Announcement

ANNREP: CEN: Contact Energy - FY19 Results and Annual Report 08:30a.m. 
CEN  
12/08/2019 08:30  
ANNREP  
PRICE SENSITIVE  
REL: 0830 HRS Contact Energy Limited  
 
ANNREP: CEN: Contact Energy - FY19 Results and Annual Report  
 
Monday, 12 August 2019  
 
Investments in customer-centric processes, products and propositions benefit  
customers  
 
Key financial metrics  
[see table in attached media release]  
 
Highlights for the year  
 
o Introduction of new, differentiated products and digital service  
investments improve customer advocacy by 6 points. Smart payment solutions  
help customers avoid entering the credit cycle; outstanding debt at record  
low levels  
 
o Flexible generation portfolio with favourable hydrology, access to stored  
gas and strong risk management delivers a $56 million improvement to  
operating earnings over FY18  
 
o Cost efficiency programme continues to deliver capital efficiency, with  
cash spent on stay-in-business (SIB) capital projects down by $18 million  
(30%) and other operating costs down $11 million (5%)  
 
o Completed the sale of Ahuroa gas storage (AGS) and the sale of the Rockgas  
LPG business in the year, receiving net cash proceeds of $390m. These  
transactions simplify and focus the organisation and have strengthened our  
balance sheet  
 
o Committed to drilling four geothermal appraisal wells at Tauhara in  
anticipation of a final investment decision to develop a new renewable power  
station  
 
o Investment made in Simply Energy to add the capability required to deliver  
innovative solutions that will help our Commercial and Industrial customers  
transition to the low carbon solutions that Tauhara will deliver  
 
o Rewarding shareholders with increasing dividends. FY19 ordinary dividend of  
39 cents per share (FY18 32 cents per share)  
 
Putting our energy where it matters  
 
"It is pleasing to report a strong financial result for FY19 following the  
transformation programme we have successfully executed in recent years which  
included sector leading reductions to operating and capital expenditure, a  
deepening of the relationship with our customers and the simplification of  
our portfolio of assets", Chief Executive Dennis Barnes said.  
 
Contact reported a statutory profit for the twelve months ended 30 June 2019  
of $345 million, $213 million higher than the prior corresponding period  
after realising a gain on the sale of Rockgas and AGS of $170m. EBITDAF from  
continuing operations increased by $56 million, or 12%, to $505 million led  
by strong operational performance in the Wholesale business. Operational  
improvements resulted in a further reduction in other operating costs of $11  
million, 5% down on the prior comparative period. Operating free cash flow  
increased to $341 million, up 13% on FY18 on a combination of higher  
operating earnings, lower stay in business capital expenditure and interest  
costs that were partially offset by higher cash tax.  
 
Contact's portfolio of long-life renewable generation assets continues to  
provide the Board confidence to distribute ordinary dividends which target a  
pay-out ratio of 100% of expected operating free cash flow. For FY19 this  
equated to 39 cents per share, compared to the 32 cents per share declared  
for FY18.  
 
Connecting with our customers  
 
Contact's Customer business continues to reduce the cost to serve while  
improving the customer experience.  
 
Customer experience improvements saw a final quarter Net Promoter Score of  
+26, up +6 on the prior comparative period as operational efficiencies led to  
a 1% reduction in the cost to serve customers. Contact also invested in a  
refreshed brand, new products and digital capability to drive improved  
customer experience. These factors have contributed to customer churn being  
1.7 percentage points below the market. Despite strong operational  
performance, Customer EBITDAF was down $9 million to $67 million for the  
twelve months ended 30 June 2019, as continuing competitive pressures limited  
Contact's ability to recover rising costs for electricity and distribution  
networks, with the result also impacted by lower sales volumes to electricity  
customers.  
 
"Even with volatile wholesale prices, the retail electricity market remains  
highly competitive, with heavy discounting and large sign on credits the  
predominant tools for acquiring customers. In order to differentiate our  
products and services from our competitors we have delivered several smart  
customer solutions in the period, including our new payment methods - PrePay  
and weekly/fortnightly billing - that help customers manage their bills, and  
we launched new products to deliver customer choice and innovative rewards  
such as 'free-bill', 'promise plan' and our broadband and electricity bundle.  
To assist those who struggle to pay their bills we are removing prompt  
payment discounts and replacing them with simple plans such as our  
pre-existing 'basic plan' or guaranteed discounts.  
 
The significant improvement in customer advocacy and take-up of our new  
products gives me confidence that our transformation into a customer-centric  
digital energy company is progressing well" said Mr Barnes.  
 
Generating for the future  
 
Contact's Wholesale business is working with business customers, partners and  
suppliers to decarbonise New Zealand's energy sector.  
 
"Volatile wholesale market conditions driven by a shortage of gas have shown  
the value of our flexible and diverse generation assets, strong risk  
management, our continuous improvement programme and our access to stored  
gas", Mr Barnes said.  
Generation EBITDAF increased by $67 million to $464 million in the twelve  
months to 30 June 2019 compared to the same period a year ago, as production  
from hydro generation increased by 22%, or 752GWh after a dry FY18 in  
Contact's Clutha catchment. In addition, Contact supported the market by  
accessing gas stored in AGS and offering additional thermal generation above  
our contracted sales to meet wholesale spot demand.  
 
"New Zealand is undergoing a transformation from reliance on fossil fuels to  
renewable electricity. Contact is well placed to meet the expected growth in  
electricity demand which will result in meaningful reductions to the nation's  
carbon emissions by developing our large-scale consented geothermal  
development options backed by our world-class geothermal capability and  
strong balance sheet", Mr Barnes said.  
 
Outlook  
 
"After successfully lowering the cost of geothermal since our last build, we  
are taking the next step towards developing the geothermal power station  
project we have consented at Tauhara by committing to drill a series of four  
appraisal wells.  
 
Our commitment to reducing carbon emissions is not limited to the supply-side  
and we are actively partnering with our Commercial and Industrial customers  
through our investment in Simply Energy - an innovative energy solutions  
company that uses demand-side management tools to assist customers switch to  
electricity from their current energy sources, help them be more energy  
efficient, reduce their costs and cut their carbon emissions.  
 
We remain focussed on delivering on our transformation programme to reduce  
controllable costs, and seek opportunities to capture value from scale  
efficiencies through brownfield geothermal development and by leveraging our  
customer systems and lean operating model to improve returns", Mr Barnes  
said.  
 
ENDS  
Investor enquiries: Matthew Forbes +64 21 072 8578  
Media enquiries: Andrew Austin +64 21 644 167  
End CA:00338910 For:CEN Type:ANNREP Time:2019-08-12 08:30:13  

Click here to view related attachments.