Contact Energy bucks the trend with small dip in annual profit
Monday, 15 August 2022
The second of the country’s big five electricity generators has reported its annual profit for the 2022 financial year.
In a result that appears to buck the trend for the wider power industry, Contact Energy announced a small dip in its profit for the year, which fell 3% to $182 million.
Manawa Energy, formerly Trustpower, was the first power company to report its results for the 2022 financial year in May, when it announced a near quadrupling of its annual profit to $120m in the year to the end of March.
State-owned generators Mercury, Genesis and Meridian are due to report their annual results over the next two weeks.
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The five generators experienced a strong year last year, when they raised their combined profits by 26% to $821m.
Meridian, Contact, Mercury and Genesis subsequently reported another jump in their combined net profit for the six months to the end of December, which rose a further 60% to $779m, from $487m during the same period in 2020.
The Major Electricity Users Group (MEUG) which represents major power users, commissioned a study last year that estimated Meridian – the largest of the power companies – had made $3.5b in “excess profits” over the past 20 years.
It said Meridian’s excess profit over the past five years alone had totalled almost $2b, questioning whether that could be evidence of “persistent market power”.
Meridian disputed the methodology of the study.
The MEUG subsequently commissioned a study of Contact Energy’s profits over the past 10 years, but chairman its John Harbord said that in Contact’s case it found no evidence of the company making excess profits.
The study estimated Contact had averaged an annual return of 2% above its cost of capital with “no big blips” during the period, which Harbord believed was not a matter of concern.
Contact Energy chief executive Mike Fuge said Contact had this year delivered “a solid financial performance despite unpredictable and volatile trading conditions”.
The result reflected lower wholesale electricity prices, lower sales and rising gas and carbon unit costs, which were partially offset by more renewable generation, he said.
Contact aimed to “lead New Zealand’s decarbonisation efforts”, he said.
Fuge announced Contact would build a new 51 megawatt (MW) geothermal power station adjacent to its existing Te Huka power station near Taupo at a cost of $300m, and confirmed its 44MW Te Rapa gas power station would close in June.
He reiterated Contact’s appeal for the industry and the Government to consider the creation of a new power business, which he has dubbed “Thermal Co”, to combine ownership of the country’s coal and gas power stations ahead of the phase out of fossil-fuelled generation.