here Annual Report 2013 ANNUAL REPORT Contact 2013 ...is where we do our best work. CONTENTS Contact 2013 At Contact… We keep the lights burning, We are one of New Zealand’s largest listed companies but we operate with the same genuine concern for our the hot water flowing and the customers and communities as the smallest. We are BBQ fired up for around 566,000 integral to our customers’ lives – and our customers customers across the country. are integral to us. OUR BEST WORK 4 CASE STUDIES 30 CONTACT AT A GLANCE 12 HOW WE OPERATE 40 OUR BUSINESS MODEL 14 GOVERNANCE 56 WHERE WE OPERATE 16 REMUNERATION REPORT 62 KEY PERFORMANCE INDICATORS 18 STATUTORY DISCLOSURES 65 CHAIRMAN & CEO’S REVIEW 20 FINANCIAL STATEMENTS 69 OUR BOARD 26 INDEPENDENT AUDITOR’S REPORT 99 OUR LEADERSHIP TEAM 28 CORPORATE DIRECTORY 100 This Annual Report is dated 5 September 2013 and is signed on behalf of the Board by: Grant King Sue Sheldon Follow us at facebook.com/contactenergy Chairman Director OUR BEST WORK Contact 2013 “The kids think there’s always money on the card – they think nothing of a 30 minute shower.” Contact customer research Everyone in the family has unique habits when it comes to energy use. That can make it tough for households to manage their energy costs. We’ve created an easy-to-use online tool, called HEAT, to help our customers manage their energy and identify practical ways to save money on their energy bills. 4 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 5 OUR BEST WORK Contact 2013 “I’ll come home on a sunny day and she’ll have the dryer on for half an hour to do her bra and knickers.” Contact customer research Household energy costs vary from month to month as energy use fluctuates. With SmoothPay, customers pay a fixed amount each month regardless of season. It’s a hassle-free way of smoothing out the highs and lows of energy costs so there are no unexpected surprises with the bill. 6 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 7 OUR BEST WORK Contact 2013 “We all pretty much live our own lives here. We cook our own meals and keep our own TVs, laptops and heaters in our rooms.” Contact customer research Flatties... can’t live with them, can’t live without them. To help make splitting the bill a little less hair-raising, we offer a range of services and payment options. That includes an online prompt payment discount of up to 22 per cent. Divided five ways of course. 8 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 9 OUR BEST WORK “People just Contact 2013 don’t expect power cuts these days – I remember we always had candles in the drawer.” Contact customer research In years gone by, tighter electricity supply and a reliance on rain-dependent hydro lakes meant power cuts were much more common. Over the past 5 years, Contact has invested over $2 billion to secure a more stable energy supply for Kiwis into the future, including a number of major renewable geothermal developments. 10 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 11 CONTACT AT A GLANCE Contact 2013 We are one of New Zealand’s largest electricity generators and retailers. Who, Our focus is on delivering great value, great products and great service to our customers. We supply electricity and natural gas through our Contact Energy brand and bottled LPG through Contact Rockgas LPG. Where, Our electricity generation business is focused on meeting New Zealand’s energy needs in a safe, reliable and efficient manner. Over recent years we have been building a more flexible portfolio by introducing new power generation assets. This diversity has enabled us to What. respond more efficiently to changing electricity market conditions. Generation by type for the year ended 30 June 2013 1,160 $1.24 m 23% Total – 9,879 GWh We employ around 1,160 We invested $1.24 million We supply 23 per cent Hydro – 3,560 GWh people from Auckland into community initiatives of the New Zealand to Invercargill. during the year. electricity retail market. Geothermal – 2,249 GWh Thermal – 4,070 GWh 1.3m 73,000 199,000 Our contact centres Contact is one of New We are New Zealand’s largest took 1.3 million calls and Zealand’s largest listed online energy company with handled 190,000 emails companies with around 199,000 customers signed during the year. 73,000 shareholders. up to receive Contact’s online services. Customers by energy type at 30 June 2013 Total – 566,000 Electricity – 439,500 $3.5b 11 Our net assets are We own and operate 11 worth $3.5 billion. power stations across New Zealand and we generate around a quarter of New Zealand’s electricity. Natural gas – 61,500 LPG – 65,000 12 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 13 OUR BUSINESS MODEL Contact 2013 Our Business Model Insight Source Generate Wholesale Distribute Sell & Serve First, we assess the future energy We seek the most cost-effective We purchase and source fuel for We sell the electricity generated