australia.

“As is well known, Contact has been looking at opportunities for growth in Australia for more than three years and, for the last 12 months, we have been working quietly on a retail initiative that in many ways is designed to replicate our success with Empower, the brand that has driven our New Zealand retail customer growth over the last two to three years.

“We now see an opportunity to export this knowledge and experience across the Tasman.”

Barrett said Contact had long regarded Australia as important because of its proximity, similar institutional structures and its regulatory and political environments.

“As we approach the limits of growth in New Zealand, it is a natural market for us to seek new growth.”

A key Aussie pre-requisite had been to secure a flexible energy supply to service the growth of a customer base in a market where it currently had no dedicated baseload generation.

“So I’m very pleased to be able to announce today that we have signed a long-term agreement with a major Australian generator to provide just such an energy supply. We are therefore able to plan the prudent creation of a retail customer base there,” said Barrett, who did not name the Aussie generator.

Contact was in the process of obtaining the necessary regulatory consents and had every reason to expect those consents would be granted so it could launch a retail offering to Victorian householders later this year.

With a population base similar to New Zealand’s and a recently deregulated electricity market, Victoria appeared the most attractive venue for entering the Australian retail electricity market.

“This is a modest and measured move into the Australian market. Our plans are ambitious, but realistic. We are not trying to take over the town, but believe after careful analysis that there is a strong niche opportunity for us in this market.

“We are thoroughly looking forward to bringing new competition, pricing and product offers to the consumers of Victoria.”

Contact deputy chairman (and Edision Mission Energy’s senior vice-president) Bob Edgell reassured Contact shareholders that there would be no fire-sale of EME’s international assets.

He said EME was not a “distressed seller” and was looking for a buyer or buyers for a package of international assets. EME would not quit Contact at a price that did not reflect its full value.

Pryke hinted at Contact’s possible takeover intentions of some EME assets, including those in Australia, by saying “we see a prospect that EME’s wider divestment process may create an opportunity to further Contact’s goal of building an integrated energy business in Australasia.”

Any major acquisition of EME assets would require approval by Contact’s minority shareholders.

Rumours recently re-emerged about EME’s cornerstone (51%) shareholding in Contact after Edison Mission chief executive Tom McDaniel resigned from the Contact board, saying he needed to devote significant time to implementing the EME international restructuring plan.


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