Contact Energy Annual Report 2013

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Annual Report 2013

ANNUAL REPORT
Contact 2013

...is where we do

our best work.

At
Contact…

We keep the lights burning,
the hot water flowing and the
BBQ fired up for around 566,000
customers across the country.

OUR BEST WORK
CONTACT AT A GLANCE
OUR BUSINESS MODEL
WHERE WE OPERATE
KEY PERFORMANCE INDICATORS
CHAIRMAN & CEO’S REVIEW
OUR BOARD
OUR LEADERSHIP TEAM

4
12
14
16
18
20
26
28

CONTENTS
Contact 2013

We are one of New Zealand’s largest listed companies
but we operate with the same genuine concern for our
customers and communities as the smallest. We are
integral to our customers’ lives – and our customers
are integral to us.

CASE STUDIES
HOW WE OPERATE
GOVERNANCE
REMUNERATION REPORT
STATUTORY DISCLOSURES
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
CORPORATE DIRECTORY

30
40
56
62
65
69
99
100

This Annual Report is dated 5 September 2013 and is signed on behalf of the Board by:

Grant King
Chairman

Sue Sheldon
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.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

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.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

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.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

OUR BEST WORK
Contact 2013

“People just
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.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Who,
Where,
What.

CONTACT AT A GLANCE
Contact 2013

We are one of New Zealand’s largest electricity generators and retailers.

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.

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
respond more efficiently to changing electricity market conditions.

1,160

We employ around 1,160
people from Auckland
to Invercargill.

$1.24m 23%

We invested $1.24 million
into community initiatives
during the year.

We supply 23 per cent
of the New Zealand
electricity retail market.

Generation by type
for the year ended
30 June 2013
Total – 9,879 GWh

1.3m

Our contact centres
took 1.3 million calls and
handled 190,000 emails
during the year.

73,000 199,000

Contact is one of New
Zealand’s largest listed
companies with around
73,000 shareholders.

We are New Zealand’s largest
online energy company with
199,000 customers signed
up to receive Contact’s
online services.

Customers by
energy type
at 30 June 2013
Total – 566,000

$3.5b

Our net assets are
worth $3.5 billion.

We own and operate 11
power stations across
New Zealand and we
generate around a quarter
of New Zealand’s electricity.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Hydro – 3,560 GWh

Geothermal – 2,249 GWh

Thermal – 4,070 GWh

Electricity – 439,500

Natural gas – 61,500

LPG – 65,000

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Our
Business
Model

OUR BUSINESS MODEL
Contact 2013

Insight
First, we assess the future energy
needs of customers, as well as the
broader economic and local energy
market conditions.

Source
We seek the most cost-effective
and efficient generation
development options to meet
future customer needs or to
replace existing, less efficient
generation. Geothermal
developments are our priority –
market conditions dictate when
we build new or adapt older
generation.

Generate
We purchase and source fuel for
electricity generation. We buy gas
and diesel from producers; rain
and snow-melt fills hydro storage
lakes; drilling extracts geothermal
fluid and steam. We also have the
ability to store and use gas from
our Ahuroa gas storage facility. We
vary the output and combination
of plants used to meet energy
demand peaks and respond to
seasonal/weather factors.

Wholesale
We sell the electricity generated
on the wholesale electricity market
and also purchase the electricity
needed for sales to our customers.
We buy and sell futures to manage
risk and take market positions.

Distribute
Electricity is transported from
generators by Transpower and
then by local lines distribution
companies to customers. Gas
is sourced by producers and
transported by Vector, Maui and
gas network companies. Contact
delivers bottled LPG to customers
via our fleet of delivery trucks. Within
Christchurch we also supply LPG
through the reticulated network.

Sell & Serve
As a retailer, we sell electricity,
gas and LPG products and
services to residential, small
business, commercial and
industrial customers to meet
their energy needs. We keep in
touch with customers, answer
queries and provide information
on usage through our contact
centre team, business account
managers, our website, email,
social media and post.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Where
We
Operate

Existing power stations

Offices

Power stations in construction

LPG sales and distribution

Clyde

Queenstown/
Wanaka

WHERE WE OPERATE
Contact 2013

We provide electricity, natural gas and LPG to residential, small
business, commercial and industrial customers nationwide. Our
head office is centrally located in Wellington, and we have a total of
22 operational sites across the country from Auckland to Invercargill.

Auckland

¯Ot¯ahuhu

Ohaaki

Te Rapa

Stratford

Te Mihi

Whirinaki

Christchurch

Ahuroa

Dunedin

Roxburgh

Invercargill

Te Huka

Wellington

Wair¯akei

Levin

Poihipi

Name
Ahuroa

Output
–

Commissioned
2011

Type
Gas storage facility

Clyde
Ohaaki
Ōtāhuhu A

Hydro
Geothermal
Thermal

1992
1989
1968

Conventional
Flash steam
Gas, open-cycle turbine

Location
Taranaki

Otago
Waikato
Auckland

Capacity (MW)
10 petajoules (PJ)
stored as at
30 June 2013
432
40

Ōtāhuhu B
Poihipi

Thermal
Geothermal

1999
1996

Combined-cycle turbine
Flash steam

Auckland
Waikato

400
55

1. For year ended 30 June 2013.

2013 Generation (GWh)1
Ability to store and extract
gas as conditions require

1,941
330
This station provides reactive
power, supporting the stable
operation of the electricity
transmission system
1,684
416

Name
Te Huka
Te Mihi
Te Rapa
Roxburgh
Stratford
Stratford
Wair¯akei

Output
Geothermal
Geothermal
Thermal
Hydro
Thermal
Thermal
Geothermal

Type
Commissioned
2010
Binary cycle
Under construction Flash steam
1999
1956–1962
1998
2011
1958, 2005

Open-cycle turbine cogeneration Waikato
Conventional
Combined-cycle turbine
Peaker gas turbine
Flash steam/Binary cycle

Capacity (MW)
Location
Taupō
23
North of Taupō 166 (on completion) –
44
320
377
200
172 (reducing to
114 MW on completion
of Te Mihi)
155

Otago
Taranaki
Taranaki
Waikato

Hawke’s Bay

226
1,619
1,709
447
1,305

Whirinaki

Thermal

2004

Diesel fuel, open-cycle turbine

2013 Generation (GWh)1
198

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Key
Performance
Indicators

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
our performance against a range of measures that are integral to our
business success. The measures highlight our 5-year performance
across key areas such as finance, operations, customers, our people,
safety and the environment. Our Board and Leadership Team use the
same measures to assess our performance against strategic priorities.

s
t
n
e
C

10
11
Financial year

Underlying earnings
per share
Measures performance of the underlying
business and is calculated by dividing underlying
earnings after tax by the weighted average
number of shares on issue during the year.
Underlying earnings after tax is calculated by
adjusting reported profit for the year to remove
any significant items that are not related to the
ongoing performance of our business.

2013
Improvements over the past 3 years reflect the
benefits of the investments made in improving the
diversity and flexibility of our generation portfolio
and the reduction in gas take-or-pay volumes.

s
t
n
e
C

10,000

8,000

6,000

4,000

2,000

h
W
G

10
11
Financial year

Energy sales
volume
In an integrated business like Contact’s, the energy
volume sold to customers is a key component
in ensuring stable earnings. Volume needs to be
carefully managed against the risks associated
with selling too much load and not being able to
cover demand during high price periods.

2013
Energy sales volume was in line with the prior
year at 8,277 GWh with a 3 per cent year-on-year
decline in mass market to 4,067 GWh being
offset by a 3 per cent increase in commercial and
industrial sales to 4,210 GWh.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

11
12
Financial year

Gearing
(net debt ratio)
Gearing is a measure of financial leverage,
demonstrating the degree to which a firm’s
activities are funded by owner’s funds versus
creditor’s funds. The gearing ratio is calculated as
net debt divided by net debt plus shareholders’
equity adjusted for the net effect of fair value of
financial instruments after tax.

2013
Gearing ratio improvement in FY13 was driven by
the issue of equity in lieu of dividends in September
2012 and a lower closing net debt position.

11
12
Financial year

Operating
cashflow per share
Measures cash available to fund distributions to
shareholders and growth capital expenditure.
Operating cash flow per share is calculated as
operating cash flow divided by the weighted
average number of shares on issue over the year.

2013
Operating cash flows improved by $29 million
due to improved earnings from our core
operations.

e
s
a
b
r
e
m
o
t
s
u
c
f
o
%

Contact
Market
excluding
Contact

11
12
Financial year

11
Financial year

Plant
availability
Measures the reliability of our generation plants.
The availability factor calculates the total
availability of the generation portfolio over a
39-month historical time period. The time period
selected removes the effect of seasonality and
known standard maintenance cycles to provide a
comparable measure of performance across years.

2013
Plant availability has continued to trend
upwards over the past 4 years as systems and
processes have been enhanced to identify and
plan preventative maintenance requirements.
This focus has been further enhanced with the
implementation of the SAP asset management
module in FY12, which has provided greater
insight and structure to our maintenance activities.

Loyalty &
customer switching
Our performance relative to other retailers
is shown by comparing the percentage of
customers who switch away from Contact each
year, compared with the industry (excluding
Contact). Around 30,000 residential electricity
customers change their supplier every month in
New Zealand.

2013
Despite customer retention and acquisition
activities reducing customer losses by 1 per cent
from FY12, we continue to experience greater
levels of switching than the industry average
for residential and small to medium business
customer segments.

M
E
C

R
F
R
T

d
e
g
a
g
n
e
s
e
e
y
o
p
m
e
f
o
%

s
e
e
y
o
p
m
e
f
o
%

Female
Male

12
11
Financial year

11
10
Financial year

Customer
experience
We regularly, independently survey a sample of
customers who have contacted us to determine
how satisfied they are with their experience.
Customers are asked to score their experience
from 1 (poor) to 10 (excellent) across a range
of questions covering timeliness of response,
quality of communication and issue resolution.
The results feed into an overall annual Customer
Experience Measure (CEM).

2013
Despite heightened competition in the market,
our customers still rate their experience when
dealing with us as excellent. Our CEM has
remained consistent at 8.5 out of 10 for the third
straight year. CEM relating to our email customer
service channel was 8.1.

Employee
engagement
We aspire to develop and challenge our people
and be recognised as a great place to work. Each
year we conduct an independent AON Hewitt
survey to assess our progress on employee
engagement and to identify areas for development.
Note: No survey was conducted in 2010.

2013
Our overall engagement score increased to
56 per cent in 2013, up from 53 per cent in
2012. The result is pleasing given the extent of
change across Contact over the last 12 months
and we remain committed to further improving
engagement in the year ahead.

Gender
diversity
We believe the inclusion of a diverse range of
perspectives and ideas is a key ingredient for
success for any business. While acknowledging
that true diversity is achieved by a far broader set
of measures than gender representation across
an organisation alone, it is with this indicator that
we begin our diversity KPI reporting.

2013
Continuing the trend from the previous year,
male and female representation across Contact
moved a further 2 per cent closer to parity. This
has been driven for the last 3 years through
resourcing and recruitment initiatives.

R
F
O

3,500

3,000

2,500

2,000

1,500

1,000

500

O
C
s
e
n
n
o
t
n
o

i
l
l
i

2.5

2.0

1.5

1.0

0.5

Natural gas
LPG
Geothermal

11
10
Financial year

Financial year

Total Recordable Injury
Frequency Rate (TRIFR)
The safety of our people is our number one
priority and our goal is Zero Harm. TRIFR is a
key indicator of our employee and contractor
safety performance and is calculated by taking
the number of incidents resulting in lost time,
restricted work or medical treatment, dividing
this by exposure hours for the period, and then
multiplying this by a million.

2013
A significant focus on the safety of our operations
has seen consistent improvement in our safety
performance over the past 5 years. We met our
improvement target in FY13, achieving a 31 per
cent decrease on the previous year.

Observation
Frequency Rate (OFR)
We strongly encourage our people to observe their
working environment, say something when they
identify safe or unsafe situations and behaviour,
and record these Zero Harm conversations on
observation cards. Trends of quality observations
enable action to prevent future harm. OFR is
calculated by dividing the number of observations
by hours worked, and multiplying this by one million.

2013
Observation frequency rate was measured for
the first time in FY13, with a target of 1,700 and
a result of 2,970, driven by strong participation
at operational sites. The target equates to two
observations a year for corporate employees and
one per month for operations employees.

11
Calendar year

Greenhouse
gas obligations
The majority of our annual CO2 emissions stem
from our natural gas generation operations.
However the mix of natural gas, geothermal and
hydro generation we use each year is related to
weather conditions. During wet years we rely more
on our hydro generation, while during dry years our
use of natural gas generation increases, along with
overall emissions.

2012
Natural gas greenhouse gas emissions trended
up during 2011 and 2012 as increased gas was
purchased and storage injections were reduced.
Emissions from geothermal generation have been
trending down due to reduced steam extractions
from Ohaaki.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Q & A

Grant King
Chairman

Q. How has Contact
performed this year for
its shareholders?

Contact has continued to benefit
from the investments made in
improving the flexibility of our
generation portfolio, resulting in
profit for the financial year 2013
(FY13) of $199 million,
a $9 million increase (5 per
cent) on the financial year
2012 (FY12). Our earnings
before net interest expense,
tax, depreciation, amortisation,
change in fair value of financial
instruments and other significant
items (EBITDAF) for FY13
were $541 million, $32 million
higher (6 per cent) than the prior
year. Underlying earnings after
tax (profit for the year adjusted
for significant items that do not
reflect the ongoing performance of
the Group) were $202 million, up
$26 million (15 per cent).

Q A&

CHAIRMAN & CEO’S REvIEW
Contact 2013

Q & A

Dennis Barnes

Chief Executive Officer

Q. What were some of
the highlights of the year
for Contact?

Three stand out for me. First, we
continued to improve our safety
performance, with a 31 per cent
reduction in our total recordable
injury frequency rate compared
with the prior year. Second, we saw
the positive impacts of improving
the flexibility of our generation
portfolio and reduced operating
expenses. Third, our major
projects continued to move towards
completion, with both the Te Mihi
power station and our upgrade of
our retail systems approaching
the final stages of completion.
Overall, our results in FY13
reflect the progress we are making
in all aspects of the business –
something that everyone at
Contact should be proud of.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

CHAIRMAN & CEO’S REvIEW
Contact 2013

Performance for the year ended 30 June 2013

$199m

Profit for the year,
up 5 per cent

$541m

EBITDAF1 ,
up 6 per cent

25cps

Total shareholder
distributions,
up 9 per cent

Q. How does the programme
of partial privatisation of the
state-owned electricity companies
impact Contact?

Grant: As we’ve said before: we
welcome the partial privatisation of the
state-owned electricity companies as we
believe it improves the competitiveness
of the New Zealand electricity market
by having all companies compete on a
level playing field. The listing of these
companies also deepens the capital
markets in New Zealand and improves
transparency of performance in the
energy sector.

Q. What does the recent
announcement on the Tiwai
aluminium smelter mean
for Contact?

Grant: First, it is good for the people
and businesses of Southland that there
is some certainty on the future of the
smelter. For Contact, the announcement
provides us with greater clarity on the

near-term situation in the electricity
market. However, while substantial
uncertainty remains around future
demand, Contact will not be making
any commitment to increase generation
capacity.

Q. Contact announced that it is
reprioritising its wind projects,
which includes exiting the Haua-uru
ma- raki (HMR) project. Does this
signal a move away from renewable
energy projects for Contact?

Q. The Government recently
announced a set of reforms as
part of its ‘Working Safer’
blueprint. How does this fit with
Contact’s view of workplace health
and safety in New Zealand?

Dennis: Our aspiration of Zero Harm
is completely compatible with the
Minister’s proposed changes to the
Health and Safety Act and Contact is
very supportive of the ‘Working Safer’
blueprint’s recommendations.

We believe New Zealand business has to
make a step-change in how it manages
work-related hazards and safety risks,
and the blueprint’s recommendations are
a significant move in the right direction.

Grant: No, not at all. In fact it’s the
opposite. What it does signal is that
Contact is committed to investing in the
projects that present the best opportunities
for Contact and its shareholders. In
response to a lack of recent demand
growth and an oversupply of generation,
an extensive market review led us to exit
our HMR project on the Waikato coast. We
also decided not to proceed any further in
the foreseeable future with our Waitahora
development near Dannevirke. Our focus
will remain on our Tauhara geothermal
development, which we believe is New
Zealand’s next best lower cost electricity
development option.

1. Earnings before net interest expense, tax, depreciation, amortisation, change in fair value of financial instruments and other significant items. EBITDAF and underlying
earnings after tax are non-generally accepted accounting practice (non-GAAP) profit measures. Management and directors monitor EBITDAF as a key indicator
of Contact’s performance at segment and Group levels, and believe it assists investors in understanding the performance of the core operations of the business.
A reconciliation of EBITDAF to profit after tax is provided in the Income Statement on page 70 of Contact’s audited financial statements. Management and directors monitor
underlying earnings after tax and believe it assists investors in understanding the ongoing performance of the business. Underlying earnings after tax is a non-GAAP profit
measure that is not included in Contact’s segment reporting disclosures in the financial statements because debt funding and tax expense are managed at a Group level.
A reconciliation of underlying earnings to profit after tax is provided below the Income Statement on page 70 and an explanation of the reconciling items in Note 3 of
Contact’s audited financial statements.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Q & A

Q. How would you describe the
market conditions over FY13, and
how did Contact respond?

Q. How has Contact’s good
performance been reflected in
returns to shareholders?

Dennis: During FY13 we saw lower
average wholesale spot prices compared
with FY12. As is typical in the New
Zealand electricity market, much of
the market conditions were dictated by
the weather and FY13 saw periods of
both low and high rainfalls, including
drought, which meant that thermal
generation was required to meet demand
and manage hydro lake storage levels.

Contact has the most diverse and
flexible fuel portfolio in the New
Zealand market. By that I mean we
can generate electricity through hydro,
geothermal, combined-cycle gas-fired
power stations, and gas-fired peakers
and also have the ability to store and use
gas from our Ahuroa gas storage facility.
This gives us the ability to respond
quickly and decisively to changing
market conditions. We wouldn’t be
in such a strong position if we hadn’t
embarked on our $2 billion investment
programme 5 years ago.

Grant: I’m pleased to say that the
Contact Energy Board of Directors
declared a final, fully imputed cash
distribution to shareholders of 14 cents
per share (total cash distribution of
25 cents per share for the year). The
distribution represents a pay-out of
91 per cent of underlying earnings after
tax for the year and an increase of 2
cents per share from FY12.

