Contact Energy has delivered profits well ahead of analysts' expectations and is pleased with the result, despite its after-tax profit for the six months to December being down 0.3% at $78.8 million on last year's result.
Contact also announced yesterday it had signed an engineering procurement and construction contract for the $623 million Te Mihi geothermal project northwest of Lake Taupo.
This will be funded by debt and a rights issue, and includes backing from majority owner Australian-listed Origin Energy.
Contact shares were down 1.8%, or 12c, trading in low volumes about $6.07 after the announcement.
Last year's 11c per share dividend will again be paid this year.
Market consensus was for after-tax profit to fall within a range of $50 million to $71 million, with Forsyth Barr and Craigs Investment Partners brokers earlier forecasting profits expectations to be more than 20% down on last year's result.
Contact managing director David Baldwin said the result was good, given wet conditions during the half and significant external cost increases.
Craigs broker Chris Timms said the $78.8 million should be taken as a positive for investors.
He credited the better-than-expected result to delays in the commissioning of two Contact plants, at Stratford and Ahuroa, which meant depreciation costs were not included.
Forsyth Barr broker Peter Young said the result was much stronger than ''we were forecasting'', with the area of outperformance being lower than expected costs, particularly gas costs being $15 million lower than expected.
He said Contact could raise its debt gearing levels temporarily from 33% to 40% for financing the Te Mihi project.
Mr Timms said Contact's share price depression could reflect ''further downward pressure'' until more details of the rights issue were made available.
Mr Baldwin said revenues were 12% higher, largely because of higher sales volumes and prices, but increases in network and gas costs as well as the onset of carbon costs from introduction of the Emissions Trading Scheme largely offset the revenue increases.
''The financial year to date has been marked by encouraging financial performance and a series of strategic milestones including the completion of Ahuroa gas storage project, the current commissioning of the Stratford Peaking project and the start of construction of the Te Mihi geothermal project,'' he said.
A pro-rata renounceable rights issue would be launched ''in the near term'' to part-fund Te Mihi, he said.
Geothermal generation remained Contact's priority investment and Contact had consented two important new generation projects, the 250 megawatt Tauhara 2 geothermal project and the 156 megawatt Waitahora wind project.
''Contact had three major resource consent processes running contemporaneously.
Our focus has been on ensuring that new generation options are developed, consented and ready to execute when conditions are appropriate to do so, and we have achieved that,'' he said.
