Pryke to step away from Contact chair: new skills needed, too much history
Contact Energy's [NZX: CEN] interim chairman and longest-serving director, Phil Pryke, will not stand again for the chairmanship of the company he helped form in 1995.
Mr Pryke explained his decision in an interview with BusinessDesk as Contact announced a "disappointing" 43% drop in net profit for the year ended June 30 to $133 million, with the closure by the end of next month of the Otahuhu-B gas-fired power station, which just a decade ago was part of the backbone of the New Zealand electricity system and today has been superseded by renewable energy and the use of fast-starting, gas-fired "peaking' plant.
The often controversial former chairman said there were two reasons for his decision not to stand.
"One, I don't want to be the focus," said Mr Pryke, who attracted the wrath of shareholders over the years for his support of takeover and merger bids by the company's two majority shareholders since privatisation, California's Edison Mission Energy, and Australia's Origin Energy, which sold the 53.1% stake it had held in Contact since 2004 at a discount earlier this month.
"More importantly, I want to be in a position to contribute to the real challenges that are going to arise in the future" by helping choose a new chairperson with the skills and experience to help Contact navigate potentially huge shifts in the balance of power between electricity generator-retailers and customers through the advent of off-grid generation, such as rooftop solar, and the use of online tools to manage electricity use more effectively.
Mr Pryke says he wants to stay on as a director.
He likened the potential disruption to the traditional model of electricity retailing to the changes that transformed the telecommunications industry from the mid-1990s to the mid-2000s.
"The whole substrata shifted from analogue to digital. A million things happened on top of that in mobile. A similar set of things will happen in 'customerland' in the electricity sector, except I expect the cycle time will be faster."
Contact's $101 million drop in profit reflected "continued margin pressure in the retail electricity business, an unfavourable movement in the fair value of financial instruments and transition costs from the retail transformation project and associated activities," partially offset by a $16 million tax reduction for depreciation on powerhouses.
Underlying earnings after tax were $161 million, 29% lower than in the previous financial year. Free cashflow was $363 million, up 21% owing to natural gas inventory movements and favourable retail collections more than offsetting the reduction in ebitdaf.
"As expected ... free cashflow increased by 21% in the 2015 financial year and with no near-term opportunities for capital investment it is pleasing to declare total dividends for the year of 76c per share," Contact chief executive Dennis Barnes said.