Electricity is transported from As a retailer, we sell electricity, needs of customers, as well as the and efficient generation electricity generation. We buy gas on the wholesale electricity market generators by Transpower and gas and LPG products and broader economic and local energy development options to meet and diesel from producers; rain and also purchase the electricity then by local lines distribution services to residential, small market conditions. future customer needs or to and snow-melt fills hydro storage needed for sales to our customers. companies to customers. Gas business, commercial and replace existing, less efficient lakes; drilling extracts geothermal We buy and sell futures to manage is sourced by producers and industrial customers to meet generation. Geothermal fluid and steam. We also have the risk and take market positions. transported by Vector, Maui and their energy needs. We keep in developments are our priority – ability to store and use gas from gas network companies. Contact touch with customers, answer market conditions dictate when our Ahuroa gas storage facility. We delivers bottled LPG to customers queries and provide information we build new or adapt older vary the output and combination via our fleet of delivery trucks. Within on usage through our contact generation. of plants used to meet energy Christchurch we also supply LPG centre team, business account demand peaks and respond to through the reticulated network. managers, our website, email, seasonal/weather factors. social media and post. 14 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 15 WHERE WE OPERATE Contact 2013 We provide electricity, natural gas and LPG to residential, small business, commercial and industrial customers nationwide. Our Where head office is centrally located in Wellington, and we have a total of We 22 operational sites across the country from Auckland to Invercargill. Operate Existing power stations Auckland Ot¯ahuhu¯ Offices Power stations in construction Ohaaki LPG sales and distribution Te Rapa Te Mihi Whirinaki Stratford Clyde Queenstown/ Wanaka Christchurch Ahuroa Dunedin Te Huka Wellington Wair¯akei Roxburgh Invercargill Poihipi Levin Name Output Commissioned Type Location Capacity (MW) 2013 Generation (GWh)1 Name Output Commissioned Type Location Capacity (MW) 2013 Generation (GWh)1 Ahuroa – 2011 Gas storage facility Taranaki 10 petajoules (PJ) Ability to store and extract Te Huka Geothermal 2010 Binary cycle Taupō 23 198 stored as at gas as conditions require Te Mihi Geothermal Under construction Flash steam North of Taupō 166 (on completion) – 30 June 2013 Te Rapa Thermal 1999 Open-cycle turbine cogeneration Waikato 44 226 Clyde Hydro 1992 Conventional Otago 432 1,941 Roxburgh Hydro 1956–1962 Conventional Otago 320 1,619 Ohaaki Geothermal 1989 Flash steam Waikato 40 330 Stratford Thermal 1998 Combined-cycle turbine Taranaki 377 1,709 Ōtāhuhu A Thermal 1968 Gas, open-cycle turbine Auckland This station provides reactive Stratford Thermal 2011 Peaker gas turbine Taranaki 200 447 power, supporting the stable operation of the electricity Wair¯akei Geothermal 1958, 2005 Flash steam/Binary cycle Waikato 172 (reducing to 1,305 transmission system 114 MW on completion of Te Mihi) Ōtāhuhu B Thermal 1999 Combined-cycle turbine Auckland 400 1,684 Whirinaki Thermal 2004 Diesel fuel, open-cycle turbine Hawke’s Bay 155 4 Poihipi Geothermal 1996 Flash steam Waikato 55 416 1. For year ended 30 June 2013. 16 Contact Energy LIMITED Annual Report 2013 Contact Energy LIMITED Annual Report 2013 17 KEY PERFORMANCE INDICATORS Contact 2013 This year we have introduced 12 key performance indicators into our reporting. These enable interested stakeholders to more easily assess Key our performance against a range of measures that are integral to our business success. The measures highlight our 5-year performance Performance across key areas such as finance, operations, customers, our people, safety and the environment. Our Board and Leadership Team use the Indicators same measures to assess our performance against strategic priorities. 30 80 40 10 60 60 8 50 50 60 30 20 40 40 Female 6 Male 40 % 20 30 30 CEM Cents Cents 4 10 20 20 20 10 % of employees 2 10 10 % of employees engaged % of employees 0 0 0 0 0 0 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 Financial year Financial year Financial year Financial year Financial year Financial year Underlying earnings Operating Gearing Customer Employee Gender per share cashflow per share (net debt ratio) experience engagement diversity Measures performance of the underlying Measures cash available to fund distributions to Gearing is a measure of financial leverage, We regularly, independently survey a sample of We aspire to develop and challenge our people We believe the inclusion of a diverse range of business and is calculated by dividing underlying shareholders and growth capital expenditure.