Q. TV, radio and newspapers are
filled with offers by electricity
companies. Has Contact managed
to compete?

Dennis: It’s fair to say that the
retail market continues to be highly
competitive and our business worked
hard to maintain market share in a
market defined by naturally high levels of
customer switching activity.

Our online prompt payment discount
for customers who receive and pay their
bills online continues to be popular, with
24,000 customers taking this up during
FY13. With 199,000 customers signed
up to online services through our website,
Contact is New Zealand’s largest online
energy company.

The loss of demand we saw in
our smaller residential and small
business customers (mass market) was
offset by sales to larger time-of-use
commercial and industrial customers.
Our commercial and industrial sales
remained strong as a result of new
customer contracts being signed in the
second half of FY13. Overall, our sales
volume in this important segment of
the market rose to 4,210 GWh, a 3 per
cent rise on FY12, off-setting the lower
than previous year demand in our mass
market segment.

“Our aspiration of Zero Harm is completely
compatible with the Minister’s proposed
changes to the Health and Safety Act and
Contact is very supportive of the ‘Working
Safer’ blueprint’s recommendations.”

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

CHAIRMAN & CEO’S REvIEW
Contact 2013

Performance for the year ended 30 June 2013

31%

Reduction in the total
recordable injury
frequency rate

$401m

$115m

Of maturing debt
refinanced

From the sale of
non-core assets

Q. What’s on the horizon for the
next financial year and beyond?

Grant: Priority will be given to
completing our major capital investment
programme, both with the commissioning
of Contact’s Te Mihi power station and
the roll-out of the retail systems upgrade.
At the end of this programme, we will be
well positioned to remain competitive in
the market next year and the years ahead.

Dennis: We will remain vigilant on
our costs, ensuring that operational
efficiencies introduced in FY13 are
retained in the years ahead. The next
financial year is an exciting one for
Contact as we look to leverage the
gains made in FY13.

Q. When are we likely to see the
completion and commissioning of
the Contact Te Mihi power station?

Dennis: Since our last report, we
have made significant progress on the
construction of the Te Mihi power station,
with all power station related construction
complete and commissioning well
advanced. Like any major construction
project, final commissioning depends on
a number of factors, but we expect first
power to the grid in the next few months.

While completion and commissioning of
Te Mihi will be a significant milestone,
it is one piece of our investment in
extending the life of the Waira-kei
steamfield. In September 2012 we
opened the Waira-kei bioreactor which
significantly reduces its operations
impact on the Waikato River.

Aerial view of the Te Mihi power station.
Photographer: Jeremy Bright.

We would like to thank the people of
Contact who have worked hard to deliver
this strong result and also thank our
shareholders and our customers for
their continuing support.

Grant King
Chairman

Dennis Barnes
Chief Executive Officer

Q & A

Q. How does the sale of Contact’s
gas meter assets and the sale of the
site of the former New Plymouth
power station relate to Contact’s
longer term strategy?

Q. In February 2013 it was
reported Contact was restructuring
the business with the loss of
approximately 100 jobs – why
was this necessary?

Dennis: During the year we completed
approximately $115 million of
transactions related to the sale of non-
core assets. This included the sale of the
gas meter assets to Vector for $60 million,
and the sale of the site of the former
New Plymouth power station to
Methanex New Zealand and Port
Taranaki in two separate transactions for
a total price of $24 million. In addition
to our multi-year programme to sell land
assets, these divestments are not core to
our operations or future developments.
This activity is part of our strategy to
drive further efficiencies in our business.

Dennis: It’s well-known that the
electricity market in New Zealand is
both oversupplied in terms of generation
capacity, and is stagnant in terms of
demand growth. The Board and the
Leadership Team took action to ensure
that Contact’s costs remain stable and
that the organisation is the right shape
and size to fit the market.

Restructuring is never easy, both for
those that lose their jobs as well as those
that remain to see colleagues leave and
roles change. Throughout the process
we provided support through access
to resources for interview preparation,
career guidance, job placement
assistance as well as confidential
counselling services.

We are pleased to see from results of
our most recent people engagement
survey that engagement has increased
despite going through a restructure,
which is a testament to the way the
restructure was managed.

Q. Contact was active during the
financial year in securing debt.
What’s the importance of this to
Contact and its shareholders?

Grant: Contact has $705 million of
debt maturing in 2014, which we use
to partially fund our operations, and
securing refinancing at competitive
rates is a priority. During the year we
raised $401 million of the $705 million
through $100 million of domestic
wholesale bonds in May 2013 and
$301 million of US Private Placement
notes in June 2013. The Board is
confident that, due to our forward-
planning, the current borrowings will
be refinanced at or prior to maturity.

“We will remain vigilant on our costs, ensuring
that operational efficiencies introduced in
FY13 are retained in the years ahead.”

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Our
Board

OUR BOARD
Contact 2013

Grant King

Phillip Pryke

Chairman and
Non-Executive Director

Deputy Chairman
and Independent
Non-Executive Director

David Baldwin

Non-Executive
Director

Term of Office
Appointed director 1 October
2004, last re-elected 2011 annual
meeting.

Term of Office
Appointed director 8 November
1995, last re-elected 2012
annual meeting.

Board committees
Chairman of the Nominations
Committee and member of the
Risk Committee.

Grant King was appointed to the
Board when Origin Energy became
Contact’s majority shareholder in
2004. He is the managing director
of Origin Energy, which he was
appointed to at the time of its
demerger from Boral Limited in
February 2000, and was managing
director of Boral Energy from
1994. Prior to joining Boral, he was
general manager for AGL Gas
Companies. Grant is a councillor
of the Australian Petroleum
Production and Exploration
Association, a director of the
Business Council of Australia, and
chairman of the Business Council
of Australia Infrastructure and
Sustainability Growth Committee.
Grant has a civil engineering degree
from the University of New South
Wales and a Master of Management
from the University of Wollongong.

Board committees
Chairman of the Remuneration
Committee and member of the
Health, Safety and Environment
Committee, Nominations
Committee, and Risk Committee.

Phil Pryke has been involved with
Contact since its establishment
in 1995 and was the chairman of
the Board until October 2004. Phil
has management and governance
experience in a diverse range of
industries including the energy
sector, fishing, financial services,
health, and technology industries.
Phil is a director of Co-Investor
Group, Tru-Test Corporation
Limited, and Goodman (NZ)
Limited. His previous roles include
vice president, global sales and
client solutions – Asia Pacific at
Electronic Data Systems (EDS),
chief executive of Nextgen
Networks and chief executive
officer of Lucent Technologies
Australia Pty Limited. Phil holds an
economics degree.

Term of Office
Appointed director 16 March 2009,
last elected 2011 annual meeting.

Board committees
Chairman of the Health, Safety
and Environment Committee, and
member of the Risk Committee.

David Baldwin joined Origin in
May 2006 and is responsible for
Origin’s interests in Australia Pacific
LNG, including operatorship of the
upstream and pipeline components
of the joint venture. Prior to being
appointed to his current role in April
2011, he was managing director of
Contact Energy in New Zealand.
Before joining Origin, David held
senior roles with MidAmerican
Energy Holdings Company in
Asia and the United States, and
with Shell in New Zealand and the
Netherlands. David holds a Master
of Business Administration from
Victoria University and a Bachelor
of Engineering (Chemical) from
Canterbury University.

Bruce Beeren

Non-Executive
Director

Whaimutu Dewes

Independent
Non-Executive Director

Karen Moses

Non-Executive
Director

Sue Sheldon CNZM

Independent
Non-Executive Director

Term of Office
Appointed director 1 October
2004, last re-elected 2012
annual meeting.

Term of Office
Appointed director 22 February
2010, last elected 2010 annual
meeting.

Term of Office
Appointed director 1 October
2004, last re-elected 2010
annual meeting.

Board committees
Member of the Board Audit
Committee; the Health, Safety and
Environment Committee; and the
Risk Committee.

Whaimutu Dewes is of Ng¯ati
Porou and Ng¯ati Rangitihi descent
and lives in Rotorua. He is the
chairman of Aotearoa Fisheries
Limited and Housing New Zealand,
and is a non-executive director
on the Treasury Board. His former
directorships include Television
New Zealand Limited and the AMP
New Zealand Advisory Board, and
he was deputy chairman of Sealord
Group between 1992 and 2008.
Whaimutu has also held senior
management roles at Fletcher
Challenge and the Department
of M¯aori Affairs. Whaimutu has
a Master’s degree in public
administration and degrees in
arts and law.

Board committees
Member of the Board Audit
Committee, Remuneration
Committee and Risk Committee.

With over 35 years’ experience
in the energy industry, Bruce
was chief executive officer of
VENCorp, the Victorian gas system
operator, and held several senior
management positions at Origin
Energy and AGL, including chief
financial officer. He is a director
of Origin Energy Limited (since
March 2000), Equipsuper Pty
Limited (since August 2002) and
The Hunger Project Australia Pty
Limited (since August 2008). He is
a former director of ConnectEast
Group (2009–2011), Coal & Allied
Industries Limited (2004–2011),
Envestra Limited (2000–2007)
and Veda Advantage Limited
(2004–2007). Bruce has degrees
in science and commerce, and a
Master of Business Administration.
He is a fellow of CPA Australia
and the Australian Institute of
Company Directors.

Board committees
Chairman of the Risk Committee
and member of the Remuneration
Committee.

Karen Moses is the executive
director, finance and strategy of
Origin Energy Limited, and prior
to this was Origin Energy’s chief
operating officer. Before joining
Origin, Karen held development
and trading roles with Exxon Group
(1983–1994). Karen is a director of
SAS Trustee Corporation (since
March 2012), Sydney Dance
Company (since May 2012) and
Energia Andina S.A. (since April
2013). She is a former director
of Australian Energy Market
Operator Limited (July 2009–
June 2012), Energy and Water
Ombudsman (Victoria) Limited
(October 2005–November 2010),
Australian Energy Market Operator
(Transitional) Limited (September
2008–July 2009) and VENCorp
(2007–2009). Karen holds a
Bachelor of Economics and a
Diploma of Education from the
University of Sydney.

Term of Office
Appointed director 16 March 2009,
last re-elected 2011 annual meeting.

Board committees
Chairman of the Board Audit
Committee, member of the
Nominations Committee and Risk
Committee.

Sue Sheldon is a professional
company director. She is the
chairman of Chorus Limited,
Freightways Limited, Paymark
Limited and deputy chairman of
the Reserve Bank of New Zealand.
She is a former deputy chairman of
Christchurch International Airport
Limited, a former director of Smiths
City Group Limited and former
chairman of the board of trustees
of the National Provident Fund.
Prior to moving into a professional
director role, Sue practised as
a chartered accountant. She is
a former president of the New
Zealand Institute of Chartered
Accountants and was made a
Companion of the New Zealand
Order of Merit in the Queen’s
Birthday Honours List in 2007
for services to business.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Our
Leadership
Team

OUR LEADERSHIP TEAM
Contact 2013

Dennis Barnes

Graham Cockroft

Peter Kane

Annika Streefland

Mark Corbitt

Nicholas Robinson

Ruth Bound

James Kilty

Paul Ridley-Smith

Tania Palmer

Chief Executive
Officer
As a Leadership Team
our focus this year has
been on progressing major
projects, targeting greater
operational efficiency and
restructuring the company.
As part of the reshaping of
Contact we made changes
to some Leadership
Team roles, to integrate
customer insight, marketing
and communications
activity under one role,
and company wide sales
and customer experience
activity under another. To
further support our journey
towards Zero Harm a new
General Manager, Health
Safety and Environment
role has been created,
effective 2 September 2013.

Chief Financial
Officer
This year we’ve continued
our programme to improve
our business efficiency
and competitiveness
through a wide range of
initiatives including a new
approach to procurement,
the divestment of non-
core assets and the
simplification of processes.
We’ve also raised over
$400 million in the debt
capital markets and
established new bank
credit lines to maintain our
strong balance sheet. We
improved our financial and
performance reporting
to help stakeholders
better understand the key
drivers of our business. In
May Contact was named
the ‘Market leaders best
corporate communicator’
at the Institute of Finance
Professionals New Zealand
(INFINZ) annual awards.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

General Manager –
Operations
Our drive to improve
the supply of safe and
reliable electricity and to
optimise our generation
portfolio ensures we can
sustain value-adding
power station operations
in response to changing
market conditions. We’ve
also worked closely with
the Finance team to put
systems and arrangements
in place that deliver
greater efficiency and
value in our procurement
activities. Our Zero Harm
goal continues to be our
number one priority, and
our improvement in health
and safety performance
proves the success of our
focused work in this area.

General Manager –
People and Culture
We are committed to
getting great results
for Contact through
our people. To do this,
we focus on the whole
employee life cycle to
recruit, develop and retain
high performing people.
Last year we initiated a
company-wide project
focused on productivity
and competitiveness. A
major piece of this work
involved reshaping our
organisational structure
to simplify our operating
model and better support
our customers. Our
new, flatter structure
encourages more direct
accountability and
ownership, and positions
Contact well for the future.

General Manager –
Information and
Communication
Technology
This year we’ve been
working to simplify our
technological environment
and implement world-class
infrastructure to ensure
the ongoing reliability
and security of Contact’s
services. Successful
projects to reduce spend
and improve performance
have delivered great
results, particularly in
the telecommunications
space. We’ve also
continued to implement
support structures ahead
of the launch of Contact’s
new customer service
system later this year. This
work will enable our team
to enhance the service we
provide internally within
Contact and allow us to
better integrate all parts of
our business.

General Manager –
Customer Insight,
Marketing and
Communications
Our focus in the past
year has been on more
deeply integrating our
communication and
engagement activities
by scrutinising and
rationalising our activity.
We have also consolidated
the number of external
partners we work with
through a rigorous appraisal
process. Alongside this
activity, we reviewed our
community investment
and sponsorship portfolio
in line with what the
communities we operate in
and our wider stakeholders
expect of a company the
size of Contact.

General Manager –
Sales and Customer
Experience
In what has continued to be
a very competitive market,
we’re pleased that we
have had another year of
increased sales to business
customers and continued
to see consistently strong
customer satisfaction
levels. A major focus has
been the development of,
and now preparation for the
implementation of, our new
customer service system.
This will be a major step
forward for us in terms of
supporting our customer
services activities and
enriching our relationships
with our customers.
Alongside our continued
roll-out of smart meters
to all residential and small
business customers, it will
enable us to offer enhanced
and innovative customer
services and products.

General Manager –
Trading Development
and Geothermal
Resources
This year we have seen
the portfolio benefit
from reduced gas
purchasing and thermal
plant maintenance
commitments that, in
conjunction with our
Ahuroa gas storage facility,
have enabled Contact to
operate its thermal plant
more flexibly in response
to market conditions.
We have also divested
legacy land holdings
this year as we seek to
reduce our cost base.
These activities, together
with the growth in our
commercial and industrial
customer book and the
completion of construction
on the Wairākei Investment
Programme, position
Contact well for the new
financial year.

General Counsel
The Governance team
provides legal advice to
Contact business groups
and manages regulatory
affairs and government
relations. We work to
ensure that Contact’s
activities are ethical, fair
and legal through strong
governance, internal
compliance, and training
and engagement with
various external parties
and regulators. The
redevelopment of our
Wellington head office was
a major project this year,
which enabled us to bring
our Wellington employees
together in one location
and to reduce lease costs.

General Manager –
Health, Safety and
Environment (HSE)
For us, Zero Harm is a
culture where safety is
part of our DNA, where
we strive to eliminate the
risk of harm to people,
our plant, and New
Zealand’s unique natural
environment. Our progress
towards Zero Harm is
maturing and our new
HSE team is focused on
consolidating and building
on the strong employee
engagement and excellent
programme of work to
date. We are committed
to supporting the
Government’s new Working
Safer initiatives, and
bringing additional insight,
visibility, and simplification
to our HSE programme.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Case Study One
Stay safe mate

Stay safe mate

Health and safety is Contact’s number one priority. As part of our commitment
to Zero Harm, we have created the ‘Stay Safe Mate’ and ‘Lifesavers’ initiatives.
All Black great Tana Umaga slipped on some hi-vis overalls, steel cap boots
and a hard hat to take a safety message to Contact employees and contractors
across New Zealand.

Check out Tana’s ‘Stay Safe Mate’ and ‘Lifesavers’ videos at youtube.com/contactenergy.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Tana packs down a scrum with members
of the Wellington office touch rugby team.

Neil (right), our Production Supervisor at
Clyde power station, chats with
Tana during his visit.

Tana prepares to film the opening scene
of the ‘Stay Safe Mate’ video.

CASE STUDY: SAFETY
Contact 2013

Tana Umaga’s story

Contact health and safety
spokesperson. Head Coach,
Counties Manukau Steelers

When I was younger I had a bit of a gung-
ho attitude to life, where you feel like
you’re invincible and nothing can stop
you. I had an attitude of, ‘ah, it’ll never
happen to me’. Now I always relate health
and safety back to family, because that’s
probably the most important thing to me.
It’s about looking after yourself so you can
be around your loved ones, and take care
of those around you.

Being part of the Contact health and safety
programme has reminded me that the
actions you take do affect others. In my
industry, injuries are always around the
corner. For me, my body is a tool I need
to go to work. Now rugby is just a game.
For some it’s just fun, and for us it was
a job. But for people in an industry like
Contact’s, if they have an accident it can
be major. They’re dealing with their lives.
If they don’t have their wits about them or
don’t follow protocol, it can be very serious.

I’ve visited nearly all the sites. Going
down to the Clyde dam was incredible –
seeing the sheer size of it and the volume
of water that comes through. They opened
the gates for us. It’s all nice and still, and
then all of a sudden you see this mad rush

of water come out. Visiting the sites really
showed me that there are a lot of areas
where things can go wrong if you’re not
careful. It put things in perspective about
what I do and the situations these people
manage every day when they go to work.

My role in the programme is to be a
voice and an image used to promote
health and safety to Contact employees
and contractors. It’s about helping them
take a fresh approach to deliver the
messages and supporting all the great
work people across Contact are already
doing on safety.

“ I had an

attItude of,
‘ah, It’ll
never happen
to me’.”

I think Contact has done a really good
job with the communications. I can see
they’ve put a lot of resource into it; it’s
not just a token gesture. I’m the face on
some billboards, and I’m in DVDs. You
see my ugly mug when you arrive on site
and then again when you’re leaving. It’s
really eye catching and I think they’ve
gotten some real engagement from the

staff, which is what you need in the end.
You can send all the messages you want,
but if people aren’t engaged, it’s not going
to catch on.

