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Contact improves future gas portfolio to give more breathing space
7 December 2004 - Contact Energy, one of the country’s largest energy suppliers, says the gas deals which it has signed in the past six months has lifted its forward gas entitlements by almost 60% providing valuable breathing space.
This has secured gas supply for core power generation needs until late in the decade.
The Wellington–based company, in which Australian company Origin Energy recently became a majority shareholder, also holds 40% of the gas retail market and 30% of both the electricity generation and electricity retail markets.
In presentations made recently to international investors about its 2004 annual results Contact says it still faces a fuel challenge with approximately 50% of the company’s electricity generation based on natural gas.
Contact is looking to extend its fuel horizon through a range of strategies. These include purchasing additional gas where economic, encouraging upstream competition, clarifying existing contractual entitlements, increasing flexibility of generation portfolio and investigating LNG as a backstop fuel.
Contact is continuing to assess potential development of new thermal capacity with its Otahuhu generation site in Auckland already consented for an additional 400 MW plant and its Stratford station site in Taranaki consented for a new 500 MW gas-fired development.
Meanwhile the company is expecting a 10MW capacity improvement for its Otahuhu B plant as a result of a compressor upgrade.
Retail gas sales fell slightly to $120.6m in the year to 30 September 2004, compared to $122.7m for previous year. Contact continues to see difficult conditions in the retail gas market.
In announcing Contact’s results of a net surplus of $144 million for the year to 30 September 30, chief executive Steve Barrett said that the company’s use of gas fell to 50.6 PJ from 71.6 PJ in the previous year.
A substantial factor in the reduced gas use was the decision to reduce generation and source electricity supply from the wholesale market at times when it was more cost-effective than running its gas-fired power stations.
Mr Barrett said that the dynamics of Contact's gas business continued to experience fundamental change.
"We are moving from the Maui era characterised by a relatively secure and fuel-rich environment to one in which scarcity and uncertainty will tend to prevail. This is especially so during the next few years as we move from dependence on Maui to reliance on a range of smaller existing and new fields.”
