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Contact pulls plug on New Zealand wind projects

Contact Energy, the power company controlled by Origin Energy, will pull back from two big wind-powered projects in New Zealand after announcing an increase in annual profit and final dividend.

Earnings before interest, tax, depreciation, amortisation and changes in fair value instruments were $NZ541 million ($A484.07 million) in the year ended June 30, up six per cent on the previous year, the Wellington-based company said.

Net profit of $NZ199m was slightly above First NZ Capital’s expectation of $NZ191.7m.

It is exiting the Hauauru ma raki wind generation project on the Waikato coast, which would power up to 170,000 houses, and will not proceed for the time being with the Waitahora wind project near Dannevirke, which could power 70,000 houses, citing market conditions and the cost of large projects.

“Contact’s performance for the year has been characterised by the continued reduction in energy procurement costs and focus on retail operating performance in what remains an oversupplied and highly competitive market,” chief executive Dennis Barnes said.

The company increased its final dividend by two NZ cents a share to 14 NZ cents a share.

It has been saying for some time that it expects little growth in demand for electricity and that the retail market will remain highly competitive.

It has also cited the government’s partial privatisation of the state-owned electricity companies as a challenge, but one that it can met.

The government is detailing its plans for the partial privatisation of Meridian on Tuesday.

The company said investment in a flexible generation portfolio has reduced its reliance on large volumes of contracted gas.

It is driving on with a strategy of reducing energy procurement costs and says the completion of the Te Mihi power station near Taupo helps.

“The investments in gas storage and flexible generation, coupled with the reduction in gas purchase obligations, have enabled Contact to better manage and respond to the inherent volatility of hydro generation output in New Zealand,” Mr Barnes said.

Contact’s revenue fell to $NZ2.5 billion from $NZ2.68b.

The shares gained 0.9 per cent after the announcement to $NZ5.35.