I’ve been really impressed with the whole
programme. I think it’s heightened my
awareness of health and safety. In rugby,
there are a lot of ‘what ifs’ that you can’t
control. But in training, I can control it
more and try to make it as safe as possible.
For instance, if we’re doing team-on-team
training and someone kicks the ball up
in the air, straight away I’m worried that
the two guys chasing the ball are going to
collide. So I have a rule that if one team
kicks it, the other team has to catch it. If
I see an instance like that, where there
could be an accident, then I try to avoid it.
That way, hopefully, everyone gets through
the week unscathed and gets home with
no issues. For me, that should always be
our goal: to make sure we get home to our
loved ones in good nick.

I’m very happy to be part of Contact’s
programme. For me, seeing my face on a
billboard is a bit uncomfortable but for
such a good message, I’m proud. Hats off
to Contact for what they’ve done and the
way they’ve implemented it.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Case Study Two
Farmers Trading Company

Farmers

Contact has had a relationship with The Farmers Trading Company for over a decade.
In 2012, we proactively approached Farmers to discuss options to reduce the energy and
network charges they incur. We recommended the purchase of power factor correction
equipment to reduce their power factor penalty charges for a number of sites. We’ve also
provided recommendations on how to reduce costs and improve the efficiency of in-store
lighting, which they are implementing progressively.

CASE STUDY: CUSTOMERS
Contact 2013

Les Tom’s story

Corporate Services Manager,
Farmers Trading Company

As Corporate Services Manager, I’ve been
involved with procuring the electricity
for Farmers. At the moment, energy
efficiency is one of my pet projects. I’ve
taken it to heart really. I think that from a
corporate perspective it’s the right thing to
do, to be more energy efficient.

We have 58 stores across New Zealand.
Power provides the lighting that
creates ambience in our stores while
customers are shopping and viewing
our merchandise. Power runs the air
conditioning for the comfort of staff and
customers. And obviously, in this day and
age, you need power to drive registers,
computers, video equipment and
EFTPOS machines. Without power, we
can’t complete electronic sales. And if we
can’t sell, we close the doors.

Power makes up about 8 per cent of our
expense cost. So it’s quite significant
and we need to manage it well. As it
turns out, we had some sites with poor
‘power factor’. Power factor is basically
a measure of how efficiently you use
electricity. If you’re not efficient, the lines
companies penalise you.

Recently, our lines company increased
their reactive charges for having poor
power factor.

My account manager at Contact was
proactive in making me aware of these
changes. She recommended we install
power factor correction equipment to
the affected sites, which we’ve done.
It basically makes our power use more
efficient, which allows the lines company
to waive the penalty charges they’d
normally apply. Any cost saving like this
is important because it helps improve our
bottom line.

The problem with our business is that we
have limited opportunity to save power.
It’s not like we can have half the lights on.
You know, ‘there’s only a few customers
in the store, let’s turn half the lights off’.
That doesn’t work with a retailer like us.
It’s the same with the air conditioning.
You can’t turn off the air con just because
the customer count is down. We have to
look after our team. So there’s limited
opportunity for improvement. That’s why
something like power factor correction
equipment and the savings it provides is
important for us.

We have a very trusting relationship
with Contact. They’ve been very helpful
whenever we’ve called upon them.

They were aware of the penalty changes
and they took the initiative to look into
how it impacted Farmers. They identified
four of our sites as being worthwhile to
install the correction equipment. They
did all the groundwork, sourced it for us
and worked out the payback period so
we could weigh it up and decide if it was
worth pursuing. Which it was. It’s all to do
with partnership, really. They raise issues
with us if they believe something will
have an impact on our business.

I like the fact that we’ve got an account
manager who understands our needs
and is easily contactable. She’s been
proactive in informing me about how the
electricity market works and very helpful
in providing me with information or data
I’ve required to assess our various energy
efficiency initiatives. In my view, Contact
provides the expertise and knowledge
base that we don’t have in our own
organisation.

I’ve made a conscious choice to use
Contact at home as well. Delving into how
the electricity supply works has really
opened my eyes. I understand the market
a bit better. That knowledge has certainly
helped me deal with all those door
knockers who want to convert me to all
their different retailers. I can turn them
away with confidence now.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Case Study Three
Te Mihi

Te Mihi

The Te Mihi power station is a key part of Contact’s Waira-kei Investment Programme.
Due to deliver electricity to the grid in the next few months, the power station is part
of a 5-year, $2 billion investment programme by Contact to increase the flexibility
and reduce the cost of our electricity generation.

Panoramic view of cooling tower two at
Te Mihi. Photographer: Jeremy Bright.

Aerial view of Te Mihi geothermal power
station. Photographer: Jeremy Bright.

CASE STUDY: DEvELOPMENTS
Contact 2013

Wayman Connell’s story

Director, Connell Construction
Company Limited

Geothermal runs in my family. My father
worked in the Waira-kei geothermal field
back in the ’50s and ’60s. When I was
a baby in 1960, I lived in the Waira-kei
Village. Now I’ve got five daughters and
four of them have worked on the Te Mihi
geothermal project with me. One does a
lot of the safety work, another does the
financial stuff and a couple of them even
drive machines for me.

I’ve been in the construction industry
for over 30 years now. The big civil stuff,
probably 15, 20 years. Te Mihi is my third
geothermal project. My company, Connell
Construction Company Limited, was
contracted to do the civil works at Te Mihi.
That’s all the concrete, the major structural
stuff that holds the whole plant together. I
think we put something like 18,000 cubic
metres of concrete in there, plus another
2,500 tonnes of reinforcing in that.

I enjoy the big jobs. I’ve built hundreds of
houses and it’s not really a challenge for
me. Big jobs like Te Mihi are pushing the
boundaries of engineering. On the turbine
tables, we put in over a thousand tonnes of
concrete in 24 hours, and it’s 10 metres up
in the air. It’s nerve-wracking but that’s part

of the challenge. If you can’t handle it, you
don’t do it. That’s why you have a limited
field of people who do these big jobs.

Safety is a big thing too. It’s massive, our
safety regime. Every one of my guys has
just about every certification ticket that
you can think of as far as safety goes. If
you’re not safe, you’re never going to get
the job; that’s all there is to it.

I swear by geothermal power. I think it’s
a great thing. It’s a natural resource and
cleaner for the environment than a lot
of other energy sources. It’s good for the
town, too. At the peak of the project, there
were 500 people on the site, and once
that’s over there will be a continuation
of full-time jobs. In my company, I
employ about 20 guys full-time. They’ve
been with me for years. On the Te Mihi
project, I had probably 70 on the job. And
probably 90 per cent of them were local
people. I had a few specialised people
that I brought in from out of town to help
me through some difficult areas, but most
of the people on the job were locals.

People in the wider community think
Te Mihi is a great thing. They love it.
The local Ma-ori have got behind it as
well. Contact has always been proactive
in keeping up with the community. They
sponsor a cycle race that goes around the

lake every year. It’s the biggest cycle race
in New Zealand. And Contact is right
behind it. They’re always there to help
with community projects.

Te Mihi is definitely a good thing. It’s a
twin turbine station. Each turbine is about
83 megawatts. Together they probably
produce enough power to run Wellington
city, although most of it will go to
Auckland. I think all of New Zealand will
benefit from it eventually. It’s a project
that’s going to keep running for a long
time. It’s a constant energy source. If you
want power, that’s it – they turn the valve
and away it goes.

“ they’re always
there to help
wIth communIty
projects.”

I’m really proud to have been involved
with Te Mihi. For me personally, it’s a
project that I think we’ve done well.
Hopefully we’ll look back on it in
50 years’ time and the next generation
will say, ‘Hey, those guys did a great job’.
If Contact ever does another one, just tell
them to give me a call.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Case Study Four
The Apprentice

The Apprentice

Each year, Contact selects up to six apprentices. Their skills are developed and
nurtured through on-the-job training supported by classroom study. The programme,
run jointly with Mighty River Power, is helping to build a new generation of mechanical
and electrical tradespeople, supporting local communities and giving promising
New Zealand youth a hands-on head start in their careers.

Kurt using an engineering lathe at Wintec’s
Rotokauri campus in Hamilton.

The view from the top of Clyde dam.

Operations team members upstream
at Roxburgh dam.

Kurt Marquet’s story

Apprentice,
Contact Energy

I always wanted to do something where
I was working with my hands. When I
was at high school, I made a motorised
mountain board. We had to learn how
to weld and use the lathe. And we had
to turn down the housing to hold the
bearings and make the axles for it. That
project probably set me on the track I’m
on at the moment.

I’m a first year mechanical apprentice
now. I found out about the Contact
programme through my mum. She’s a high
school teacher and she brought home a
brochure. They started off with about 150
applicants, which they took down to 75
from our CVs. Then we went for our first
interview. I was pretty nervous but the
people were really nice and explained
everything in a friendly way. Thirty of us
got a second interview, and a couple of
weeks later I got a phone call saying
that I got in.

Before I started they flew me 1,300
kilometres down to Clyde to have a look
around the two dams down there, Clyde
and Roxburgh. I got to have a look at the
worksite and meet all the guys.

CASE STUDY: CAREERS
Contact 2013

During my first site placement in
Roxburgh, I got to be involved in a couple
of the bi-annual services on some of the
generators. Basically we have to take the
machine fully out of service.

We lubricate all the pivot points as well
as go down into the scroll case and check
gate clearances to make sure there’s not
too much stuck in them.

At another point they gave me a trolley
that was really unstable and said, ‘Can
you make it more stable, and a bit longer
and wider?’ So I changed the way the
steering worked and put a sheet of metal
on it to make the tray bigger. I had to
draw it and plan it all out. I learned
a lot from doing that. I felt like I had
accomplished something. The trolley
turned out well and the guys I work with
are really pleased with it.

The guys on site are always helping me
to learn new stuff. They’re happy to pass
on their knowledge. It’s quite a small
community down here, so everyone’s
quite tight. We go out on the weekends,
mountain biking and that. We do a lot
together as a staff team.

Working with Contact, I’ve gotten to learn
a wide range of things. I’ve learnt about
the electricity supply industry, how they

make and deliver the power to your house.
At the moment we’re learning how to wire
up switches, so one day, when I come to
build my own house, I’ll be able to wire it
up myself. I’ve learned how to make some
parts for my car. I’ve also had to learn to
fend for myself, because I’m living away
from home. I have to get up on time, pay
my bills and all that sort of stuff.

I come from quite a small community,
National Park by Mount Ruapehu. People
in smaller communities often don’t
hear about these sorts of programmes
because a lot of the industry ‘taster’
courses are in the big centres. But there
are lots of kids who grow up on farms
who are really talented when it comes
to doing the sort of stuff that’s involved
in this apprenticeship. So it’s really
good that Contact is involved in smaller
communities like mine.

This apprenticeship has opened up a lot
of doors for me. It’s allowed me to come
and study in a city where I’ve never lived
before. It’s helped me travel around New
Zealand, which I’ve always wanted to do.
I’ve made some good friends, hopefully
for life. I’m sort of getting paid to study.
They give you all the opportunities and
you’ve just got to grab them.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Case Study Five
Waira-kei bioreactor

Waira– kei bioreactor

Contact Energy’s Waira-kei bioreactor is a unique, world-first treatment facility
that uses naturally occurring bacteria growing in 378 kilometres of pipes to
treat the cooling water from the Waira-kei power station before it passes into
the Waikato River. This innovative solution is a significant part of our efforts
to improve our stewardship of natural resources in the Waira-kei region.

The completed Wairākei
bioreactor facility.

Project Engineer Milly (left) reviewing
construction drawings at the bioreactor
site with Construction Manager Jo,
in the early stages of the full-scale
bioreactor construction.

CASE STUDY: ENvIRONMENT
Contact 2013

Mark Brockelsby’s story

Programme Manager,
Energy Resource Use Group,
Waikato Regional Council

I’m a programme manager in the
regulatory part of the Waikato Regional
Council. For the better part of 30 years,
I’ve worked in resource management
related to the energy industry. Geothermal
energy is a particular interest of mine. I
see it as a valuable national resource and
I think there’s a lot more potential there
to be obtained. Ninety-five per cent of all
of New Zealand’s geothermal resources
are locked up within two regions – ours
and the Bay of Plenty – so I feel a sense
of responsibility being involved in the
regulatory management of this resource.

At the Council, our goals include
improving environmental performance
of the industries that utilise natural
resources, and improving compliance
with their resource consents. We now
have co-management responsibilities with
all of the Waikato River iwi and we have
a new vision and strategy for the river,
enshrined in legislation. That vision has
a direct impact on how we go about our
business in relation to protecting and
restoring the Waikato River.

The Waira-kei bioreactor is a treatment
plant that relies on biological processes

to improve the quality of the river. It
uses bacteria to remove over 80 per cent
of the main contaminant of concern,
hydrogen sulphide, which comes from
the geothermal fluid itself. If hydrogen
sulphide didn’t get removed, it would end
up in the river where it has an adverse
effect, particularly on the fish. The
treatment plant uses bacteria to oxidise
the hydrogen sulphide, which turns it
into a form of sulphur that’s harmless.

What I find really staggering about the
bioreactor is the amount of water that it
treats – 13,000 litres per second. That’s
one heck of a lot of water. That equates
to about 7 to 8 per cent of the flow of
the Waikato River being treated more or
less instantaneously. For me, the most
impressive thing about this system is that
it’s been designed, tested and built to be
able to treat water so effectively and at
such a massive rate.

Contact shows a lot of commitment to
environmental improvement. I’ve been
dealing with them constantly on all sorts
of regulatory matters and my overriding
impression is that they want to do the
right thing. They put a lot of resource into
their environmental management and they
comply to a very high level. They take the
initiative and come to us before we have
to remind them of things they need to do.

It’s not just a token effort at all.

I’ve also found Contact to be an extremely
well organised company when it comes
to internal procedures. They have a lot of
very well documented internal processes,
which to me is indicative of an organisation
with a culture that knows what it’s doing
and is prepared for the unforeseen.

I believe the bioreactor is benefiting
the community in a number of ways.
Directly, it’s improving fish habitats and
the quality of the river. But there’s also
an indirect benefit: every time a project
like this gets put in place, it makes our
job easier because it sets a great example
and it resets the bar a little bit higher for
everyone else.

In general, there’s a much more
responsible corporate culture now
compared with 20 years ago. And I think
it’s encapsulated by Contact’s desire to
‘be the neighbour you’d want’. I really
like that as a piece of philosophy.

I feel really good about having been
involved in the bioreactor project. When
you see these sorts of projects come to
fruition, it makes you realise that what you
do does make a difference. And it relies on
organisations like Contact being willing to
front up and take responsibility. It’s great
that those sorts of companies are out there.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

HOW WE OPERATE
Contact 2013

At Contact, we run our business in a way that balances our economic,
environmental and social responsibilities. We are committed to ensuring
that everything we do is performed with the highest level of integrity,
in accordance with our principles of good conduct and the law. We act
in the best interests of our business and our stakeholders, including
our investors, customers, employees and the communities in which
we operate.

Principles
And
Commitments

Our principles and commitments help
guide the choices we make every day:

Principles
• Due care

We conduct ourselves and our
business with due care and in
accordance with relevant laws
and regulations.

• Add value to resources

We have an overriding duty to ensure
the health and safety of our employees,
and to minimise the health, safety
and environmental impacts on our
customers and the communities in
which we operate.

• Sustainability

We will add value to the resources
that come under our control and the
value we create will be distributed
to stakeholders, recognising the
need to ensure the sustainability of
our business and its impact on the
environment and the communities in
which we operate.

• Subject to scrutiny

When faced with choices, we make
decisions knowing they will be subject
to scrutiny. We should be able to
demonstrate the soundness of our
decisions to all stakeholders.

• Encourage diversity

“ we conduct

We encourage diversity and
expression of ideas and opinions
but require alignment with the
company’s commitments, principles
and values, and the policies
established to implement them.

Commitments
• To deliver market-leading

performance for shareholders by
identifying, developing and operating
value-creating businesses across
the energy supply chain.

• To deliver value to customers by

developing and procuring competitive
sources of energy and related
products and services that better meet
customers’ energy needs.

• To create a rewarding workplace for
employees by encouraging personal
development, recognising good
performance, valuing teamwork and
fostering equality of opportunity.

• To respect the rights and interests
of our communities in which we
operate by working safely and being
mindful of, and attentive to, the
environmental and social impact
of the resources, products and
services we use or provide to others.

ourselves and
our busIness
wIth due
care and In
accordance
wIth relevant
laws and
regulatIons.”

Contact’s Ahuroa gas storage facility.

Lizzie, Rachel and Spencer look through
the plans for the recently completed atrium
at our office in Wellington. The atrium
provides easy access between the floors
and encourages employee collaboration.
Photographer: Stephen A’Court.

View of the Ohaaki wetlands looking
north. Photographer: Lizzie Blount.

Denise and Eddie in the
Wairākei steamfield.

Our wholesale trading team
busy at work.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

HOW WE OPERATE
Contact 2013

Knowing what our customers value is important to us. We work hard to
understand their energy needs and then strive to surprise and delight
them with a great range of competitive products, services and benefits.
We also offer a number of payment options and provide additional
information about their energy usage via our website. This helps to
build a relationship that works well for our customers and for us.

Customer experience
Through leading market research
company TNS Conversa, we regularly
undertake surveys to find out how our
customers feel about us. We also ask them
how they perceive the value of products
and services provided by Contact and
other energy retailers.

Each month, we get in touch with
around 150 Contact customers, who
have interacted with our contact centre
over the past month.

We ask them to tell us how they feel
about the service they received. We use
these insights to focus on improving
aspects of our service that are important
to customers. Once again, this year our
results have been pleasing with an overall
rating of 8.5 out of 10.

our competitors in key areas such as
prices, products and services, and overall
reputation. Our overall rating for the year
has remained steady at 6.8 out of 10,
after a 10 per cent improvement the year
before. We believe this is a good result in
the current competitive environment.

Correcting an LPG
billing error
In March 2013, we wrote to 2,966
reticulated LPG customers to apologise
and advise them of a credit to their account
after we discovered a processing error had
resulted in us overcharging these customers
during the period of January to December
2012. A total of $1.16 million was credited
back to customers’ accounts and we have
made changes to our billing processes to
prevent this issue from reoccurring.

Twice a year, we also survey 750 to
900 energy customers throughout the
country (both Contact and non-Contact
customers) to get their perceptions on
how they believe we measure up against

Pricing and customer
disconnections
Pricing and customer disconnections are
two key issues that stakeholders have raised
with us during the course of the year.

