Ann: FLLYR: CEN: Contact Energy Limited 2014 Full Year Results

• Release Date: 18/08/14 08:31
• Summary: FLLYR: CEN: Contact Energy Limited 2014 Full Year Results
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					CEN
18/08/2014 08:30
FLLYR

REL: 0830 HRS Contact Energy Limited

FLLYR: CEN: Contact Energy Limited 2014 Full Year Results

CONTACT ENERGY 2014 FULL YEAR RESULTS

Name of Listed Issuer: Contact Energy Limited

For the year ended: 30 June 2014

This report has been prepared in a manner which complies with generally
accepted accounting practice and gives a true and fair view of the matters to
which the report relates and is based on audited accounts.

CONSOLIDATED INCOME STATEMENT

Current Full Year NZ$m; Up/Down %; Previous Corresponding Full Year NZ$m

EBITDAF (Earnings before net interest expense, tax, depreciation,
amortisation, change in fair value of financial instruments and other
significant items - non-statutory measure) $587m; up 8.5%; $541m

PROFIT FOR THE FULL YEAR: $234m; up 17.6%; $199m
EARNINGS PER SHARE: 32.0 CPS; up 17.6%; 27.2 CPS

UNDERLYING EARNINGS AFTER TAX (excludes significant items that do not reflect
the ongoing performance of the Group - non-statutory measure) $227m; up
12.4%; $202m
UNDERLYING EARNINGS PER SHARE: 31.0 CPS; up 11.9%; 27.7 CPS

FINAL DISTRIBUTION*: 15.0 CPS
* In the form of a cash dividend

Record date: 3 September 2014

Dividend Payment Date: 15 September 2014

MEDIA RELEASE

Monday 18 August 2014

Flexible portfolio delivers in highly competitive market

Overview of results

"The completion of Contact's current investment programme in over $2 billion
of new assets is evident in the strong results our business has delivered in
FY14. Our diverse and flexible generation portfolio, supported by a reduction
in gas take-or-pay commitments and the upgrade of the inter-island
transmission link, allowed Contact to benefit from higher than normal inflows
to hydro schemes. The commissioning of the Te Mihi geothermal power station
in May 2014 was a major milestone for the company and completes this stage of
geothermal growth, and demonstrates Contact's geothermal expertise. A
continued focus on customer service and competitively priced products saw a 1
per cent increase in retail sales, during a period where we implemented our
SAP customer billing and service system" said Dennis Barnes, Contact Chief
Executive.

Contact reported profit after tax for the year ended 30 June 2014 of $234
million, up $35 million (18 per cent) compared with the prior corresponding
period (FY13). Earnings before net interest expense, tax, depreciation,
amortisation, change in fair value of financial instruments and other
significant items (EBITDAF)  were $587 million, $46 million (9 per cent)
higher than FY13. Underlying earnings after tax  (profit for the period
adjusted for significant items that do not reflect the ongoing performance of
the Group) were $227 million, $25 million (12 per cent) above FY13.

The increase in EBITDAF is primarily due to a reduction in the cost of energy
arising from increased hydro generation and the receipt of $43 million of
compensation as a result of the delayed start-up of the Te Mihi power
station. This higher level of EBITDAF is expected to be sustained in FY15
with a full year of Te Mihi operation. The increases in underlying earnings
after tax and profit for the period were driven by the increase in EBITDAF,
partially offset by the inclusion of depreciation and interest costs for Te
Mihi and Retail Transformation from the beginning of May 2014.

The Contact Board of Directors resolved that the final distribution to
shareholders would increase by 1 cent per share to the equivalent of 15 cents
per share, resulting in a full year dividend of 26 cents per share. The
distribution represents a payout ratio of 84 per cent of Contact's underlying
earnings after tax.

"The business is continuing to adapt to the reality of no demand growth and
increasing competition and innovation in the retail market.  Culture change
is being led by our continued focus on the health, safety and well-being of
our people and enhancing the customer experience. I believe a culture that
delivers safety and has the customer at the centre of its decisions will
deliver stronger outcomes for all stakeholders. While our total recordable
injury frequency rate is in-line with FY13, the journey we are on to improve
safety through visible and active leadership, encouraging a learning culture
and simplifying our management systems will help us achieve our aspiration of
zero harm and improve performance across all areas of the business.

