By Gavin Evans
Feb. 24 (Bloomberg) -- Contact Energy Ltd., New Zealand’s biggest publicly traded power retailer, will replace dividends with bonus shares and sell NZ$300 million ($153 million) of bonds to fund new generation projects.
Investors will receive shares twice a year under a profit distribution plan that should allow the company to retain “several tens of millions” in cash annually, Chief Executive Officer David Baldwin said in Wellington today. The company will announce the bond sale terms next week.
Lack of funding means the company won’t proceed with two geothermal projects costing NZ$1.5 billion until it has the money in place, Baldwin said. The pace of the developments, intended to reduce the company’s exposure to rising fuel costs and emission penalties at its gas-fired plants, will depend on the success of bond sales, he said.
“Access to cash right now is extremely tight,” he told journalists. “You don’t want to be in a position anymore where you’re reliant on raising capital as you build.”
Contact fell as much as 4.1 percent to $NZ5.80 in Wellington after the company reported a 31 percent slump in underlying first-half earnings to NZ$79.9 million. That compares with the NZ$82 million estimated in a survey of six analysts by Bloomberg.
Generation Projects
Contact, 51 percent-owned by Sydney-based Origin Energy Ltd., is committed to a three-year, NZ$1.2 billion ($610 million) investment in gas-fired and geothermal generation.
The company may spend an additional NZ$3 billion on new generation, including two wind farms, depending on funding. Borrowing overseas or selling shares would be considered if it’s economical, Baldwin says.
No new investments in wind projects are likely before 2012 because of slowing demand growth and as the 27 percent drop in the New Zealand dollar against the euro in a year increased the cost of turbines and blades, he said.
Contact last month forecast a 15 percent slump in full-year earnings after transmission restrictions and reduced demand from Rio Tinto Group’s Tiwai Point aluminum smelter slashed first-half output from the company’s South Island dams by 14 percent.
Low lake levels early in the period forced the company to buy energy from rivals at a loss to supply customers. A transformer fault at the smelter in November, coupled with heavy rain that lifted hydro storage to above-average levels, then forced Contact and rivals to spill water.
To contact the reporter on this story: Gavin Evans at gavinevans@bloomberg.net
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