Our approach involves regularly
reviewing our pricing across New
Zealand to ensure that we strike a
balance between providing a fair,
reliable and competitive service,
and remaining a profitable business.

We have a range of pricing plans
and highly competitive offers along
with a number of payment options
to help our customers meet their
energy needs.

We also take our obligation to assist
customers in vulnerable circumstances
seriously and act in accordance with
industry guidelines when working with
medically vulnerable and low income
customers. We work with customers
who are experiencing real hardship by
exploring options such as setting up
payment arrangements and seeking
Work and Income New Zealand
assistance, only stopping supply
via disconnection as a last resort.

Customers

Residential customers
We’ve seen an increasing number of
residential customers switching electricity
retailers over the past few years. This has
been prompted by the Electricity Authority’s
‘What’s My Number?’ campaign as well
as strong competition among retailers
seeking to attract new customers. Contact
has experienced customer switching levels
greater than the market in the past year
as illustrated by the loyalty and customer
switching graph on page 18. We’re working
hard to change this, and retaining and
attracting new customers continues to be
a focus for us. Our fixed price, fixed term
energy offers for new residential electricity
and gas customers introduced during the
year have proven popular. These products
provide customers with certainty on the
price they’ll pay for energy over a set period.

Business customers
We understand that running a business
can be hectic, which is why we provide
account management services to help
our larger business customers more
easily manage their energy usage.
Our dedicated Energy Solutions team
specialises in identifying energy
efficiency and energy management
issues and opportunities for large
commercial and industrial businesses.
We also have a fixed priced, fixed term
offer for natural gas business customers.

Our energy management tool, Energy
Challenger, offers a quick way for our
business customers to assess their
energy use. The tool produces a rating
and, based on that score, identifies
opportunities for the business to improve
its energy use and reduce waste and
associated costs.

Rolling out smart meters
to our customers
Over 130,000 of our customers are
currently enjoying the benefits of having
a smart meter and we are on track to
provide almost all of our residential and
small-to-medium business customers with
smart meter services by December 2015.

Our smart meters measure and transmit
electricity consumption remotely back
to Contact. For our customers, the
benefits include:

• a bill based on an actual read
every month, so they always
know they are paying for what
they have actually used
(i.e. no more estimates)

• no more meter reader visits to

their property

• more detailed information about

their electricity use with their own
online usage graph (this is really
handy because the more customers
know about their energy habits, the
easier it is for them to manage their
energy spend).

We are New Zealand’s
largest online energy
company
Contact is proud to be New Zealand’s
largest online energy company, with
over 199,000 customers, or 42 per
cent of our residential and business
customers, now signed up to our
online services.

Through online services, customers can
access and manage their account, review
energy usage, as well as utilise our
Home Energy Assessment Tool (HEAT)
to explore how their energy is being
used and look for opportunities to save.
Around 44 per cent of our residential
customers also enjoy a special online
prompt payment discount, which rewards
them with a 22 per cent discount for
choosing to receive their bills online and
pay on time by direct debit or internet
banking. It’s an option that’s easier on
the environment, as we mail far fewer
paper bills as a result.

Sam takes a call at our contact
centre in Levin.

Our Contact Rockgas LPG team
look after 65,000 customers across
the country.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

HOW WE OPERATE
Contact 2013

Our people are crucial to the success of our business. We work hard to
create a rewarding workplace by encouraging personal development,
recognising good performance, valuing teamwork and fostering equal
opportunity. We aim to create an inclusive workplace where diversity
in all forms is valued and used to its full potential, for the success
of our people and our company.

Total employee numbers
As of 30 June 2013, we had a total
of 1,164 employees. This included
995 permanent and 169 fixed term
staff. Around 13 per cent of our
employees were on collective
employment agreements.

Our total headcount, split by gender,
is 44 per cent female and 56 per
cent male.

We have people from a wide range
of ages working at Contact, as
demonstrated in the table below.

Personal and professional development
is important to us at Contact. We want to
make sure our people have the skills to
undertake their roles safely.

Members of the Wellington team singing
the Contact waiata. Photographer:
Stephen A’Court.

Age range (year)

68 and over (Traditionalists)
49 – 67 (Baby Boomers)
33 – 48 (Generation X)
32 and under (Generation Y)
Undisclosed

Total employees

0.3%
31.0%
44.3%
20.0%
4.3%

No.

4
361
516
233
50

As at 30 June 2013, gender representation on our Board and Leadership Team
was as follows:

Board of directors
Leadership team

Male

5
7

Female

2
2

Total

7
9

Gender split
by status

s
e
e
y
o
p
m
e
f
o
r
e
b
m
u
N

700

600

500

400

300

200

100

Female Male
Fixed term

Female Male
Permanent

June 2012
June 2013

Our
People

Developing our people
Contact is committed to ongoing personal
and professional development. We are
building an environment that encourages
and supports innovation, learning and
critical thinking. This is key to our
employee life cycle: to recruit, develop
and retain high performing people.

Our vision is for all of our people to
be competent and skilled to undertake
their roles safely, while meeting internal
and external compliance and regulatory
requirements. We endeavour to engage
and retain our people by helping them
to perform and develop in their current
and future roles.

Learning opportunities available to our
people include on-the-job development
opportunities, a wide range of facilitated
group courses, self-paced online learning
as well as role-specific training identified
as part of individual development plans.

Valuing diversity
We strive to create a diverse
organisation, and believe diversity
creates opportunities and challenges.

Workplaces that tap into the potential
of New Zealand’s diverse population
are better placed to attract and retain
talented people and customers, and find
innovative solutions to issues – and this
is something that we look to be a part of.

We measure our diversity progress
annually – on gender, age and ethnicity
– and report our progress to the
Leadership Team and Board.

This is managed by our People and
Culture team, who are also responsible
for all policies and strategies that guide
our employee relations and diversity
practices at Contact.

Employee engagement
Understanding what motivates
our people, what they like and value
most about working at Contact, and
areas where they feel we need to
improve is very important to us.
We measure employee engagement
annually via an all employee survey
conducted independently by AON
Hewitt. Results are benchmarked
against high performing organisations
compiled by AON Hewitt into a Best
Employer performance range. The
results help us to focus on areas where
further improvement is needed to ensure
we continue to create a rewarding
workplace that inspires our people
to do great things.

restructure, with most changes taking
effect from 1 July 2013. Recognising
that this was an unsettling time for
many of our people, we worked through
the process in an open and transparent
manner, communicating regularly and
ensuring in-house and independent
support was available. It also created
new opportunities for our people with
the majority of appointments to new roles
filled internally.

Employee turnover
In FY13, we had a total of 236
new hires, around 20 per cent of
our total headcount. Of these new
hires, 49 per cent were female and
51 per cent were male. Our voluntary
turnover, reflecting resignations or
unplanned departures, was 11.5 per cent
for FY13. However, with organisational
restructuring, our total turnover climbed
to 21.9 per cent including all planned
departures.

Our changing
organisational shape
During the second half of the financial
year, we completed a reshape
of our organisation to move to a
simpler operating model and flatter
organisational structure. The aim was
to be more customer focused and cost
effective. This has enabled us to align
roles to strategic objectives and to group
similar functions and activities together,
removing duplicated effort. The size of
our permanent workforce will be reduced
by approximately 113 roles as part of the

Apprentice programme
In 2011, we partnered with Mighty River
Power to form the Electricity Supply
Apprentice Programme to increase the
number of qualified technicians and
operators in the energy industry. The
programme provides young apprentices
with the opportunity to kick-start their
career in an industry that is vital to
our country. We currently have 17
apprentices across our generation sites,
with our first intake of apprentices due
to graduate from the 3-year programme
in 2014.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Safety

Contact’s Health, Safety and Environment
(HSE) policy and HSE management
system outline behavioural expectations
and requirements to drive continual
improvement. The policy, which was last
reviewed in December 2012, applies to all
employees and contractors of Contact and
is available from our website.

The Board is responsible for
establishing and reviewing our
commitment to managing HSE
in relation to this policy and its
implementation. Our CEO Dennis
Barnes is responsible for ensuring the
commitments to the policy are being
met. Our central corporate HSE team,
with the support of HSE advisors
located at each of our major sites across
the country, lead the delivery of our
HSE programme.

Taking HSE communication
to the next level
In the past year, we have raised
awareness of health and safety issues,
motivated participation in targeted
initiatives, and have seen a positive
change in attitude towards health and
safety. This was due to a number of
new initiatives.

Our ‘Stay Safe Mate’ initiative was
launched in August 2012 with
national sports hero Tana Umaga as
our spokesperson. Using informal but
direct language, Tana helped us to share
the message of personal responsibility
around safety, which was received
very positively by our people.

We continued this work in February
2013 by launching ‘Lifesavers’. The
11 Life Saving Rules define our
behavioural expectations relating to
activities with the greatest potential to
result in serious injury or death.

Critical themes in all of our health
and safety messaging are personal
involvement, individual judgement and
empowerment. We have recognised
that Zero Harm can only be achieved
through personal accountability.
With strong and targeted leadership,
improved health and safety programmes,
and innovative campaigns, we have
effectively engaged our people in our
Zero Harm vision.

Contact’s health and safety programme
was the winner of the Excellence in
Health & Safety category at the 2013
Deloitte Energy Excellence Awards.

Injury rates and lost days
To measure our safety performance,
we report on a company-wide basis and
record both employee and contractor
data. Gender and region information is
not recorded. We use two key indicators
to measure safety performance: the
number of recordable injuries and lost
time injuries per million hours worked.
These are recorded from the employees’
next scheduled day of work.

Reporting health and safety
incidents is mandatory at Contact,
with the investigation and tracking
of incidents managed via an electronic
reporting system.

The outcomes of investigations are
shared with senior management
and the Board.

Total recordable injury
frequency rate (TRIFR)
TRIFR is calculated as the total number
of recordable injuries for employees and
contractors per million hours worked.
A recordable injury is one that results
in one day or more off work, restricted
duties, or where treatment is provided
by a medical professional, but does not
include minor first aid incidents.

For the year ended 30 June 2013, we
met our improvement target for total
combined TRIFR of 4.0 – a 31 per cent
reduction from the previous financial
year. Our improvement target for the
year ahead is 3.2.

Lost time injury frequency
rate (LTIFR)
A lost time injury is a work-related
injury or illness resulting in the
employee or contractor being unable
to attend work for one or more full
calendar days following the incident.
The LTIFR is calculated as the number
of lost time injuries per million hours
worked. In the year ended 30 June
2013, Contact’s total combined
LTIFR is 1.0.

Absentee rate
The absentee rate is a measure of actual
days lost due to incapacity of any kind,
including sick leave but not including
holidays, study or maternity leave.

HOW WE OPERATE
Contact 2013

Safety is our number one priority. The well-being of our employees,
contractors, customers and the communities in which we operate is
front of mind for all business we conduct, and we are committed to
working towards our Zero Harm vision. Our people face risk every day,
particularly those on our operational sites. Our aim is to have every
person return home safely at the end of each day.

Contact’s absentee rate for the year
in review is 5.1 days per full-time
employee, which is a 7 per cent
reduction on last year.

Fatalities
Contact had no fatalities during
the year ended 30 June 2013.

Occupational disease rate
Contact’s occupational disease rate is
calculated as the number of disease
cases per million hours worked and
was zero for the reporting period.

Health and safety
committee representation
At Contact, 100 per cent of our work
force is represented by health and safety
committees. These committees are
responsible for raising HSE issues with
management, identifying opportunities
for improved HSE performance and
promoting HSE initiatives at their sites.

Formal agreements
with trade unions
Contact has formal HSE agreements
with two trade unions (contained in our
four existing collective employment
agreements), which stipulate that union
members must adhere to Contact’s HSE
policy and procedures. These trade
unions are:

• Engineering, Printing and

Manufacturing Union

• Amalgamated Workers’ Union

New Zealand Southern.

Mate, your best
safety gears
safety gears
your ears.

are between

Stay safe mate
Stay safe mate

One of the series of ‘Stay Safe Mate’ billboards and
posters displayed at our sites around the country.

Lost time injuries (LTIs)

LTIs

Hours worked in millions

Staff

Contractors

3
0
2
2
2

7
2
3
2
3

Staff

2.3
2.3
2.4
2.6
3.0

Contractors

1.1
1.1
1.4
1.6
2.0

LTIFR

TRIFR

Staff

Contractors

Total LTIFR

Staff

Contractors

Total TRIFR

1.6
0.0
0.8
0.8
0.7

6.0
1.8
2.2
1.2
1.5

2.9
0.6
1.3
0.9
1.0

6.2
3.4
3.8
3.0
1.7

13.7
13.2
9.5
10.1
7.2

8.8
6.6
5.9
5.8
4.0

2009
2010
2011
2012
2013

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Environment

HOW WE OPERATE
Contact 2013

It’s important to us that we look after the environments in which
we operate. We aim to deliver energy to the New Zealand market
in a sustainable way that will carry our organisation into tomorrow
and beyond. We carefully monitor the impacts our operations have
on the environment, and work to reduce and mitigate these.

In September 2012, we officially opened
our Wair¯akei bioreactor, a world-first facility
providing an innovative solution to improve
the quality of cooling water discharges from
the Wair¯akei geothermal power station to
the Waikato River (see more about our
bioreactor on page 38). Contact’s Wair¯akei
bioreactor was the winner of the Energy
Project of the Year and Environmental
Excellence categories at the 2013 Deloitte
Energy Excellence Awards.

Restoration of natural
habitat
The development of the Ohaaki wetland
was a 2-year project undertaken by
Contact, and designed and managed by
Fish & Game NZ. It involved transforming
previously unused land impacted by
subsidence into a useful natural resource,
which will help increase biodiversity in
the Ohaaki region.

With the help of a number of our local
employees, the wetland was fully planted
with 26,000 plants native to the region.
The 35 hectares of land beside the
Waikato River was transformed into a
unique marshland that provides suitable
habitat for waterfowl and other bird life,
including rare or endangered species.

The project was completed in November
2012 with the support of the Department
of Conservation and local iwi, Ng¯ati Tahu.
Fish & Game NZ are responsible for the
ongoing management of the resource.

Use of water relating to
hydro operations
We recognise that water is a valuable
resource. Hydro forms a significant
part of our generation activity at
Contact, and allows us to provide
New Zealanders with clean and
renewable energy. In the year ended
30 June 2013, hydro made up 36 per
cent of our total generation – 3,561
gigawatt hours (GWh).

Contact has resource consent to use
water from the following sources:

Water source

Lake Dunstan
Lake Roxburgh
Lake Hāwea

Location

Size

Otago
Otago
Otago

26 km²
6 km²
141 km²

Water level
fluctuation

1 m
2.45 m
8 m

Protected area

Biodiversity
value

No
No
No

Low
Low
Low

Air emissions
Contact’s discharges to air are closely
monitored at our thermal sites in
accordance with their respective
resource consent requirements.
Concentrations of nitrogen oxide (NOx)
and carbon monoxide (CO) are measured
continuously at our Taranaki combined-
cycle, ¯Ot¯ahuhu and Te Rapa plants.
The Whirinaki and Stratford peaker
plants have been designed to operate
with fixed concentrations of products of
combustion, therefore monitoring is not
required. However, the Whirinaki plant
was formally tested in 2004.

*GHG emissions are recorded on the calendar year
basis in line with Climate Change (Stationary Energy
and Industrial Processes) Regulations 2009 annual
reporting requirements.

Greenhouse gas (GHG)
obligations
In the year January 2012 to December
2012*, our annual emissions return
submitted to the Environmental
Protection Authority was 2,697,975.8
tonnes of carbon dioxide (CO2). This
was a 16 per cent increase on the
previous year. We surrendered a total
of 1,348,987 carbon units to meet our
obligations under the Emissions
Trading Scheme.

Key components of our 2012
emissions return:

• Natural gas sales and operation

of gas-fired power stations:
2,230,052 tonnes CO2

• Sales of LPG to our customer base:

155,400 tonnes CO2

• Import of LPG product for sales:

48,474 tonnes CO2

• Geothermal plant operation:

264,048 tonnes CO2

Parts per million (ppm)

Ōtāhuhu 1
Taranaki combined-cycle
Te Rapa
Whirinaki 2

NOx (average)

NOx (max. value)

CO (average)

CO (max. value)

12
10.92
53.2
33.6

121
80.1
93.9
34.3

9.6
55.32
3.8
11.1

2026
407.8
4.3
12.7

1. Resource consent limit for CO is 1300ppm. There were nine breaches reported in this financial year.
2. Test results from 2004.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Contact employees and volunteers plant
some of the 26,000 plants as part of the
Ohaaki wetland restoration project.

The Roxburgh dam is due to celebrate
its 60th birthday in 2016.

Wairākei Operations team members
undertaking inspections in the Western
Borefield area.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Technology

Technology plays a key role in our business. It ensures we manage
our operational sites efficiently, gives us customer information at our
fingertips to provide great service and enables us to link our people
together across the country.

Key Stakeholders

We believe it’s vital that we understand the issues that are
important to our key stakeholders. We take a consultative and
open approach to working with stakeholders and aim to be a
leader in our industry.

HOW WE OPERATE
Contact 2013

Early in 2013, we began to simplify
our technology environment by
increasing the use of core assets whilst
rationalising non-core and legacy assets.
This includes widening the use of our
integrated SAP and other off-the-shelf
software platforms. The project, which
is expected to take 3 years to complete,
aims to reduce technology costs by
approximately $5.5 million per annum.

Once our new customer service system
is completed late in 2013, our core SAP
asset will completely replace 35 legacy
applications. Its introduction within our
Retail business will complement earlier
SAP implementation projects within our
Finance and Operations areas.

In 2013, we will also complete
a substantial upgrade of our
infrastructure. This upgrade will
enable us to take advantage of modern
technology options and assist with
the simplification of our technology
environment. The focus on core assets
will also bring improved technology and
data integration across our business and
enable us to address current and future
business needs.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Amanda works remotely from
the Contact library.

As part of our infrastructure upgrade,
we’ll be looking into modern technology
options to assist with the simplification
of our technology environment.

To achieve this, we remain engaged
with our key stakeholder groups,
which include our investors, customers,
employees, the communities in
which we operate (or where we plan
to operate), government, iwi, media,
and the wider industry.

While engagement with our stakeholder
groups is sometimes driven by regulatory
or legislative change, or change to our
business strategy, we aim to meet with

our local and business stakeholders
several times a year to discuss issues
that are important to them. These issues
have been used as part of the process
that has helped shape the content of this
year’s report. We also maintain regular
contact with the wider New Zealand
Government and regulatory groups,
particularly the Electricity Authority,
Gas Industry Company, Commerce
Commission and Transpower. As an

organisation, we actively participate in
submission processes, conferences and
industry forums. At times, we work to
drive legislative or regulatory change
that will allow our business to operate
more efficiently or enable us to
achieve better outcomes for our
customers and shareholders.

