Wet winter keeps NZ power prices down

New Zealand's wet winter is keeping a cap on wholesale power prices and on the profits of thermal generators. Listed company Contact Energy yesterday posted a 7% decrease in net profit for the nine months to June 30.

Contact chief executive Stephen Barrett said the softer wholesale electricity prices were expected to continue to the end of September, Contact's full financial year.

Wholesale electricity prices averaged $NZ45.93/MWh for the first nine months of this financial year, compared with $NZ61.90/MWh for the equivalent period in 2000-01.

"This difference reflects the extremely dry, cold winter experienced in 2001," said Barrett, "for the 2002 winter, (hydro lake) storage levels are close to or above the mean."

Contact's earnings before interest, tax, depreciation and amortisation (EBITDA) for the nine months were static at $NZ219.5 million, compared with $NZ219.9 million for the equivalent 2000-01 period.

Wholesale electricity revenue was $NZ293.7 million, down 24% on the $NZ386.0 million achieved in the 2000-01 period. However, strong growth in retail customer numbers and sales volumes increased Contact's total electricity revenue by 11% to $NZ541.1 million.

External revenues from Contact's gas business for the nine months were $NZ205.3 million, slightly down on last year ($NZ208.1 million), reflecting the loss of some lower margin customers. Total external sales volumes for the period were 37.4PJ, compared with 45.6PJ for the equivalent 2000-01 period.

Contact's total gas and electricity customer base stood at a new record high of 536,000 in June, with much of the recent growth coming from Contact's Empower division, which had moved into several new markets, including Christchurch and Wanganui, targeting business customers as well as households.

In aggregate, Contact's retail electricity sales grew by 20%, with sales totalling 3852 GWh in the nine months to June 2002 (3202 GWh in the 2000-01 period). This increased volume lifted Contact's average level of hedge cover from around 60% to approximately 77%. The average level of hedging through to the end of this financial year was likely to be about 80%.

Barrett confirmed Contact was continuing to pursue the possibility of purchasing some of the Asia-Pacific assets of NRG Inc.

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