“This is a strong result for Contact, further proving the effectiveness of the integrated energy business model, which seeks to optimise a balance between generating capacity and total retail demand,” said Contact chief executive Steve Barrett.
The balance between energy supply and demand had tightened in both the electricity and gas markets over the previous 12 months, leading to increases in gas and electricity tariffs that reflected rising wholesale prices.
One of the key factors in earnings growth was the increase in average wholesale electricity prices. Average prices, at NZ$55.57 per MWh during the 2005 January-March 2005 period, were 54% higher than in the same quarter a year earlier.
There was strong demand in the greater Auckland region, a major planned maintenance outage at Contact’s Taranaki Combined Cycle plant, and restricted operations at Genesis Energy’s Huntly power station because of Waikato River water temperatures.
Contact was able to make greater use of its hydro facilities and also run the aging gas-fired New Plymouth station to offset the loss of the Stratford TCC shutdown.
Barrett said retail power tariffs were now approaching the levels needed to support the cost of new generation, which had been “a key factor in the announcement of various plant upgrades and new generation investments by Contact and other electricity companies.”
Meanwhile, Contact’s total gas revenues increased by 27% to NZ$77.8 million, reflecting increased sales to wholesale customers, and retail tariff adjustments to reflect rising gas prices. Total gas usage increased to 25.3PJ, compared with 22.7PJ for the same period a year earlier.
Wholesale gas sales to external customers rose by 61% to 3.8PJ, resulting in revenue rising to NZ$17.9m, a 61% increase, due to sales to Genesis and small opportunistic sales to other wholesale customers.
Retail gas revenue was NZ$59.9m, compared with $50.4m, while total retail gas volumes fell by 10% to 3.8PJ. Gas customer numbers, at 87,000, however remained some 8000 below levels at the same time last year.
Barrett said Contact continued to investigate future fuel options, particularly accessing new gas supplies to run the company’s existing and planned power stations in Auckland and Taranaki. Work was also continuing, in conjunction with Genesis, on the feasibility of LNG importation.
“While this is a backstop rather than our preferred future fuel option, we remain confident about the commercial viability of imported natural gas for New Zealand,” he said.
“We are still conducting technical studies and are some months from announcing a preferred site for the required facilities.”
Contact was planning some seismic work in its offshore Taranaki licence PEP 38493 and assessing farmout opportunities, according to Barrett.
Finally, he warned the government against any industry over-regulation.
“The market-led parts of the sector are working increasingly well, responding to price signals and appear capable of delivering security of supply as long as they are allowed to continue working,” he said.
“We continue to be concerned about the regulatory environment. Under-investment in the national transmission system is a particular cause of concern and Contact would regard any attempt to compensate for this failure by moving towards central planning . . . as a serious backward step that could compromise New Zealand’s ability to secure necessary investment.’