Policy

During this reporting period, we have
monitored and engaged with policy
activity in the following areas:

Transmission pricing

Fresh water reform
and regulation

Securities law

Energy strategy

Consumer law reform

Memberships

At a corporate or individual level, we are
members of the following organisations:

Business
New Zealand

BusinessNZ
Energy Council

Petroleum
Exploration
and Production
Association of
New Zealand
(PEPANZ)

Gas Industry
Company (GIC)

The Electricity
and Gas
Complaints
Commissioner
Scheme

The Hugo Group

The New Zealand
Institute for
the Study of
Competition and
Regulation (ISCR)

The Sustainability
Business Council

The Electricity
Authority’s
Wholesale
Advisory Group
and Security
and Reliability
Council

We are also voluntary members of the Sustainable Business Network, and Land and Water Forum.
In 2010, we signed the Department of Labour’s Zero Harm pledge.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Community

HOW WE OPERATE
Contact 2013

We live, work and operate in communities throughout New Zealand.
Our philosophy is to ‘be the neighbour you’d want to have’. That means
we engage with and respect the rights of others, and ensure the safe
and best practice operation of our sites.

We voluntarily put the ‘be the neighbour
you’d want to have’ philosophy into place
in 2007 and it has helped guide us in all
our community engagement, both positive
and negative, from individual neighbour
relations to the wider community. With
it, we aim to operate as a valued and
welcomed community member, according
to our principles of ‘due care’ and
‘sustainability’.

Our priority areas for local community
engagement are locations where we
have either a significant operational
footprint, new generation facilities under
development (such as our Te Mihi power
station in Waira-kei), or a significant
number of employees.

We currently have engagement plans in
place for seven of a total of 22 operations,
equating to 32 per cent of our sites.
Community engagement plans were
completed this year for our generation
operations in Ohaaki, ¯Ot¯ahuhu and our
contact centre in Levin. These plans
were based on face-to-face consultation
with a wide range of groups, including
community and interest groups, local iwi
and councils, as well as our local site
management and employees. The aim
was to identify key community issues and
develop plans to help alleviate or remove
these issues where possible.

Recommendations from these processes
are now being implemented and, while
our focus remains on our generation sites,
our goal for the financial year ahead is
to complete and implement engagement
plans for our Dunedin call centre and
Wellington head office.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Supporting community
initiatives
Our engagement plans, investments
and employee volunteering programmes
are developed and managed by our
Community Relations team. The
team has dedicated resource in both
Wellington and in Waira-kei, where
Contact has significant ongoing
generation and development activities.
Over the 2013 financial year, we
invested over $1.24 million, supporting
community initiatives ranging from
learn to swim programmes to community
festivals and national sporting events.

At site level, each of our operational,
contact centres and LPG distribution sites
operates a local community sponsorship
fund, administered by a committee of
local staff and aimed at providing site-
specific support to the local community.
In addition to our funding support,
our engagement plans also enable our
employees to take an active part in their
local community. From February 2013,
our people helped deliver 59 community-
based projects across New Zealand,
investing over 1,650 hours through our
employee volunteering programme,
Community Contact.

Monitoring and evaluating
our approach
Our community engagement plans
are based on an internally developed
approach. However, in order to
benchmark their effectiveness, in the
second half of FY13 we participated in
the Sustainable Business Network pilot

of the United Kingdom-based Business
in the Community (BITC) Footprint
programme. The programme is used
by a number of large United Kingdom-
and European-based companies, and
provides a good mix of quantitative and
qualitative approaches to community
engagement. At the time of writing,
the pilot is close to completion and we
expect to have a final report in early
FY14, which will help us to further
evaluate and improve our approach.

Local stakeholder and employee feedback
are two other key sources of information
we take into account. Feedback and
proactive engagement, with neighbours
who border our Te Mihi development site
for example, has seen a new approach of
providing advanced written notice of any
upcoming site activity expected to create
significant levels of noise. This has led
to opportunities for site visits to enable
these stakeholders to meet our local team
involved in this work and to learn more
about the project.

During the year, as part of our new
Social Investment strategy, we also
reviewed our key sponsor partnerships
to assess their fit with our philosophy
and future strategic direction.

This review saw us conclude our
successful 7-year relationship with
Triathlon New Zealand. In the coming
year, following the completion of this
strategy work, we will be making
further announcements about our new
approach to community engagement
and investment.

David takes on the challenge
of the Contact Epic – a 125km
circumnavigation of Lake Hāwea.
Photographer: Garrick Cameron.

It’s an early start at the Contact Epic,
but views like this make it worth it.
Photographer: Garrick Cameron.

Members of our Wellington team baking
for families staying at Ronald McDonald
House as part of the Community
Contact volunteer programme.

The Alexandra Blossom Festival is a
highlight on the Otago calendar, and
Contact looks forward to celebrating
with the community each spring.
Photographer: Jayne Fletcher.

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Community
continued

Ha–wea
Whitewater
Park

The park opened in March 2013
and incorporates a range of in-river
hydraulic features for use by kayakers,
including features designed to create
surfing waves, eddies and eddy lines.
Designed by one of the world’s premier
whitewater park designers and three-
time Olympian Scott Shipley, and
constructed by Fulton Hogan, the park
has been a popular spot for local and
international kayakers alike and also
hosted the National Kayak Freestyle
Championships earlier this year.

“The park is a fantastic resource, and
a real draw card for kayakers from
throughout New Zealand and overseas
– there’s nothing else like it in New
Zealand,” summarised Mr Rayner.

We’re delighted with the creation
of Ha-wea Whitewater Park, a world-
class facility that was jointly developed
by Contact, Central Otago Whitewater
(COW) and Whitewater NZ. It was part
of an agreement with kayak users on
the Ha-wea River relating to the
renewal of our resource consents. COW
chairman Gordon Rayner said that it
was a great example of a big business
working successfully with a recreational
group affected by that business’s
commercial activity.

“Contact’s involvement in developing
the concept of the park over a number of
years and its construction last summer
is testament to their efforts to be a good
corporate citizen in our local Central
Otago community. Contact’s support of
local kayakers is a responsible approach
which recognises the ongoing shared
use of the Clutha River and associated
waterways,” said Mr Rayner.

“ the park
opened In
march 2013 and
Incorporates
a range of
In-rIver
hydraulIc
features for
use by kayakers.”

The Whitewater Park was constructed
in 2012 and is a purpose-built community
facility for all to enjoy.
Photographer: Tim Pierce.

The Park includes two river-waves which
can be used by kayakers, bodyboarders,
surfers, and rafters to surf, play and train on.
Photographer: Tim Pierce.

GOvERNANCE, REMUNERATION
REPORT & STATUTORY DISCLOSURES

Governance,
Remuneration
Report & Statutory
Disclosures

GOVERNANCE
REMUNERATION REPORT
STATUTORY DISCLOSURES

56
62
65

CONTACT ENERGY LIMITED ANNUAL REPORT 2013

Governance

GOVERNANCE

Responsible corporate conduct is integral to the way we do business. Our actions are governed by our
principles and commitments, which are reinforced at all levels within the company. At Contact, we are
committed to doing things the right way, which means making business decisions and acting in a way
that is ethical and is in compliance with the applicable legislation.

the Board of directors (the Board) is responsible for and committed to maintaining the highest standards of corporate governance,
ensuring transparency and accountability to investors and stakeholders.

Compliance

Contact seeks to follow best practice recommendations for listed companies to the extent that is appropriate for the size and nature
of Contact’s operations.

Contact believes that it complies in all material respects with the nZX Corporate governance Best practice Code (nZX Code).

the comprehensive Financial markets authority Corporate governance in new Zealand principles and guidelines sets out nine
fundamental principles of good governance. the structure of this section in the annual report reflects Contact’s compliance with
those fundamental principles.

Contact’s constitution, and the Board and committee charters, codes and policies referred to in this section, are available to view at
www.contactenergy.co.nz.

Principle 1 – ethical standards

Directors observe and foster high ethical standards.

Contact expects its directors, officers, employees and contractors to act legally, ethically and with integrity in a manner consistent
with Contact’s principles, commitments and policies.

Code of Conduct

the Code of Conduct sets out the ethical and behavioural standards expected of Contact’s directors, officers, employees and
contractors. Contact has established internal procedures to monitor compliance with the Code of Conduct. the reporting serious
concerns directive supports the reporting and investigation of breaches of the Code of Conduct and serious wrongdoing in or by
Contact.

Securities trading policy

directors and employees who are likely to have knowledge of, or access to, inside information can only buy or sell Contact securities
during permitted periods and with the written consent of the general Counsel. they must not use their position of confidential knowledge
of the company or its business to engage in securities trading for personal benefit or to provide benefit to any third party. Short-term
trading in Contact securities while in possession of unpublished, price-sensitive information is strictly prohibited. Compliance with this
policy is monitored with regular checks across our share register.

Principle 2 – Board composition and performance

There is a balance of independence, skills, knowledge, experience and perspective among directors that allows the
Board to work effectively.

Board size and composition

the Board encourages strong individual thinking and rigorous discussion and analysis when making decisions. the current
Board comprises directors with a mix of qualifications and skills, and who hold substantial and diverse business, governance
and energy-industry experience appropriate to Contact’s existing operations and strategic direction.

Contact’s Board comprises a balance of independent directors and origin Energy-associated directors. the Board consists
of seven directors, three of whom are independent directors, with at least two being resident in new Zealand.

the chairman of Contact’s Board, grant King, is not an independent director and does not hold a casting vote. the Board regularly
assesses its performance to ensure that constructive working relationships are maintained. Qualifications and experience of
individual directors are detailed on pages 26 and 27.

Director independence

the nZSX Listing rules and the company’s constitution require Contact to have a minimum of two independent directors. in order
to be an independent director, a director must not be an executive officer of the company, or a have a ‘disqualifying relationship’.
Having a disqualifying relationship includes (but is not limited to):

• being an associated person of a substantial security holder of the company (in Contact’s case, the origin Energy group of

companies), other than solely as a consequence of being a director of Contact, or

• having a relationship (other than the directorship itself) with the company or being a substantial security holder of the company
by virtue of which the director is likely to derive, in the current financial year of the company, a substantial portion of his or her
annual revenue from the company (excluding dividends and other distributions payable to all shareholders).

at 30 June 2013, phillip pryke, Whaimutu dewes and Sue Sheldon each held (and still hold) no disqualifying relationship in relation to
Contact and are therefore each independent directors. grant King, david Baldwin, Bruce Beeren and Karen moses are not considered
to be independent directors by virtue of being directors/employees of, and hence associated persons of, substantial security holder
origin Energy.

Board role and responsibility

the Board charter regulates Board procedures and describes its role and responsibilities. the Board is responsible for setting the
strategic direction of Contact, with its ultimate goal being to protect and enhance the value of Contact’s assets and business in the
interests of the company and for all its shareholders.

the Board meets regularly on a format schedule basis and otherwise as required. the chairman and the Chief Executive officer (CEo)
establish the agenda for each Board meeting. Each month, as a standing item, the CEo prepares a report to the Board that includes
disclosure of performance against key health and safety benchmarks and a summary of the company’s operations, together with a
detailed financial report. in addition, the Board receives regular briefings on key strategic and operational issues from management,
either as part of the regularly scheduled Board meetings or in separate dedicated sessions.

Delegation

the Board has delegated certain aspects of its powers to committees of the Board, and the day-to-day management of the company
to the CEo. the CEo in turn delegates authority to his direct reports and senior management. these authorisation levels are subject to
internal and external audit review.

Avoiding conflicts of interest

the Board is conscious of its obligations to ensure that directors avoid conflicts of interest between their duty to Contact and their own
interests. Contact maintains an interest register in which relevant transactions and matters involving the directors are recorded. See the
‘Statutory disclosures’ section (page 65) of this annual report for details of directors’ interest.

Induction and Board access to information and advice

new directors appointed to the Board receive induction training. this training primarily involves written and oral presentations by the
CEo and Leadership team on the key strategic and operational business issues facing Contact.

directors have unrestricted access to company information and briefings from senior management. Site visits provide directors with a
better understanding of the company and industry issues.

directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional
advice at the company’s expense, with the approval of the chairman.

Nomination and appointment of directors

procedures for the appointment and removal of directors are governed by the company’s constitution. the nomination Committee
identifies and nominates candidates to fill director vacancies for the approval of the Board.

recently appointed directors must stand for election at the next annual meeting. all directors are subject to re-election by rotation at
least once every three years. directors who retire each year are those who have been longest in office since their last election or, where
there are more than one of equal term, by agreement.

ContaCt EnErgy LimitEd annuaL rEport 2013

GOVERNANCE

Evaluation of Board performance

Health, Safety and Environment Committee

Contact’s Board follows a practice of reviewing the performance of the Board every 2 years, and of reviewing the performance of
those directors standing for re-election at the next annual meeting every year. in accordance with this practice:

membership shall comprise at least three members, and the majority must be independent. at 30 June 2013, the members of the
Health, Safety and Environment Committee were:

•
•

in July 2013 Contact undertook a formal assessment of the Board and the Board audit Committee, and
the Board reviewed the performance of Whaimutu dewes and Karen moses, being those directors required to retire and stand
for re-election at the 2013 annual meeting.

the Board recommends that shareholders vote in favour of the re-election of Whaimutu dewes and Karen moses.

Principle 3 – Board committees

The Board uses committees where this enhances effectiveness in key areas while retaining Board responsibility.

Committees established by the Board review and analyse policies and strategies, usually developed by management. they examine
proposals and make recommendations to the full Board. they do not take action or make decisions unless specifically mandated by
their charter or by prior Board authority to do so.

the Board appoints the chairman of each committee. members are chosen for skills, experience and other qualities they bring to the
relevant committees. Each committee operates under a charter agreed by the Board.

Standing Board committees are:

• Board audit Committee
• Health, Safety and Environment Committee
• nominations Committee
• remuneration Committee
• risk Committee

in addition, the Board establishes special committees to deal on its behalf with specific issues from time to time. an independent
directors Committee (idC) meets to evaluate and approve various related party transactions with origin Energy. at 30 June 2013,
the members of the idC were:

• Phillip Pryke (chairman)

• Sue Sheldon

• Whaimutu Dewes

Board Audit Committee

membership is restricted to non-executive directors, with at least three members, and the majority must be independent. the chairman
must also be independent and must not be the chairman of the Board. all must have appropriate financial experience and at least one
member must have an accounting or financial background. at 30 June 2013, the members of the Board audit Committee were:

• Sue Sheldon (chairman)

• Bruce Beeren

• Whaimutu Dewes

Sue Sheldon is a Fellow Chartered accountant and a former president of the new Zealand institute of Chartered accountants. Bruce
Beeren is a Fellow of Cpa australia and the australian institute of Company directors. Sue Sheldon and Whaimutu dewes are both
independent directors.

the Board audit Committee meets a minimum of four times each year. the Board audit Committee’s role is to assist the Board to
fulfil its responsibilities in relation to the oversight of the:

• quality and integrity of external financial reporting
•
• adequacy of the internal control system for financial reporting integrity.

independence and performance of the external auditor

the CEo and the Chief Financial officer (CFo) attend each Board audit Committee meeting at the invitation of the Committee.
at each meeting, and at any other time the Board audit Committee requires, it holds private sessions with the Head of risk and
assurance, Contact’s external auditors, the CEo and the CFo.

• David Baldwin (chairman)

• Phillip Pryke

• Whaimutu Dewes

the Health, Safety and Environment Committee meets a minimum of three times each year. the Health, Safety and Environment
Committee’s role is to assist the Board to fulfil its responsibilities in relation to health, safety and environmental matters arising out of the
activities of Contact and its related companies. these matters relate to those activities that affect employees, contractors, communities
and the environment in which Contact operates. the Health, Safety and Environment Committee monitors Contact’s compliance
with the health, safety and environment policy, reviewing and recommending to the Board targets for health, safety and environment
performance, assessing performance against those targets, and reviewing health, safety and environment-related incidents and
considering appropriate actions to minimise the risk of recurrence.

Nominations Committee

membership shall comprise a minimum of three members, and the majority must be independent. the nominations Committee is
chaired by the chairman of the Board. at 30 June 2013, the members of the nominations Committee were:

• Grant King (chairman)

• Phillip Pryke

• Sue Sheldon

the nominations Committee meets as required but must meet at least once a year. the nominations Committee’s role is to ensure that
the Board comprises individuals who are best able to discharge the responsibilities of directors. the committee also attends to other
matters put to it, including directors’ performance assessment and appointments, with recommendations to the Board.

Remuneration Committee

membership is restricted to non-executive directors, with no fewer than three members. at 30 June 2013, the members of the
remuneration Committee were:

• Phillip Pryke (chairman)

• Bruce Beeren

• Karen Moses

the remuneration Committee meets at least twice a year and more frequently if required. the remuneration Committee’s role is to
provide advice and make recommendations to the Board on remuneration policy for employees, remuneration for the CEo and senior
management, performance-based components of remuneration, and remuneration for non-executive directors.

Risk Committee

membership shall comprise at least three members. at 30 June 2013, all directors were members of the risk Committee, and Karen
moses was chairman. no additional fees are being paid for this membership.

the risk Committee meets at least three times a year, with additional meetings called as deemed necessary. the role of the risk
Committee is to assist the Board to fulfil its responsibilities in relation to the identification and control of significant risks to Contact.
the risk Committee receives and reviews reports on the risk management framework, risk capacity, tolerance and exposure limits,
the enterprise-wide risk profile, significant risks, and selected risk management processes and functions.

Board and committee meetings

the Board normally meets at least 10 times a year or whenever necessary to deal with specific matters. the table below shows the
directors’ attendance at the board and committee meetings during the year ended 30 June 2013.

Board audit
Committee

Health, Safety and
Environment
Committee

nominations
Committee

remuneration
Committee

risk Committee

independent
directors
Committee

3
3

5
5
4*
5

1
1
1

3
2
3
3
2
3
2
3

Board

10
10
10
10
10
10
10
10

Number of meetings
grant King
phillip pryke
david Baldwin
Bruce Beeren
Whaimutu dewes
Karen moses
Sue Sheldon

* attended as an observer.