We are continuing to hold market share in one of the most competitive retail
electricity markets in the world, with our range of products and payment
options remaining popular with customers both at home and in business. The
number of customers switching electricity provider in FY14 increased by 10
per cent, driven by the continued growth of smaller competitors, increased
innovation and targeted offers from existing retailers and several new
retailers entering the market. Retail margins remain under pressure with
price increases only recovering network cost increases. As the latest
Statistics New Zealand Quarterly Survey of Domestic Electricity Prices shows,
the annual rate of increase in the energy component of tariffs was 0.5 per
cent over the past three years and was only 0.3 per cent in the past year; in
the last quarter of the year the energy component decreased by 0.7 per cent.
Warmer weather and home energy efficiency measures resulted in reduced
residential demand; however, for Contact this was more than offset by
increased sales in the commercial and industrial business, with total
electricity sales increasing 1 per cent or 101 GWh.

A 14 per cent increase in our hydro generation in FY14 reduced the need to
run more expensive thermal generation and reduced our cost of energy. As
expected, with take-or-pay gas no longer such a constraint, utilisation of
our combined-cycle gas-fired power stations continued to decrease with
third-party supply increasingly used to meet customer demand. Te Mihi has
reduced our generation costs which, combined with lower future gas
take-or-pay constraints and New Zealand's only gas storage facility, means
our thermal power stations will only operate when we can achieve an economic
return. These factors contribute to making Contact's earnings more
predictable," said Mr Barnes.

Refinancing programme

Over the past 14 months Contact raised $773 million in new funding to
refinance its $705 million of 2014 maturities and to redeem the $200 million
Capital Bond in November 2013. "Our refinancing programme aimed to increase
the term and maintain the diversity of our funding sources. I am pleased that
through the utilisation of bank debt, issuance of United States Private
Placement notes and domestic retail and wholesale bonds we have been able to
achieve this objective," Mr Barnes said.

Looking forward

Contact is focussed on enhancing the customer experience, increasing the
efficiency of existing operations and managing cashflow. The $2 billion
capital investment programme has positioned the business for current market
conditions with no significant capital expenditure required in the immediate
future.

"The work we have completed over the past five years sees the business well
structured and our employees motivated to deliver. With intense retail
competition we need to find ways to reduce our costs to acquire and serve
customers and I believe our SAP customer billing and service system will
provide us with an advantage. Process efficiency, mass market segmentation,
revised pricing models and improved digital capability will all provide
opportunities to leverage the new system to reduce cost to serve at the same
time as enhancing customer experience. It will take time to fully realise the
benefits of the new systems and processes and provide a positive contribution
to profits above the increase in interest and depreciation costs.

Our investment in the Ahuroa gas storage facility and the flexibility of our
portfolio allows us to take a patient approach to gas contracting beyond 2014
as we manage regulatory and demand uncertainty. In June 2014 we announced a
gas supply agreement to support the extension of our Te Rapa co-generation
contract. Completing the supporting gas purchase with Genesis Energy was a
significant step for Contact as we contemplate our future gas purchase
needs," said Mr Barnes.

The 2015 financial year will include a full year of Te Mihi generation,
replacing the contribution from the delay compensation, together with a full
year of associated depreciation and interest costs.

"It is important that we operate in a stable regulatory environment given the
long-term nature of our industry. The current market structure has delivered
a significant increase in renewable generation including our $623 million Te
Mihi power station which we were pleased to formally open last week.
Consumers are seeing clear evidence that the current market is working with
high levels of competition leading to lower energy prices. Contact has
positioned itself strongly with the right assets, the right systems, and a
strong pipeline of new products for the future which will continue to ensure
we serve our customers well," Mr Barnes said.

ENDS

Media enquiries: Shaun Jones 021 204 4521

Investor enquiries: Fraser Gardiner 021 228 3688
End CA:00253956 For:CEN    Type:FLLYR      Time:2014-08-18 08:31:03