CEN 0.36% $5.61 contact energy limited

Ann: HALFYR: CEN: Contact Energy Limited 2015 Half Year Results

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    • Release Date: 16/02/15 08:30
    • Summary: HALFYR: CEN: Contact Energy Limited 2015 Half Year Results
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    					CEN
    16/02/2015 08:30
    HALFYR
    PRICE SENSITIVE
    REL: 0830 HRS Contact Energy Limited
    
    HALFYR: CEN: Contact Energy Limited 2015 Half Year Results
    
    CONTACT ENERGY 2015 HALF YEAR RESULTS
    
    Name of Listed Issuer: Contact Energy Limited
    
    For the 6 months ended: 31 December 2014
    
    This report has been prepared in a manner which complies with generally
    accepted accounting practice and gives a true and fair view of the matters to
    which the report relates and is based on unaudited accounts.
    
    CONSOLIDATED INCOME STATEMENT
    
    Current Half Year NZ$m; Up/Down %; Previous Corresponding Half Year NZ$m
    
    EBITDAF (Earnings before net interest expense, tax, depreciation,
    amortisation, change in fair value of financial instruments and other
    significant items) $257m; down 3%; $264m
    
    PROFIT FOR THE HALF YEAR: $51m; down 54%; $112m
    
    EARNINGS PER SHARE: 6.9 CPS; down 55%; 15.3 CPS
    
    UNDERLYING EARNINGS AFTER TAX (excludes significant items that do not reflect
    the ongoing performance of the Group - non-statutory measure) $76m; down 22%;
    $97m
    
    UNDERLYING EARNINGS PER SHARE: 10.4 CPS; down 21%; 13.2 CPS
    
    INTERIM DISTRIBUTION*: 11.0 CPS
    * In the form of a cash dividend
    
    Record date: 4/03/2015
    
    Dividend Payment Date: 26/03/2015
    
    MEDIA RELEASE
    
    Monday 16 February 2015
    
    Contact positioned well in a highly competitive market
    
    Overview of results
    
    "The first half of the 2015 financial year (1H15) was a transitional period
    for Contact as the Te Mihi geothermal power station and the new retail system
    were integrated into the business. Following the go-live of our new retail
    customer billing and service system we have made considerable progress in
    stabilising the system and the processes that support it. A system change of
    this size always creates challenges and I am pleased with the way we have
    been able to manage this process and hold sales volumes stable during a
    period of continued intense competition and price discounting. We have
    integrated the Te Mihi geothermal power station into our generation portfolio
    increasing renewable generation from 68 per cent to 76 per cent of our total
    output. Work completed during an extended outage at Te Mihi has improved the
    performance of the plant to a level above the business case which, combined
    with improved availability across the remainder of the portfolio, is expected
    to further reduce our cost of energy" said Dennis Barnes, Contact Chief
    Executive.
    
    Contact reported statutory profit for the 6 months ended 31 December 2014 of
    $51 million; $61 million (54 per cent) lower than the prior corresponding
    period primarily due to an unfavourable movement in the fair value of
    financial instruments and transition costs from the Retail Transformation
    project and associated activities. This was further impacted by EBITDAF
    reducing by $7 million (3 per cent) to $257 million predominantly due to a
    $20 million reduction in retail margins as a result of the continued
    intensity of retail competition.
    
    Underlying earnings after tax  was $76 million, $21 million (22 per cent)
    lower than the first half of the 2014 financial year (1H14) reflecting lower
    retail margins and the impact of plant outages reducing EBITDAF by more than
    the increased depreciation and interest costs following the completion of the
    significant capital programme. Operating cash flow after tax was $227
    million, up $54 million (31 per cent).
    
    The Contact Energy Board of Directors resolved that the interim distribution
    to shareholders would remain stable at 11 cents per share. The distribution
    represents a payout ratio of 106 per cent Contact's underlying earnings after
    tax.
    
    "We remain focused on the health, safety and well-being of our people. Our
    people worked over 2 million hours which has resulted in 5 people being hurt.
    While this is still 5 more than we want, our year to date Total Recordable
    Injury Frequency Rate improved from 3.9 in 1H14 to 2.4 in the current period.
    We have also launched an integrated programme of work to further improve
    process safety performance and capability, simplify safety systems and
    advance our safety culture.
    
    The retail electricity market remains highly competitive with discounting
    dominating the market. Maintaining sales volumes has been important to us as
    we grew our share of the small business market and cooler temperatures drove
    a 1 per cent increase in residential usage per customer. This was partially
    offset by residential customer losses as we implemented our new retail
    system. As our systems and processes have stabilised we have been able to
    resume customer acquisitions which saw us reverse customer losses and add 450
    customers in January. On 1 April 2015, Contact will be passing through to
    customers changes in the costs charged by network companies, increases and
    decreases, but will not be raising the energy and service components of a
    customers bill that Contact controls," Mr Barnes said.
    
    In the generation and trading business cost of energy improved by $2 per
    megawatt hour as Contact's percentage of generation from renewable fuel
    increased from 68 per cent to 76 per cent following the commissioning of the
    Te Mihi geothermal power station. This was partially offset by lower plant
    availability and reliability, with extended outages at Te Mihi and Poihipi
    reducing geothermal generation, and increased unit gas and carbon costs.
    
    Looking forward
    
    Contact's capital investments have positioned it well for the New Zealand
    market with limited need for further investment in the operating business.
    
    "Following a transitional period in 1H15, the second half of the 2015
    financial year (2H15) is expected to see improvement. Te Mihi power station
    is now performing better than business case expectations which, combined with
    changes to the existing Wairakei resource consent, are expected to increase
    overall geothermal generation to over 1,600 gigawatt hours in 2H15. The
    increase in renewable generation, subject to hydrology, will allow further
    reductions in gas-fired generation and the cost of energy. New natural gas
    and LPG contracts will reduce costs and, along with Ahuroa gas storage,
    provide flexibility to cover any shortfall in renewable supply.
    
    In the retail business, our new customer service and billing system provides
    a platform for efficiency and innovation in a highly competitive market.
    One-off impacts due to changes in network billing timing are not expected to
    repeat going forward although retail margins are likely to remain under
    pressure.
    
    In FY16 I expect a reduction in the cost to serve our customers that will
    provide a positive contribution to profits above the increase in interest and
    depreciation costs from the new system. The supply side of the business will
    continue to focus on efficiency and availability. The new Te Rapa contract,
    utilisation of our diverse and flexible fuel and asset portfolio coupled with
    wholesale prices that reflect the reduction in oversupply are all expected to
    add to profitability.
    
    Moving forward Contact will be a strongly cash generative business, providing
    new opportunities to create value for shareholders. The New Zealand
    electricity market is mature with no material growth in electricity demand
    expected and risks around the future of the Tiwai aluminium smelter and
    continued erosion of retail margins. Industry consolidation would be typical
    and beneficial to a fragmented market such as New Zealand; however, these
    opportunities appear limited.
    
    We believe that in the current environment, material growth opportunities in
    New Zealand that leverage Contact's long history in geothermal and hydro
    development and operation are unlikely. Therefore, we are investigating
    options to leverage our skills and experience to grow in international
    markets.
    
    Our priorities remain the safe operation of our business, providing customers
    with the quality of service and products they expect and creating long-term
    value for our shareholders" said Mr Barnes.
    
    ENDS
    
    Media enquiries: Shaun Jones 021 204 4521
    
    Investor enquiries: Fraser Gardiner 021 228 3688
    End CA:00260643 For:CEN    Type:HALFYR     Time:2015-02-16 08:30:06
    				
 
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