Origin is Contact’s majority shareholder. King, who is also Contact chairman, told the Contact 2006 annual general meeting in Auckland this morning that the board was satisfied the independent directors had behaved appropriately.
“They formed their opinions independently and had unlimited access to expert financial and independent legal advice,” he said.
“I am satisfied the independent directors fulfilled their obligations to Contact shareholders diligently and entirely appropriately with respect to the merger proposal.”
King said recent mergers by dual-listed companies to create BHP Billiton and Rio Tinto had driven “the outstanding performance” of those two companies over the past few years.
But such merger proposals were relatively complex and novel for the New Zealand market.
“This led, in our opinion, to a significant amount of uninformed commentary at that time,” King said.
There was a significant commitment of resources to pursue the Origin-Contact merger – to create one of Australasia’s largest integrated energy groups with a combined market capitalisation of about $A8 billion – that was considered to be in the best interests of Contact shareholders.
King said the Contact board met 13 times during the year, with the independent directors meeting an additional 17 times, to consider the merger proposal.
Minority Contact shareholders, led by Brook Asset Management and the New Zealand Shareholders Association, had called for the removal of the independent directors – Contact deputy chairman Phil Pryke, Tim Saunders and John Milne – claiming they failed to properly represent shareholders’ interests during the proposed merger.
But none of the motions from disgruntled shareholders is expected to be carried, with Origin using its 51.4% shareholding to vote them down.
King said the two key challenges facing Contact in the next year were investment in an uncertain regulatory environment, and securing competitive gas supplies for its gas-fired power stations.
He conceded that Contact was expecting its net profit for fiscal 2006-07 to be “materially lower” than last year’s $NZ280.9 million ($A234.7 million).
Natural gas powered Contact’s profit for 2005-06, with its gas-fired stations pumping out 41% more electricity to cover a significant shortfall in hydroelectricity generation.
Contact chief executive David Baldwin – attending his first AGM since replacing former boss David Hunt last May – said Contact’s gas-fired power stations helping the country through a winter of extremely tight electricity supply, showed “combined cycle gas turbines are the ideal back-up to New Zealand’s renewable generation base”.
Natural gas was the cleanest and most efficient fossil fuel back-up option available for New Zealand, producing under half the carbon emissions of coal.
Contact was also focusing on augmenting its renewable energy generation capacity, currently delivering about 50% of the company’s annual electricity production.
He signalled potential new investment in renewable geothermal generation options, depending on resource consents, of more than half $500 million over the next decade.
Baldwin also said Contact was currently doing due diligence on several wind farm sites through its alliance with Investec, which held a number of promising wind farm sites across both the North and South Islands, as well as exploring other opportunities with other wind farm developers.
