Contact Energy’s finances hit by headwinds

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Higher costs and tougher competition have dragged down Contact Energy’s profits, but it’s still planning to increase dividends.

The country’s biggest power company posted a net profit of $132 milllion for the year ended June, down 13 percent on the previous year.

Chief executive Dennis Barnes said rising costs of generation because of the hot summer, as well as high oil prices and battling to hold on to customers, had hurt its earnings.

“The additional cost of gas and carbon to run harder has weighed on our financial performance in the period.”

“Increased competition in the commercial and industrial electricity segment reduced retail margins, and rising oil prices increased the cost of LPG, which was not fully passed through to customers,” he said.

Operating earnings for its retail business and its generation business were lower. However, its operating costs fell by 8 percent, offsetting losses and it increased the full-year dividend to 32 cents per share.

Contact is selling its Ahuroa Gas Storage facility and its LPG business Rockgas for a total of $460 million, which it intends to use to pay down debt and streamline its business.

Mr Barnes said the company would focus on delivering more low carbon, renewable electricity. He expected consumer demand for environmentally friendly energy to increase.

The company is also looking to increase its dividend for this year to 35 cents a share.

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