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Contact Energy expects gas prices to rise further next year
5 September 2008, Source: Contact Energy and Lindsay Clark - The cost of natural gas is expected to rise again next year as the lower cost Maui legacy gas is exhausted, major gas user Contact Energy says.
In a presentation about its results for the June 2008 year, Contact Energy says that after a $87m increase in gas fuel costs for the 2008 year, gas costs are expected to rise by about a further $40m in the 2009 financial year.
This was because the legacy Maui 367 gas (obtained under the terms of the original Maui gas contract) would be exhausted and replaced with Maui ROFR (Right of First Refusal gas obtained at higher price market rates) and other gas arrangements.
Under the ROFR terms, Contact Energy secured 170PJ of gas and Vector 105PJ from the Maui joint venture parties. These arrangements began in April 2007 and run to December 2014.
Contact also said it had recently sought to acquire gas for long-term supply from 2014 to test the thesis for a new base-load combined cycle gas turbine (CCGT) generation station.
However the company said: “The responses did not provide sufficient insight into the long-term pricing of gas to support an investment in a new CCGT plant.”
Contact reported wholesale gas revenue in the 2008 year was 83% higher than in the 2007 year. The increase was largely due to short term sales in the period to other large wholesale gas users. These are not expected to recur in the 2009 year.
Retail gas sales volumes in 2008 were down 14% on 2007 while revenue reduced by 11%. The average sale price per unit of gas sold increased by about 3%.
Contact said its LPG customers increased by 3,500 to 52,500 in the latest year and the LPG side of the business looks set to continue to grow.
Contact Energy’s earnings after tax for 2008 was $232.8 million, 0.7 per cent higher than for the previous year.
