Contact Energy Ltd. (CEN), New Zealand’s largest publicly traded power company, will revert to cash dividends next year and may return funds to shareholders from 2014 as it ends a phase of new investment.
“We’re coming to the end of this period of significant capital investment,” Chief Executive Officer Dennis Barnes said on a conference call from Wellington. Capital spending will drop by more than two-thirds in 2013-14 and “that will be the time where we start to return some of that cash back to shareholders,” he said.
Contact has retained cash to help fund developments including the 166-megawatt Te Mihi geothermal power plant that is scheduled to finish next year. Dividends have been paid through bonus shares, which the company buys back from shareholders who elect that option.
The so-called profit distribution plan will be used for the last time when Contact pays a 12 cents-a-share second-half dividend in September, the company said in a statement today after announcing net income rose 27 percent to NZ$190.4 million ($154 million) in the year ended June 30.
“It is pleasing to see an improvement in earnings that should see Contact revert to cash distribution in 2013,” Chairman Grant King said in the statement.
Contact shares rose 3 cents, or 0.6 percent, to NZ$4.88 as at the 5 p.m. market close in Wellington.
Capital spending will fall to about NZ$350 million in 2012-13 from more than NZ$550 million in the previous year, the company said today. It is forecast to average NZ$100 million or less for the three following years, Barnes said.
Electricity demand fell 0.1 percent in the year through June 30 and is unchanged over the past two years, according to Contact figures.
“In the current low demand growth environment we will not be committing to further generation developments in the near term,” Barnes said. “There is nothing today that would say to me that significant new generation is needed any time in the next five to six years.”
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