ContaCt EnErgy LimitEd annuaL rEport 2013

GOVERNANCE

Principle 4 – reporting and disclosure

The Board demands integrity both in financial reporting and in the timeliness and balance of disclosures on entity affairs.

the Board has overall responsibility for reporting company results. the directors are committed to preparing financial statements
that present a balanced and clear assessment of Contact’s financial position and prospects. to assist with this task, the Board audit
Committee monitors the effectiveness of the company’s internal financial controls.

Financial reporting

the Board audit Committee oversees the quality and the integrity of external financial reporting including the accuracy, completeness
and timeliness of financial statements. it reviews half-year and annual financial statements, and makes recommendations to the Board
concerning accounting policies, areas of judgement, compliance with accounting standards, stock exchange legal requirements and the
results of the external audit.

management accountability for the integrity of Contact’s financial reporting is reinforced by certification from the CEo and the CFo.
the CEo and CFo provided the Board with written confirmation that Contact’s financial report presents a true and fair view, in all
material respects, of Contact’s financial position for the year ended 30 June 2013, and that operational results are in accordance with
relevant accounting standards.

Timely and balanced disclosure

Contact is committed to promoting investor confidence by providing timely, accurate, complete and equal access to information in
accordance with the nZSX Listing rules. to achieve and maintain high standards of disclosure, Contact has adopted a continuous
disclosure policy, which is designed to ensure compliance with nZX continuous disclosure requirements. this policy sets guidelines
and outlines responsibilities to safeguard employees against inadvertent breaches of continuous disclosure obligations.

the general Counsel has responsibility for overseeing and co-ordinating disclosure to the market.

Principle 5 – remuneration

The remuneration of directors and executives is transparent, fair and reasonable.

Contact’s remuneration structure is designed to attract, retain and motivate high calibre directors and senior executives who are able to
enhance the company’s performance. the ‘remuneration report’ on pages 62 to 64 outlines in detail the remuneration framework of Contact.

Principle 6 – risk management

The Board regularly verifies that the entity has appropriate processes that identify and manage potential and relevant risks.

the Board has primary responsibility for ensuring Contact has an appropriate risk management framework. the risk Committee
assesses the systems and procedures that are in place to ensure that all significant risks and issues are reported to the Board.

Contact has an Enterprise risk management system, which is aligned to the international Standard iSo 31000 risk management –
principles and guidelines. the implementation and operation of this system demonstrate that Contact is committed to the effective
management of risk, which is central to the continued growth and profitability of the company.

the Enterprise risk management team and business unit risk specialists ensure risk management practices are applied consistently
across the business and are integrated within core processes, including strategic planning, budgeting and forecasting, project delivery,
contract management and capital expenditure.

the Head of risk and assurance is accountable for monitoring the company’s key risks. regular reporting on risks and their mitigation
is provided to the risk Committee and Board.

Assurance

Contact has an independent in-house Business assurance function that provides objective assurance of the effectiveness of
the internal control framework.

Business assurance (Ba) assists Contact to accomplish its objectives by bringing a disciplined approach to evaluating and improving
the effectiveness of risk management, internal controls and governance processes. Ba adopts a risk-based assurance approach
driven from the company’s Enterprise risk management system. Ba also assists with external audits by making available findings from
the internal assurance programme for the external auditors to consider when assessing the degree of reliance they are able to place on
the control environment when providing their opinion on the financial statements. Led by the Head of risk and assurance, Ba has the
autonomy to report significant issues directly to the CEo, CFo and the Board audit Committee or, if considered necessary, the chairman
of the Board.

the risk and Board audit Committees oversee the assurance programme and provide Ba with the mandate to perform the agreed
assurance programme. Ba has unrestricted access to all other departments, records and systems of the Contact group, and to the
external auditors and other third parties as it deems necessary.

Principle 7 – auditors

The Board ensures the quality and independence of the external audit process.

the independence of the external auditor is of particular importance to shareholders and the Board.

the Board audit Committee is responsible for considering and making recommendations to the Board regarding any issues
relating to the appointment or termination of the external and internal auditors.

the external auditors are prohibited from undertaking any work that compromises, or is seen to compromise, independence
and objectivity.

the Board audit Committee requires the external auditor to confirm on a six-monthly basis that it has:

remained independent of the group at all times

•
• complied with the provisions of all applicable laws and relevant professional guidance in respect of independence,

integrity and objectivity, and

• adopted a best practice approach in relation to matters of financial independence and business relationships.

the Board audit Committee is responsible for pre-approving all other assurance and other services provided by the external auditor.
the CFo is responsible for the day-to-day relationship with the external auditor, while individual business units have a direct responsibility
for their relationship with the external or internal auditor, ensuring the provision of timely and accurate information and full access to
company records.

Principle 8 – shareholder relations

The Board fosters constructive relationships with shareholders that encourage them to engage with the company.

Contact values its dialogue with institutional and private investors and is committed to giving all shareholders comprehensive,
timely and equal access to information about its activities.

Contact currently keeps shareholders informed through:

information provided to analysts and media during regular briefings

• periodic and continuous disclosure to nZX
•
• annual and half-year reports
•
•

the annual shareholders’ meeting and any other meetings called to obtain approval for Board actions as appropriate
the company’s website.

the Board considers the annual report to be an essential opportunity for communicating with shareholders. Contact publishes its annual
and half-year reports electronically on its website. investors may also request a hard copy of the reports by contacting Contact’s share
registrar, Link market Services Limited, whose details appear in the directory section of this report.

the notice of meeting for the annual shareholders’ meeting is circulated at least 10 days before the meeting and is also posted on Contact’s
website. Shareholders are provided with notes on resolutions proposed through the notice of annual meeting. the Board encourages full
participation of shareholders to ensure a high level of accountability and identification with Contact’s strategies and goals.

Contact’s external auditor also attends the annual meeting, and is available to answer questions relating to the conduct of the external
audit, and the preparation and content of the auditor’s report.

Principle 9 – stakeholder interests

The Board respects the interests of stakeholders within the context of the company’s ownership type and its fundamental purpose.

Contact is committed to making, selling and using energy responsibly and sustainably. the company manages its business in a way that
balances its economic, environmental and social responsibilities. Contact’s approach to social responsibility is based on sharing and
listening. a description of the way in which Contact engages with key stakeholders is set out on page 51.

Contact encourages a working environment in which diversity is recognised and where equal employment opportunities are offered to all
potential and existing employees on the basis of relevant merit. While Contact has not adopted a formal diversity policy, the company’s
intent is embedded in its principles and commitments. gender diversity is outlined in detail on page 45.

ContaCt EnErgy LimitEd annuaL rEport 2013

Remuneration
Report

Directors’ remuneration

Directors’ fees

the current total directors’ fee pool approved by shareholders in 2008 is $1,500,000 per annum. the Board passed resolutions and
signed accompanying certificates to confirm the distributions for Fy13 among directors of $1,162,500 as detailed below.

Remuneration details of directors

details of the total remuneration and the value of other benefits received by each Contact director for Fy13 are as follows.

director

grant King
phillip pryke
david Baldwin
Bruce Beeren
Whaimutu dewes
Karen moses
Sue Sheldon
Total

position

Chairman
deputy Chairman
director
director
director
director
director

Board fees

Committee fees

total remuneration

$217,500

$136,000

$119,500

$951,000

–

$38,000

$21,500

$40,500

$11,000

$60,000

$217,500

$174,000

$141,000

$160,000

$130,500

$179,500

$211,500

$1,162,500

directors’ fees exclude gSt, where appropriate. in addition, Board members are entitled to be reimbursed for costs directly associated
with carrying out their duties, including travel costs.

Chief Executive Officer remuneration

Employment arrangements

dennis Barnes is seconded to the role of Chief Executive officer (CEo) by his employer, origin Energy Limited.

during the term of his secondment, remuneration paid by Contact to dennis Barnes is processed by Contact reimbursing origin
Energy for the cost of this remuneration. an exception exists for share options and performance share rights awarded under Contact’s
Long-term incentive (Lti) Scheme, which are provided directly by Contact.

Remuneration

remuneration paid by Contact to the CEo reflects the breadth and complexity of the role; references market remuneration data
benchmarks; is linked to the achievement of performance goals; and aligns with the creation of sustainable shareholder value in the long
term. the remuneration package paid includes a fixed remuneration component comprising cash salary and other employment benefits,
and at-risk/variable remuneration comprising short-term incentives (cash) and long-term incentives (share options and performance
share rights).

approximately two-thirds of the CEo’s potential annual remuneration is at-risk/variable remuneration and one-third is paid as fixed
remuneration. the amount of short-term incentive paid and the level of long-term incentive allocated to the CEo is dependent on the
degree to which Contact’s financial, health and safety in employment (HSE), and other strategic goals are met, which is determined after
the end of the relevant financial year and paid in the subsequent financial year.

the following tables detail the nature and amount of the remuneration paid to dennis Barnes during Fy13.

year ended 30 June 2013
year ended 30 June 2012

Cash remuneration paid

Fixed remuneration
$

Variable remuneration1
$

total cash remuneration paid
$

936,544

811,250

646,380

492,000

1,582,924

1,303,250

REMUNERATION
REPORT

Equity rights issued (options and performance share rights)

number of options
issued during year

number of performance
share rights issued
during year

Value of equity rights
issued and amortising
during year1
$

Value of equity rights
issued in past years and
amortising during year
$

total equity rights vested
during year
$

year ended 30 June 2013
year ended 30 June 2012

715,117

490,625

97,620

106,409

$153,750

$52,335

$314,003

$196,251

–

1. the allocation of long-term incentives is determined at the end of each financial year. Each allocation has a total performance period of 5 years from the grant date with

exercise hurdles tested on the third, fourth and fifth anniversaries of the grant date. Whether any options and performance share rights vest and become exercisable by or
to dennis Barnes is subject to the achievement of specified exercise hurdles as described on page 64. the value of the long-term incentive disclosed above is the portion of
the fair value of options and performance share rights allocated to the relevant reporting period. none of the options or performance share rights allocated to dennis Barnes
vested in the 2012 and 2013 financial years.

movements during Fy13 in the number of options over ordinary shares and performance share rights held in Contact are set out in the
following table.

Held at
1 July 2012

596,707

129,983

granted as
compensation

715,117

97,620

Exercised

–

Held at
30 June 2013

1,311,824

227,603

Vested
during year

Vested and
exercisable at
30 June 2013

–

options
performance share rights

Employee remuneration

there are three components to employee remuneration: fixed remuneration, at-risk/variable remuneration and other benefits.

the determination of fixed remuneration is based on responsibilities, individual performance and experience, and available market
remuneration data. at-risk/variable remuneration for eligible permanent employees comprises short-term incentives and, for senior
executives, employees with high potential to advance to key leadership roles and senior employees who hold critical skills essential for
Contact’s success, long-term incentives.

We also offer a range of benefits to our people as a way of thanking them for being part of Contact’s success. all permanent and fixed
term employees are offered discounts for home energy, including electricity, natural gas and Lpg. Complimentary health insurance is
available to all eligible permanent employees. additional employee benefits and offers from local retailers and services providers are
also offered from time to time.

Short-Term Incentive (STI) Scheme

Contact’s variable remuneration recognises and rewards high performing individuals whose contributions support business goals and
objectives, while meeting the goals set for the individual. Contact’s Sti comprises cash payments based on performance measured
against key performance indicators (Kpis). Kpis generally comprise company, business unit and individual targets. these targets are
designed to create goals that will support an achievement- and performance-oriented culture. the Sti programme is designed to
differentiate and reward exceptional and good performance.

the Board reserves the right to adjust Sti awards if HSE targets are not met.

Long-Term Incentive Scheme

Ltis are awarded to key talent to align participants’ interests with that of Contact’s shareholders, and encourage and reward longer-term
decision-making.

during Fy13, the Board allocated Lti awards that are, by value, 50 per cent share options and 50 per cent performance share rights
(options with an exercise price of zero).

at 30 June 2013, there were 87 participants in Contact’s Lti Scheme.

1. Short-term incentive remuneration relates to payment for the financial year noted, is determined following the end of the financial year and is based on the achievement of

performance goals and criteria set by the Board.

Share Option Scheme

under the Share option Scheme, the Board issues share options to participants to acquire ordinary shares in Contact at the market
price determined at the effective grant date. the Board also issues performance share rights to participants to acquire ordinary shares
in Contact at zero cost.

ContaCt EnErgy LimitEd annuaL rEport 2013

REMUNERATION
REPORT

the options and performance share rights will only become
exercisable to the extent that exercise hurdles determined by
the Board are satisfied. the exercise hurdle is a comparison of
Contact’s total shareholder return (tSr) against the tSr of a
reference group comprising the nZX50 index in the relevant
period, commencing on the effective grant date. the exercise
hurdle will be measured on three annual test dates, the first
being 3 years from the effective grant date.

For the options and performance share rights issued in Fy13,
participants’ vesting entitlements will be:

• zero per cent vesting if Contact’s tSr over the performance
period does not exceed the 50th percentile of the tSrs of
those companies that are in the nZX50 at grant date and
remain listed at the relevant test dates

• 50–100 per cent vesting (on a sliding scale: that is, the
percentage of performance share rights/share options
exercisable increases proportionately on a straight-line sliding
scale from the 50th up to the 75th percentile), if Contact’s
tSr is ranked between the 50th percentile and the 75th
percentile of those companies that are in the nZX50 at
the grant date and remain listed at the relevant test date
100 per cent vesting if Contact’s tSr is at or above the
75th percentile of the tSrs of those companies that are in
the nZX50 at the grant date and remain listed at the relevant
test date.

•

these vesting entitlements will be calculated on three test dates,
being 1 october 2015, 1 october 2016 and 1 october 2017.

For full details of the Share option Scheme and the number
of options and performance share rights granted, lapsed and
on issue at the end of the reporting period, see note 20 to the
financial statements.

Employee remuneration

the table at right shows the number of employees and former
employees of Contact who, in their capacity as employees,
received remuneration and other benefits (including redundancy
payments and the fair value of any options and performance share
rights allocated to the relevant reporting period) during Fy13 of
at least $100,000 in brackets of $10,000. at 30 June 2013, no
Contact subsidiary had any employees.

the remuneration figures analysed include all monetary payments
actually paid during the course of Fy13. the figures do not include
amounts paid post 30 June 2013 that related to the year ended
30 June 2013.

the value of remuneration benefits analysed includes fixed
remuneration, short-term incentive (including the short-term
incentive relating to Fy12 and paid in Fy13, as well as short-term
incentive for Fy13 paid prior to 30 June 2013 for employees made
redundant during the year), long-term variable remuneration,
and redundancy and other payments made on termination of
employment. the value of the equity-based incentives included
in the remuneration band analysis represents the portion of the
grant date fair value of the equity instruments allocated to the
reporting year ended 30 June 2013. the remuneration (and any
other benefits) of the CEo, dennis Barnes, is disclosed in the CEo
remuneration section on page 62.

ContaCt EnErgy LimitEd annuaL rEport 2013

remuneration bands

$100,001–$110,000
$110,001–$120,000
$120,001–$130,000
$130,001–$140,000
$140,001–$150,000
$150,001–$160,000
$160,001–$170,000
$170,001–$180,000
$180,001–$190,000
$190,001–$200,000
$200001–$210,000
$210,001–$220,000
$220,001–$230,000
$230,001–$240,000
$240,001–$250,000
$250,001–$260,000
$260,001–$270,000
$270,001–$280,000
$280,001–$290,000
$290,001–$300,000
$300,001–$310,000
$310,001–$320,000
$320,001–$330,000
$330,001–$340,000
$340,001–$350,000
$350,001–$360,000
$360001–$370,000
$380,001–$390,000
$410,001–$420,000
$440,001–$450,000
$460,001–$470,000
$490,001–$500,000
$500,001–$510,000
$530,001–$540,000
$570,001–$580,000
$600,001–$610,000
$620,001–$630,000
$650,001–$660,000
$730,001–$740,000
$740,001–$750,000
$770,001–$780,000
$840,001–$850,000
$920,001–$930,000
$1,510,001–$1,520,000
Grand total

number of employees

433

Statutory
Disclosures

Disclosures of interests by directors
the following are particulars of general disclosures of interest by directors holding office as at 30 June 2013, pursuant to section 140(2) of
the Companies act 1993. Each such director will be regarded as interested in all transactions between Contact and the disclosed entity.

Grant King
origin Energy Limited and group companies
australian petroleum production and Exploration association

managing director/shareholder/employee
Councillor

Phillip Pryke
Co-investor Capital partners pty Limited
Frog Hollow Limited
gmt Bond issuer Limited
gmt Wholesale Bond issuer Limited
goodman Funds management Limited
goodman Limited
goodman (nZ) Limited
goodman property aggregated Limited
pauatahanui projects Limited
pryke pty Limited
tru-test Corporation Limited
tru-test pty Limited

David Baldwin
origin Energy Limited

Bruce Beeren
origin Energy Limited
Equipsuper pty Limited
the Hunger project australia pty Limited

Whaimutu Dewes
aotearoa Fisheries Limited
Housing new Zealand Board
iwi rakau Limited
Kura Limited
ngati porou Fisheries Limited
ngati porou Forests Limited
ngati porou Holding Company Limited
ngati porou Seafoods Limited
ngati porou Whanui Forests Limited
pupuri taonga Limited
rakaikura Limited
real Fresh Limited
Whainiho developments Limited
the treasury Board

director/shareholder
director/shareholder
director
director
director
director
director
director
director/shareholder
director/shareholder
director
director

Employee/shareholder

director/shareholder and former employee/executive director
director
director

Chairman
Chairman
director
Chairman
director
director
Chairman
director
director
director
director
director
managing director/shareholder
director

Karen Moses
origin Energy Limited and group companies
Energia andina S.a.
SaS trustee Corporation Board
Sydney dance Company
university of new South Wales, australian School of Business advisory Council

director/shareholder/employee
director
director
director
Committee member

Sue Sheldon
Chorus Limited
Fibretech new Zealand Limited
Freightways Limited
paymark Limited
reserve Bank of new Zealand
Sue Sheldon advisory Limited

Chairman
Chairman
Chairman
Chairman
deputy Chairman
director

there were no specific disclosures made during the year of any interests in transactions entered by Contact or any of its subsidiaries.

ContaCt EnErgy LimitEd annuaL rEport 2013 65

STATUTORy
DISCLOSURES

Information used by directors
no director issued a notice requesting to use information received in his or her capacity as a director that would not otherwise be
available to the director.

Indemnity and insurance
in accordance with section 162 of the Companies act 1993 and the constitution of the company, Contact has continued to indemnify and
insure its directors and officers, including directors of subsidiary and associated companies, against potential liability or costs incurred in
any proceeding, excluding actions for gross negligence, criminal liability, breach of fiduciary duty or breach of directors’ duties.

