Ann: ADDRESS: CEN: Chairman's Address to CEN

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• Summary: ADDRESS: CEN: Chairman's Address to CEN 2012 AGM
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CEN
17/10/2012 10:03
ADDRESS

REL: 1003 HRS Contact Energy Limited

ADDRESS: CEN: Chairman's Address to CEN 2012 AGM

17 October 2012

Chairman's Address to Contact Energy 2012 Annual Meeting of Shareholders

About five years ago we recognized the importance of making Contact Energy's
generation and fuel portfolio more flexible to respond effectively to changes
in the New Zealand energy market. At that time we didn't foresee the impact
the Global Financial Crisis would have on global and regional economies,
including here in New Zealand. This has led to a material reduction in the
demand outlook for Energy in New Zealand. Nor could we anticipate a number of
years of higher than normal rainfall which has created a surplus of energy in
the New Zealand market.

These circumstances have resulted in a number of challenging years for
Contact particularly in terms of financial performance. In this light, it is
particularly pleasing that the strategy for increased flexibility in
Contact's generation and fuel portfolio is now contributing to improved
financial performance.

Financial Performance
For the financial year ended 30 June 2012, EBITDAF increased by 15 percent to
$509 million, and underlying earnings after tax for the year were $176
million, an increase of seventeen per cent from the year before.

Progress on our strategy
During the year we saw the benefits of Contact's more flexible generation and
fuel portfolio - a pleasing and affirming result of our strategy given the
continued environment of suppressed demand, excess generation and heightened
competition for retail customers. As examples:
o The Stratford peakers, were put to use, by supplying valuable thermal
generation in the low hydro generation environment.
o Our Ahuroa gas storage facility played its part in our strong results,
storing gas in an oversupplied gas market in the first half of the year, and
providing extra gas in the second half as the peakers were called into play.

o We further enhanced the diversity of our generation assets with the
addition of the diesel-fired Whirinaki power station which provides
additional cover in periods of very high prices.
o We divested our interest in the Oakey power station in Australia which
allows us to concentrate our efforts entirely on New Zealand.
o Contact maintained its retail market share - a considerable accomplishment
considering the high levels of customer churn and generally suppressed
demand. In particular, we continued to see the success of our On-Line-On-Time
product at a time when customers have become increasingly concerned about
higher energy costs.

We also continue to invest for the future to ensure the ongoing
competitiveness of our business
o Construction continued apace at the 166 MW Te Mihi geothermal development,
near Taupo. We expect this project to be completed towards the end of this
financial year.
o The programme of implementing SAP in our Retail business is progressing;
however, the project completion date is looking later than planned to ensure
the smoothest possible transition.

Dennis will describe these activities in more detail in his presentation.

Capital Expenditure and Balance Sheet
During the year we invested over $550 million to further the implementation
of our strategy.

In order to further strengthen and improve balance sheet flexibility, we
added long-term funding during the year through the $200-million issuance of
capital bonds. We also established a long-term, $105-million export-credit
agency financing for the Te Mihi project.

We expect that capital expenditure in the current year will remain relatively
high, although lower than the prior year. In the forward years our committed
capital expenditure is substantially reduced.
Distribution to shareholders

Given the year's performance and a reduction in forward capital requirements
your Directors resolved that the final distribution to shareholders be the
equivalent of 12 cents per share, a total distribution for the year of 23
cents per share, representing a payout ratio of 93 per cent of Contact's
underlying earnings per share. This distribution is the same as the prior
year but on an increased number of shares on issue due to the use of the
profit distribution plan. Contact has utilised the Profit Distribution Plan
for the last time in making this distribution.

Outlook
Looking to the future, we expect little growth in demand for electricity and
the retail market to remain highly competitive.  The government's proposed
partial privatisation of the State Owned electricity companies will mean that
the industry, including Contact Energy, will be in the full glare of scrutiny
from investors, customers and the community to maintain a reliable and
competitive supply of energy. A challenge Contact Energy is sure the industry
can meet.

The Board is confident that our strategy over the past five years provides
Contact with a more flexible generation and fuel portfolio to compete
profitably in the environment. Your company is positioned well for the years
ahead.

When New Zealand does experience increased demand for electricity or older,
less efficient plant is retired Contact is well positioned with some of the
most competitive development opportunities, particularly in Geothermal power
generation.

With the current capital investment programme coming to end the Contact Board
will be considering how best to utilise the significant cash-flow of the
business and how this could best be applied to the benefit of shareholders.

In concluding, I would like to thank my colleagues on the Board, your
directors, for their contribution during the year. We also thank all the team
at Contact for their ongoing efforts on your behalf.

We would also like to thank you, our shareholders, for your continued support
of the company.

ENDS
End CA:00228539 For:CEN    Type:ADDRESS    Time:2012-10-17 10:03:52