For its full year, operating profits were down 10.6% to $525million; underlying profit, excluding one-off items, was down 29%, or $66million, to $161million; and after-tax profit fell 43% to $133million.
Contact Energy (CEN) is shutting down its gas-fired 400MW Otahuhu power station in Auckland at the end of September, effectively replacing it with its new Ti Mihi geothermal power station north of Lake Taupo.
Chief executive Dennis Barnes said the profit decline was due to continued margin pressure in the retail electricity business, an unfavourable movement in the fair value of financial instruments and transition costs from CEN's Retail Transformation project.
Those were partially offset by a reduction in tax expense, including a $16million tax adjustment for depreciation on powerhouses, he said.
The board announced yesterday it intended to conduct a share buyback programme starting in the first half of the 2016 financial year.
''As part of ongoing debt refinancing, Contact is considering making an offer of unsecured, unsubordinated fixed-rate bonds to institutional investors and New Zealand retail investors in the coming weeks,'' Mr Barnes said.
The final shareholder distribution for the year was 15c, taking the full-year dividend to 76c.
CEN shares were up 1% at $5.21 following the announcement.
Mr Barnes said that after investments made, free cash flow increased by 21% in 2015, and with no near-term opportunities for capital investment, it was pleasing to declare total dividends for the year of 76c per share.
Craigs Investment Partners broker Peter McIntyre said the result was in line with expectations.
The Otahuhu closure announcement, when taken together with Genesis' recently announced future closure of the Rankine units at Huntly, meant there should be a positive effect on the whole electricity-generation sector.
CEN also announced yesterday plans to complete a major maintenance programme to provide an additional 24,000 hours of efficient base load generation from its Taranaki combined-cycle gas-fired power station.
Mr Barnes said, ''These decisions reflect the important role that gas-fired generation will play in the future, but also the transition the industry is making [to renewable energy].''
Mr McIntyre said annual operating cost savings from closing Otahuhu could be about $15million, including $7million of gas transmission costs, while the Otahuhu land sale could release more than the cost of upgrading the Taranaki combined-cycle contract.
Mr Barnes said maintaining sales volumes had been important to CEN as it expanded its share of the small-business market, while cooler temperatures drove a 1% increase in residential use per customer.
However, this was partially offset by residential customer losses as CEN implemented its retail system.
''Pleasingly, as our system has stabilised, we have reduced the rate of customer losses to a level below the industry average,'' Mr Barnes said.