Directors’ security participation
directors are requested to hold a minimum of 20,000 shares within 3 years of appointment or within 3 years of the commencement
of fees being paid.

Securities of the company in which each director has a relevant interest at 30 June 2013

director

grant King
phillip pryke
david Baldwin
Bruce Beeren
Whaimutu dewes
Karen moses
Sue Sheldon

number of
ordinary shares

number of options
(including pSrs) 1

33,886
88,401
nil
35,901
20,011
21,038
21,803

n/a
n/a
1,128,1072
n/a
n/a
n/a
n/a

1. performance share rights.
2. david Baldwin participated in the Lti Scheme during his secondment to Contact. david Baldwin retains these securities subject to exercise hurdles and vesting.

Securities dealings of directors

during the year, the directors disclosed the following transactions in respect of section 148(2) of the Companies act 1993. note that all
dealings are in ordinary shares unless otherwise specified.

director

grant King

date of
transaction

21/09/12

phillip pryke

21/09/12

david Baldwin

Bruce Beeren
Whaimutu dewes

Karen moses
Sue Sheldon

24/10/12
30/11/12
30/11/12
21/09/12
21/09/12
21/09/12

29/11/12
21/09/12
21/09/12

21/09/12

28/06/13
28/06/13

Consideration
per security

number of securities
acquired (disposed of)

nature of relevant interest

$4.88

$5.40
nil
nil
$4.88
$4.88
$4.88

$5.14
$4.88
$4.88

$4.88

n/a
n/a

814

2,545
(2,545)
(15,000)
(98,485)
(17,508)
863
158
245

3,300
506
524

17
(17)
(653)
8% Fixed rate Bonds
(10,000)

acquisition of bonus issue shares under the profit distribution plan
(pdp) by Fabco investments pty Limited
allotment and buyback of bonus issue shares under the pdp by
pryke pty Limited
on-market sale by pryke pty Limited
Lapse of options under Lti Scheme
Lapse of pSrs under Lti Scheme
acquisition of bonus issue shares under the pdp by Bg Beeren
acquisition of bonus issue shares under the pdp by WK dewes
acquisition of bonus issue shares under the pdp by WK dewes,
Ja Baillie and gW david
on-market purchase by WK dewes
acquisition of bonus issue shares under the pdp by Ka moses
acquisition of bonus issue shares under the pdp by SJ Sheldon,
pJ Sheldon and mJ Walker
allotment and buyback of bonus issue shares under the pdp by
private nominees Limited
Ceased to have a relevant interest
Ceased to have a relevant interest

ContaCt EnErgy LimitEd annuaL rEport 2013

Subsidiary company directors
the australian subsidiaries were deregistered during Fy13. paul Smith received the australian dollar equivalent of $22,276 in Fy13 in his
capacity as a consultant to Contact australia pty Limited and Contact operations australia pty Limited. no director of any of Contact’s
subsidiaries received additional remuneration or benefits in respect of their directorships. the following people held office as directors
of subsidiary companies at 30 June 2013.

Company

Contact aria Limited

Contact Wind Limited

rockgas Limited

directors

dennis Barnes
paul ridley-Smith
dennis Barnes
graham Cockroft
alistair yates
dennis Barnes
graham Cockroft
peter Kane (appointed 31/05/13)
Chris Brown (resigned 31/05/13)

Stock exchange listings
Contact’s ordinary shares are listed and quoted on the new Zealand Stock market (nZSX) under the company code ‘CEn’. Contact has
two issues of retail bonds listed and quoted on the new Zealand debt market (nZdX) under the company codes ‘CEn010’ (2009 series)
and ‘CEnFa’ (2011 series).

Shareholder statistics
Twenty largest shareholders as at 20 August 2013

origin Energy pacific Holdings Limited
Jp morgan Chase Bank – nZCSd 1
HSBC nominees (new Zealand) Limited – nZCSd 1
accident Compensation Corporation – nZCSd 1
Cogent nominees Limited – nZCSd 1
Citibank nominees (nZ) Limited – nZCSd 1
HSBC nominees (new Zealand) Limited – nZCSd 1
national nominees new Zealand Limited – nZCSd 1
new Zealand Superannuation Fund nominees Limited – nZCSd 1
FnZ Custodians Limited
tea Custodians Limited – nZCSd 1
Custodial Services Limited
premier nominees Limited – nZCSd 1
origin Energy universal Holdings Limited
private nominees Limited – nZCSd 1
masfen Securities Limited
guardian nominees Limited a/c Westpac nZ Shares 2002 Wholesale trust – nZCSd 1
Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
Total for top 20

number of ordinary shares

% of ordinary shares

383,508,980
25,547,472
24,793,051
19,040,108
18,884,462
14,166,156
12,642,868
12,471,785
11,021,769
7,777,047
7,673,612
6,196,338
5,813,451
4,767,920
4,735,816
3,099,331
2,433,638
2,350,385
1,885,210
1,714,943
570,524,342

52.30
3.48
3.38
2.60
2.58
1.93
1.72
1.70
1.50
1.06
1.05
0.84
0.79
0.65
0.65
0.42
0.33
0.32
0.26
0.23
77.79

1. new Zealand Central Securities depository Limited (nZCSd) is a depository system which allows electronic trading of securities to members. as at 20 august 2013, total

holding in nZCSd were 166,361,451 or 22.69 per cent of shares on issue.

Distribution of ordinary shares and shareholders as at 20 August 2013

Size of holding

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 and over
Total

number of shareholders

% of shareholders

number of ordinary shares

% of ordinary shares

33,393
34,648
3,213
1,578
87
61
72,980

45.76
47.48
4.40
2.16
0.12
0.08
100.00

22,070,204
59,127,069
22,048,490
27,954,698
5,942,336
596,159,024
733,301,821

3.01
8.06
3.01
3.81
0.81
81.30
100.00

ContaCt EnErgy LimitEd annuaL rEport 2013 67

STATUTORy
DISCLOSURES

FINANCIAL
STATEMENTS

Substantial security holders
according to notices given under the Securities markets act 1988, the following persons were substantial security holders of the
company as at 20 august 2013:

Substantial security holder

origin Energy new Zealand Limited and its subsidiaries

number of ordinary shares in
which relevant interest is held

389,314,921

date of notice

11 august 2011

the total number of voting securities of Contact at 20 august 2013 was 733,301,821 fully paid ordinary shares.

Financial
Statements

For the year ended 30 June 2013

Bondholder statistics
Retail fixed rate bonds (CEN010) at 20 August 2013

Size of holding

1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 and over
Total

number of bondholders

% of bondholders

812
2,016
4,789
672
338
8,627

9.41
23.37
55.51
7.79
3.92
100.00

Capital bonds (CENFA) at 20 August 2013

Size of holding

1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 and over
Total

number of bondholders

% of bondholders

401
1,042
2,044
272
159
3,918

10.23
26.60
52.17
6.94
4.06
100.00

number of bonds

4,055,000
19,281,000
137,886,327
58,602,673
330,175,000
550,000,000

number of bonds

2,005,000
10,103,000
57,415,000
23,788,000
106,689,000
200,000,000

% of bonds

0.74
3.51
25.07
10.65
60.03
100.00

% of bonds

1.00
5.05
28.71
11.89
53.35
100.00

Auditor fees
Kpmg has continued to act as auditors of the company. the amount payable by Contact and its subsidiaries to Kpmg as audit fees in
respect of Fy13 was $570,520. there was no non-audit work undertaken during the year.

Donations
in accordance with section 211(1)(h) of the Companies act 1993, Contact records that it made no donations (2012: $11,388). no subsidiaries
made any donations during Fy13. donations are made on the basis that the recipient is not obliged to provide any service such as
promoting Contact’s brand and are separate from Contact’s sponsorship activity. no political contributions were made during the year.

NZX waivers
details of all waivers granted and published by nZX within or relied upon by Contact in the 12 months immediately preceding the date
two months before the date of publication of this annual report are available on the company’s website www.contactenergy.co.nz.

Exercise of NZX disciplinary powers
nZX did not exercise any of its powers under Listing rule 5.4.2 in relation to Contact during Fy13.

Credit rating as at 20 August 2013
Contact Energy Limited had a Standard & poor’s long-term credit rating of BBB/stable and short term rating of a-2/stable.

the $550 million unsubordinated, unsecured fixed rate bonds issued in march 2009 were rated BBB by Standard & poor’s.

the $200 million subordinated, unsecured, redeemable, cumulative fixed rate capital bonds issued in december 2011 were rated
BB- by Standard & poor’s.

inComE StatEmEnt
StatEmEnt oF ComprEHEnSiVE inComE
StatEmEnt oF CHangES in EQuity
StatEmEnt oF FinanCiaL poSition
StatEmEnt oF CaSH FLoWS
notES to tHE FinanCiaL StatEmEntS

75
76
77
78
78
inventories and gas storage – cushion gas 79

1. Basis of accounting
2. Segments
3. Components of profit
4. Earnings per share
5. Share capital and distributions
6.
7. property, plant and equipment and

intangible assets

8. goodwill
9. Carbon emission units
10. Borrowings
11. Financial instruments

79
83
83
84
85

12. Financial risk management
13. note to the Statement

of Cash Flows

14. receivables and prepayments
15. payables and accruals
16. provisions
17. taxation
18. operating commitments
19. related parties
20. Share-based compensation
21. Contingent liabilities
22. Subsequent events

indEpEndEnt auditor’S rEport

70
71
72
73
74
75

91
92
92
93
93
95
96
97
98
98

ContaCt EnErgy LimitEd annuaL rEport 2013

Statement of
Comprehensive Income
For the year ended 30 June 2013

Profit for the year
Other comprehensive income:
Change in cash flow hedge reserve
Total other comprehensive income before tax
deferred tax relating to other comprehensive income
Total other comprehensive income after tax
Total comprehensive income for the year

note

group
2013
$m

199

16
16
(4)
12
211

group
2012
$m

190

36
36
(7)
29
219

parent
2013
$m

183

16
16
(4)
12
195

parent
2012
$m

186

36
36
(7)
29
215

the accompanying notes form an integral part of these financial statements.

Income
Statement
For the year ended 30 June 2013

revenue
other income
operating expenses
Earnings before net interest expense, tax, depreciation, amortisation,
change in fair value of financial instruments and other significant items
(EBITDAF)
depreciation and amortisation
Change in fair value of financial instruments
other significant items
Equity accounted earnings of associate
net interest expense
Profit before tax
tax expense
Profit for the year
Basic and diluted earnings per share (cents)

note

7
11
3

group
2013
$m

2,504
22
(1,985)

541
(195)
11
(28)
–
(66)
263
(64)
199
27.2

group
2012
$m

2,683
18
(2,192)

509
(193)
(11)
21
2
(72)
256
(66)
190
26.9

parent
2013
$m

2,324
37
(1,846)

515
(190)
11
(21)
–
(66)
249
(66)
183

parent
2012
$m

2,464
33
(2,007)

490
(189)
(11)
32
–
(72)
250
(64)
186

Non-statutory measure: underlying earnings after tax

underlying earnings after tax is presented to enable stakeholders to make an assessment and comparison of ongoing performance. it is
calculated by adjusting profit for the year for significant items that do not reflect the ongoing performance of the group.

Profit for the year
Underlying adjustments
Change in fair value of financial instruments
other significant items:

gas meter assets sale
decommissioned new plymouth power station sale and provision release
Clutha asset impairment and land sales
asset impairments
restructuring costs
transition costs
Exit of investment in oakey power Holdings pty Limited

Adjustments before tax

tax credit on underlying adjustments

Underlying earnings after tax
Underlying earnings per share (cents)

the accompanying notes form an integral part of these financial statements.

note

11
3

group
2013
$m

199

(11)

(26)
(17)
(13)
72
8
4
–

(14)

202
27.7

group
2012
$m

190

–
–
2
–
–
5
(28)

(10)

(4)

176
25.0

ContaCt EnErgy LimitEd annuaL rEport 2013

ContaCt EnErgy LimitEd annuaL rEport 2013 71

Statement of
Changes in Equity
For the year ended 30 June 2013

Group

Balance at 1 July 2011
profit for the year after tax
other comprehensive income after tax
restricted shares, share options and performance share rights lapsed
Transactions with owners recorded directly in equity:
Change in share capital
Change in share-based compensation reserve
distributions declared
Total transactions with owners recorded directly in equity
Balance at 30 June 2012
Balance at 1 July 2012
profit for the year after tax
other comprehensive income after tax
Share options and performance share rights lapsed
Transactions with owners recorded directly in equity:
Change in share capital
Change in share-based compensation reserve
distributions declared
Total transactions with owners recorded directly in equity
Balance at 30 June 2013

Parent

Balance at 1 July 2011
profit for the year after tax
other comprehensive income after tax
restricted shares, share options and performance share rights lapsed
Transactions with owners recorded directly in equity:
Change in share capital
Change in share-based compensation reserve
distributions declared
Total transactions with owners recorded directly in equity
Balance at 30 June 2012
Balance at 1 July 2012
profit for the year after tax
other comprehensive income after tax
Share options and performance share rights lapsed
Effect of Empower Limited amalgamation
Transactions with owners recorded directly in equity:
Change in share capital
Change in share-based compensation reserve
distributions declared
Total transactions with owners recorded directly in equity
Balance at 30 June 2013

note

Share
capital
$m

1,413
–
–
–

121
–
–
121
1,534
1,534
–
–
–

71
–
–
71
1,605

Share
capital
$m

1,413
–
–
–

121
–
–
121
1,534
1,534
–
–
–
–

71
–
–
71
1,605

retained
earnings
$m

1,855
190
–
1

–
–
(162)
(162)
1,884
1,884
199
–
1

–
–
(167)
(167)
1,917

retained
earnings
$m

1,764
186
–
1

–
–
(162)
(162)
1,789
1,789
183
–
1
54

–
–
(167)
(167)
1,860

Cash flow
hedge
reserve
$m

Share–based
compensation
reserve
$m

total
shareholders’
equity
$m

(37)
–
29
–

–
–
–
–
(8)
(8)
–
12
–

–
–
–
–
4

5
–
–
(1)

–
4
–
4
8
8
–
–
(1)

–
4
–
4
11

3,236
190
29
–

121
4
(162)
(37)
3,418
3,418
199
12
–

71
4
(167)
(92)
3,537

Cash flow
hedge
reserve
$m

Share–based
compensation
reserve
$m

total
shareholders’
equity
$m

(37)
–
29
–

–
–
–
–
(8)
(8)
–
12
–
–

–
–
–
–
4

5
–
–
(1)

–
4
–
4
8
8
–
–
(1)
–

–
4
–
4
11

3,145
186
29
–

121
4
(162)
(37)
3,323
3,323
183
12
–
54

71
4
(167)
(92)
3,480

Statement of
Financial Position
At 30 June 2013

note

14
6
9
11
7

6
7
7
8
6
19
11
11

15
10
11
16

10
11
16
17

group
2013
$m

3,537

80
343
45
18
8
6
500

92
5,116
242
182
52
–
3
2
8
5,697
6,197

319
671
60
6
15
1,071

699
87
58
735
10
1,589
2,660
3,537

group
2012
$m

3,418

6
351
38
17
3
7
422

93
5,163
188
182
52
–
3
1
8
5,690
6,112

409
102
56
5
28
600

1,202
128
64
700
–
2,094
2,694
3,418

parent
2013
$m

3,480

78
332
41
18
8
6
483

92
5,048
242
179
52
69
–
2
8
5,692
6,175

356
671
60
5
15
1,107

699
87
56
736
10
1,588
2,695
3,480

parent
2012
$m

3,323

4
361
33
17
3
7
425

93
5,062
188
123
52
133
–
1
8
5,660
6,085

485
102
56
5
28
676

1,202
128
61
695
–
2,086
2,762
3,323

Shareholders’ equity
represented by:
Current assets
Cash and cash equivalents
receivables and prepayments
inventories
Carbon emission units
derivative financial instruments
assets held for sale
Total current assets
Non-current assets
inventories
property, plant and equipment
intangible assets
goodwill
gas storage – cushion gas
investment in subsidiaries and associate
available-for-sale financial assets
derivative financial instruments
other non-current assets
Total non-current assets
Total assets
Current liabilities
payables and accruals
Borrowings
derivative financial instruments
provisions
tax payable
Total current liabilities
Non-current liabilities
Borrowings
derivative financial instruments
provisions
deferred tax
other payables
Total non-current liabilities
Total liabilities
Net assets

the accompanying notes form an integral part of these financial statements.

authorised on behalf of the Contact Energy Limited Board of directors on 19 august 2013:

the accompanying notes form an integral part of these financial statements.

Grant King
Chairman

Sue Sheldon
director

ContaCt EnErgy LimitEd annuaL rEport 2013

Statement of
Cash Flows
For the year ended 30 June 2013

Cash flows from operating activities
receipts from customers
payments to suppliers and employees
tax paid
dividends received
Net cash inflow from operating activities
Cash flows from investing activities
purchase of property, plant and equipment
purchase of intangible assets
purchase of Whirinaki generation plant and on-site diesel fuel
proceeds from sale of property, plant and equipment
interest received
Exit of investment in oakey power Holdings pty Limited
Net cash (outflow) from investing activities
Cash flows from financing activities
proceeds from borrowings
gas sale and repurchase arrangement
repayment of borrowings
interest paid
Financing costs
distributions paid to shareholders
Entitlement offer – related costs
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
add: cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

note

group
2013
$m

2,573
(2,058)
(46)
–
469

(288)
(43)
–
55
2
–
(274)

387
27
(335)
(103)
(1)
(96)
–
(121)
74
6
80

group
2012
$m

2,614
(2,154)
(21)
1
440

(482)
(47)
(36)
4
3
38
(520)

324
(10)
(122)
(97)
(10)
(43)
(1)
41
(39)
45
6

parent
2013
$m

2,437
(1,928)
(46)
–
463

(282)
(43)
–
55
2
–
(268)

387
27
(335)
(103)
(1)
(96)
–
(121)
74
4
78

parent
2012
$m

2,406
(1,952)
(21)
–
433

(477)
(47)
(36)
3
3
38
(516)

324
(10)
(122)
(96)
(10)
(43)
(1)
42
(41)
45
4

the accompanying notes form an integral part of these financial statements.

