Indications are there will be some tough times ahead for the company, which reported operating earnings of $224.7 million for the six months ended December, down 20% on the $281.9 million reported last year.
Earnings before interest and tax were hit hard by a change in "fair value", and last year there was a $21 million gain on the sale of Mokai geothermal land and rights.
Ebit fell to $70.1 million from $200.3 million in the previous corresponding period (pcp).
The shares fell more than 4% as a small number of investors took fright, but there was a recovery as bargain hunters stepped in.
ABN Amro Craigs broker Chris Timms said he would continue to hold a "fairly cautious view" on Contact and was mindful of the lack of profit forecast.
Contact had mentioned transmission constraints and the battering it had received by a winter drought and summer deluge.
In the first quarter of the financial year, the South Island had one of the worst droughts in recorded history. During that period, Contact's South Island generation was limited to about 80% of the company's South Island demand.
Contact was required to buy the extra electricity from the wholesale market at an average price well above the average purchase price.
Mr Timms said the company kept its distribution to shareholders intact and that had been well received. The company intended to introduce a profit distribution plan, effective from and including the December half-year.
Under the plan, all shareholders would receive distributions in the form of non-taxable bonus shares, with the option to have those shares, or a portion of them, bought back by Contact for cash.
The plan was expected to retain cash within the company, he said.
Contact chief executive David Baldwin said towards the end of 2008 the winter drought conditions had reversed, with some of the highest recorded inflows into the South Island's hydro lakes. In addition to the deluge, the removal of about 180MW of Southland electricity demand following the unexpected closure of an aluminium production line at the Tiwai Point aluminium smelter in November further limited generation from Contact's Clutha power stations.
As a consequence of transmission constraints in the lower South Island, with an excess of energy, Contact and other South Island hydro generators were forced to spill significant volumes of water during summer.
Mr Baldwin said there was no certainty as to the timing of the return of the Tiwai demand, but Transpower was implementing a plan expected to increase the transmission capacity out of Otago-Southland and help alleviate the lower South Island transmission constraint.
"What the six-month period reinforces is how dependent New Zealand is on a robust and reliable transmission grid."
New Zealand had a heavy reliance on hydro generation and the potential requirement for increasing quantities of wind generation, although its major load centres were geographically isolated from key generation sources.
A modern transmission grid that accommodated changing electricity generation and demand patterns was critical to the efficient operation of the electricity market.
"We are dealing with the impacts of historic under-investment in the country's transmission network," he said.
Contact had been developing various alternatives aimed at increasing its available funding, including arranging new bank debt facilities, extending existing facilities and preparing to raise $300 million capital in the domestic bond market.