Notes to the
Financial Statements
For the year ended 30 June 2013

1. BASIS OF ACCOUNTING

Reporting entity

Contact Energy Limited is registered in new Zealand under the Companies act 1993 and is an issuer for the purpose of the Financial
reporting act 1993. Contact Energy Limited is listed on the nZX with its ordinary shares quoted on the nZSX and two series of bonds
quoted on the nZdX.

the financial statements presented are for Contact Energy Limited (the parent) and its subsidiaries and associate (together referred to
as Contact or the group) at, and for the year ended, 30 June 2013.

Contact is a diversified and integrated energy group focusing on electricity generation and the sale of electricity, natural gas and
liquefied petroleum gas (Lpg) to residential, commercial and industrial customers throughout new Zealand.

Basis of preparation

the financial statements have been prepared in accordance with the Financial reporting act 1993, which requires compliance with
new Zealand generally accepted accounting practice. they comply with new Zealand equivalents to international Financial reporting
Standards (nZ iFrS), other applicable financial reporting standards as appropriate for profit-oriented entities, and with international
Financial reporting Standards (iFrS).

the financial statements are presented in new Zealand dollars, which is Contact’s functional currency. references in these financial
statements to ‘$’ and ‘nZ$’ are to new Zealand dollars, unless otherwise stated. all financial information has been rounded to the nearest
million ($m), unless otherwise stated.

the measurement basis adopted in the preparation of these financial statements is historical cost, except for financial instruments
measured at fair value, assets held for sale measured at fair value less costs to sell, and generation plant and equipment acquired before
1 october 2004 measured at deemed historical cost.

Accounting estimates and judgements

application of Contact’s accounting policies requires the use of estimates and judgements. the estimates are based on historical
experience and other factors that are believed to be reasonable. actual results may differ from these estimates. the areas of significant
estimation and critical judgements are as follows:

• unbilled retail revenue for unread electricity and gas meters is estimated at the end of each reporting period – refer to notes 3 and 14.

• the net realisable value of inventory gas and its classification between current and non-current are estimated at the end of each

reporting period – refer to note 6.

• the useful lives of property, plant and equipment and intangible assets are estimated based on the period over which benefits are

expected to be derived from the assets – refer to note 7.

• Cash-generating units including the carrying amount of property, plant and equipment, intangible assets and goodwill are subject
to an annual impairment test to ensure the carrying amount does not exceed the estimated recoverable amount at the end of the
reporting period – refer to notes 7 and 8.

• the fair value of financial assets and financial liabilities is estimated for recognition and measurement, and for disclosure purposes –

refer to note 11.

• Liabilities are estimated for site restoration and environmental rehabilitation – refer to note 16.

Accounting policies and standards

no changes to accounting policies have been made during the year, and policies have been consistently applied to all years presented in
these financial statements. Certain comparative amounts have been reclassified to conform to the current year’s presentation.

Contact has chosen not to early adopt the following accounting standards that may have a material effect on the financial statements in
future years:

• nZ iFrS 10 Consolidated Financial Statements, nZ iFrS 11 Joint Arrangements and nZ iFrS 12 Disclosure of Interests in Other

Entities (the consolidation suite of accounting standards) – effective for the year ending 30 June 2014

• nZ iFrS 13 Fair Value Measurement – effective for the year ending 30 June 2014

• nZ iFrS 9 Financial Instruments – effective for the year ending 30 June 2016.

Contact is in the process of assessing the impact of adopting these accounting standards.

ContaCt EnErgy LimitEd annuaL rEport 2013

ContaCt EnErgy LimitEd annuaL rEport 2013 75

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

2. SEGMENTS

3. COMPONENTS OF PROFIT

Contact’s operating segments are identified based on the internal reports that are reviewed and used by the Chief Executive officer
in assessing performance and determining the allocation of resources. during the year, the composition of the internally reported
segments changed to reflect management’s view that retail and wholesale gas are an integral part of the integrated Energy segment.

Contact has two operating segments; integrated Energy and other.

• the integrated Energy business is a generator of electricity and retailer of electricity and gas to residential, commercial and industrial

customers throughout new Zealand.

• the other business is a combination of other products and services offered by Contact. these include the sale of Lpg to residential
and commercial customers and the provision of electricity and gas meter services to other retailers and internally to the integrated
Energy business.

Group
2013

revenue and other income
Cost of goods sold
other operating expenses
EBITDAF

Group
2012

revenue and other income
Cost of goods sold
other operating expenses
EBITDAF

integrated
Energy
$m

2,385
(1,653)
(230)
502

integrated
Energy
$m

2,565
(1,857)
(239)
469

other
$m

174
(113)
(22)
39

other
$m

169
(106)
(23)
40

inter-segment 1
$m

(33)
33
–
–

inter-segment 1
$m

(33)
33
–
–

total
$m

2,526
(1,733)
(252)
541

total
$m

2,701
(1,930)
(262)
509

1. the inter-segment revenue is a charge for electricity and gas meters between the integrated Energy and other segments. the inter-segment charge aims to have the

integrated Energy segment pay the other segment an equivalent cost for Contact-owned meters as it would for third party owned meters.

Revenue
retail electricity
Wholesale electricity
Lpg
gas
Steam

other income
Total revenue and other income
Operating expenses
Electricity purchases
Electricity transmission, distribution and levies
gas purchases, transmission and levies
Lpg purchases
meter costs
Emission costs
Labour costs
other

Other operating expenses and labour costs include:
auditor’s remuneration – Kpmg audit fees
rental expense on operating leases
Contributions to KiwiSaver
Other significant items
gas meter assets sale 1
decommissioned new plymouth power station sale and provision release 2
Clutha asset impairment and land sales 3
asset impairments 4
restructuring costs 5
transition costs 6
Exit of investment in oakey power Holdings pty Limited 7

Net interest expense
interest expense
interest expense capitalised
interest income

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

group
2013
$m

1,532
742
119
92
19
2,504
22
2,526

(678)
(576)
(362)
(87)
(26)
(4)
(105)
(147)
(1,985)

(1)
(7)
(3)

26
17
13
(72)
(8)
(4)
–
(28)

(112)
44
2
(66)

group
2012
$m

1,490
963
118
92
20
2,683
18
2,701

(874)
(544)
(391)
(83)
(23)
(15)
(104)
(158)
(2,192)

(1)
(8)
(2)

–
–
(2)
–
–
(5)
28
21

(107)
32
3
(72)

parent
2013
$m

1,471
742
–
92
19
2,324
37
2,361

(657)
(555)
(362)
–
(24)
(3)
(102)
(143)
(1,846)

(1)
(5)
(2)

26
17
13
(65)
(8)
(4)
–
(21)

(112)
44
2
(66)

parent
2012
$m

1,389
963
–
92
20
2,464
33
2,497

(830)
(500)
(391)
–
(20)
(14)
(100)
(152)
(2,007)

(1)
(6)
(2)

–
–
(2)
–
–
(5)
39
32

(107)
32
3
(72)

ContaCt EnErgy LimitEd annuaL rEport 2013

retail electricity, gas and Lpg revenues include an estimate of sales for unread electricity and gas meters at the end of the reporting
period – refer to note 14.

transactions are classified as other significant items when they meet certain criteria approved by Contact’s Board of directors
(‘the Board’). other significant items are determined in accordance with the principles of consistency, relevance and clarity.
transactions considered for classification as other significant items include impairment or reversal of impairment of assets;
business integration, restructure, acquisition and disposal costs; and transactions or events outside of Contact’s ongoing operations
that have a significant impact on reported profit.

1. on 30 June 2013 Contact sold its gas meter assets to a wholly owned subsidiary of Vector Limited for $60 million and the cash proceeds were received on 1 July 2013.
2. in June 2013 Contact sold the decommissioned new plymouth power station land and assets for $24 million. Consequently the provision for the removal of asbestos of

$6 million in relation to the site was released.

3. in the 2012 financial year Contact decided not to proceed in the foreseeable future with any of the options being investigated for hydro generation development on the

Clutha river. the project development costs were impaired (2013: nil; 2012: $4 million) and some of the associated land has been sold (2013: $13 million; 2012: $2 million).

4. asset impairments resulted from Contact reviewing the carrying amount of its non-current assets. the asset impairments recognised are in relation to wind generation

development projects (group: $67 million; parent: $34 million), land held for sale during the year and at the end of the reporting period (other than in relation to the Clutha
river hydro development) ($3 million) and other minor projects ($2 million). Contact has decided to exit the Hauāuru mā raki wind generation development on the Waikato
coast and not to proceed in the foreseeable future with the Waitahora wind generation development project near dannevirke in the tararua district. as a result, the parent
has recognised a $26 million provision for impairment of the advance to the Contact Wind Limited subsidiary.

5. restructuring costs have been incurred as part of the restructuring programme announced during the year to significantly reshape the operating structure of the business.

these costs are employee redundancy costs and related employee support and outplacement service costs.

6. transition costs are those costs incurred on the retail transformation project and associated activities in the retail business.
7. on 18 January 2012, Contact exited its investment in oakey power Holdings pty Limited through a selective capital reduction and share cancellation for $38 million.

ContaCt EnErgy LimitEd annuaL rEport 2013 77

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

3. COMPONENTS OF PROFIT – CONTINUED

INVENTORIES AND GAS STORAGE – CUSHION GAS

interest expense and income are recognised using the effective interest method. net interest expense incurred on the construction or
acquisition of qualifying assets is capitalised. Capitalisation ceases once those assets are operating as intended or asset construction is
temporarily suspended. the weighted average interest rate used for capitalisation is 6.9 per cent per annum (2012: 7.2 per cent).

4. EARNINGS PER SHARE

Group
Basic and diluted earnings per share (cents)
underlying earnings per share (cents)
Weighted average number of shares on issue over the year

2013

2012

27.2
27.7
730,014,741

26.9
25.0
706,845,891

Basic and diluted earnings per share are calculated as profit after tax divided by the weighted average number of shares on issue over
the year. performance hurdles for share options and performance share rights have not been met so these equity instruments do not
affect the diluted earnings per share calculation.

underlying earnings per share is calculated by dividing underlying earnings after tax by the weighted average number of shares on issue
over the year.

5. SHARE CAPITAL AND DISTRIBUTIONS

ordinary shares have no par value and are fully paid. ordinary shareholders are entitled to receive distributions as declared from time to
time and are entitled to one vote per share at meetings of the parent.

Group and Parent
ordinary shares

Balance at the beginning of the year
Share capital issued
Share capital repurchased and cancelled
restricted shares converted to ordinary shares 1

Balance at the end of the year

2013
number

718,670,307
17,728,186
(3,096,672)
–
733,301,821

2013
$m

1,534
86
(15)
–
1,605

2012
number

695,068,288
31,377,916
(8,284,377)
508,480
718,670,307

2012
$m

1,413
162
(43)
2
1,534

1. Contact closed its restricted Share plan in June 2012 and the restricted shares held in trust were converted to ordinary shares and sold on market.

the 2013 interim distribution was paid in cash. the 2012 interim and final distributions and the 2011 final distribution were made pursuant
to the parent’s profit distribution plan (pdp). under the pdp shareholders received distributions in the form of non-taxable bonus shares
and had the option to have the shares, or a portion of them, bought back by the parent for cash (2013: $15 million, 2012: $43 million).
Shareholders who elected to have their bonus shares bought back by the parent at an equivalent cost under the off-market buy-back
facility were treated as having received a fully imputed cash dividend.

Group and Parent

previous year final distribution
Current year interim distribution
Total distributions

2013
Cents per share

12.0
11.0

2012
Cents per share

12.0
11.0

2013
$m

86
81
167

2012
$m

84
78
162

Inventories
inventories are stated at the lower of cost and net realisable value. the cost of inventory is determined on a weighted average basis.
net realisable value for inventory gas and diesel fuel is the estimated recoverable amount of the fuel stocks based on their intended
use. net realisable value for consumables, spare parts and Lpg is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses.

inventory gas
Consumables and spare parts
Lpg
diesel fuel

Current
non-current

group
2013
$m

124
7
4
2
137
45
92
137

group
2012
$m

116
7
5
3
131
38
93
131

parent
2013
$m

124
7
–
2
133
41
92
133

parent
2012
$m

116
7
–
3
126
33
93
126

the estimation of the split of inventory gas held in the ahuroa gas storage facility between current and non-current is on the basis of
forecast and actual usage. Contact expects to utilise 20 per cent of the inventory gas held in storage at 30 June 2013 within 1 year from
the end of the reporting period (2012: 20 per cent).

Gas storage – cushion gas
Contact has beneficial access to the remaining natural gas and Lpg reserves (excluding condensate) in the ahuroa reservoir. the
natural gas reserves at the date of acquisition, together with additional natural gas injections since acquisition, are referred to as cushion
gas and represent the investment necessary to enable the field to be used for the storage of operational gas. gas reserves in excess of
that required for cushion gas are treated as inventory gas.

Cushion gas is recognised at cost and is not depreciated on the basis that it is economically recoverable at the end of the life of the
ahuroa gas storage facility. the carrying amount is reviewed at the end of each reporting period for indicators of impairment – refer to
note 7 for further detail on impairment reviews.

7. PROPERTy, PLANT AND EqUIPMENT AND INTANGIBLE ASSETS
property, plant and equipment and finite life intangible assets are carried at cost less accumulated depreciation or amortisation and
accumulated impairment losses, except for generation plant and equipment acquired before 1 october 2004, which is recognised at
deemed historical cost less accumulated depreciation and accumulated impairment losses. deemed historical cost is the fair value
of those assets at 1 october 2004, which was the date of Contact’s transition to nZ iFrS and the date on which origin Energy Limited
(origin) acquired a controlling interest in Contact.

Cost
the cost of assets is the value of the consideration given to acquire the assets and the value of other directly attributable costs incurred
in bringing the assets to the location and condition necessary for their intended use.

the cost of assets constructed by Contact includes the cost of all materials and services used in construction, labour costs specifically
associated with construction, resource management consent costs (where applicable) and directly attributable variable and fixed
overheads. net revenue attributable to assets that is earned in the period until the assets are operating in the manner intended by
management is deducted from the cost of the assets.

the costs of self-constructed assets are recognised as capital work in progress until the assets are operating in the manner intended by
management at which time they are transferred to property, plant and equipment or intangible assets.

Subsequent expenditure is capitalised when it relates to asset replacements and improvements, or when laws, regulations or resource
consent conditions require it for continued operation of the asset. all other subsequent expenditure is expensed as incurred.

Exploration expenditure in relation to geothermal fields is accounted for on an area of interest basis. under this method, costs incurred in
the exploration phase on an area of interest, within a geothermal field, are expensed as incurred. Costs associated with the preparation
of resource consent applications and drilling geothermal exploration wells are capitalised as part of capital work in progress and
subsequently expensed only if the entire area of interest is unsuccessful.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

7. PROPERTy, PLANT AND EqUIPMENT AND INTANGIBLE ASSETS – CONTINUED

Depreciation and amortisation

Except for certain generation plant and equipment assets, depreciation and amortisation are recognised on a straight-line basis to allocate
the cost of the assets, less any estimated residual values, over their expected remaining useful lives. generation plant and equipment assets
where the assets’ future economic benefits are expected to be consumed on a usage basis are depreciated on an equivalent operating
hours basis.

the range of annual depreciation and amortisation rates for each class of asset is as follows:

type of asset

Land
generation plant and equipment (including buildings)
generation plant and equipment on an equivalent operating hours basis
other buildings
other plant and equipment
gas storage rights
Computer software

asset useful lives and residual values are reviewed annually and adjusted if appropriate.

Reconciliation of the carrying amount of property, plant and equipment

rate

not depreciated
1 – 33%
23,500–100,000 equivalent operating hours
2 – 33%
1 – 33%
3%
10 – 33%

Group

Cost
Balance at 1 July 2011
additions
transfers from capital work in progress
transfer to assets held for sale 1
disposals
Balance at 30 June 2012
Balance at 1 July 2012
additions
transfers from capital work in progress
transfer to assets held for sale 1
disposals
Balance at 30 June 2013
Depreciation and impairment losses
Balance at 1 July 2011
depreciation charge
impairment
disposals
Balance at 30 June 2012
Balance at 1 July 2012
depreciation charge
impairment
disposals
Balance at 30 June 2013
Carrying amount
at 30 June 2012
At 30 June 2013

generation plant
and equipment
(including land
and buildings)
$m

other land and
buildings
$m

other plant and
equipment
$m

Capital work in
progress
$m

4,940
76
91
–
(46)
5,061
5,061
78
157
(6)
(42)
5,248

(796)
(162)
–
46
(912)
(912)
(162)
(3)
40
(1,037)

4,149
4,211

53
3
1
–
(1)
56
56
–
1
–
(29)
28

(14)
(2)
–
–
(16)
(16)
(3)
–
9
(10)

40
18

289
7
5
–
–
301
301
6
3
–
(79)
231

(165)
(13)
–
–
(178)
(178)
(15)
–
47
(146)

123
85

total
$m

5,791
539
–
(7)
(54)
6,269
6,269
267
–
(6)
(155)
6,375

(978)
(177)
(4)
53
(1,106)
(1,106)
(180)
(72)
99
(1,259)

509
453
(97)
(7)
(7)
851
851
183
(161)
–
(5)
868

(3)
–
(4)
7
–
–
–
(69)
3
(66)

851
802

5,163
5,116

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

generation plant
and equipment
(including land
and buildings)
$m

other land and
buildings
$m

other plant and
equipment
$m

Capital work in
progress
$m

4,940
76
91
–
(46)
5,061
5,061
78
157
(6)
(42)
5,248

(796)
(162)
–
46
(912)
(912)
(162)
(3)
40
(1,037)

4,149
4,211

49
3
1
–
(1)
52
52
–
–
–
(29)
23

(13)
(2)
–
–
(15)
(15)
(3)
–
9
(9)

37
14

156
4
3
–
–
163
163
5
2
–
(79)
91

(93)
(9)
–
–
(102)
(102)
(10)
–
46
(66)

61
25

471
449
(94)
(7)
(4)
815
815
180
(159)
–
(5)
831

–
–
(4)
4
–
–
–
(36)
3
(33)

815
798

total
$m

5,616
532
1
(7)
(51)
6,091
6,091
263
–
(6)
(155)
6,193

(902)
(173)
(4)
50
(1,029)
(1,029)
(175)
(39)
98
(1,145)

5,062
5,048

Parent

1. assets classified as held for sale are either being actively marketed for sale following Board approval to dispose of the assets or are subject to conditional sales agreements.

these assets are expected to be sold within 1 year from the end of the reporting period.

under the treaty of Waitangi act 1975, the Waitangi tribunal has the power to recommend, in appropriate circumstances, that some of the land
and interests in land purchased from the Electricity Corporation of new Zealand and now owned by Contact be resumed by the Crown in order
that it be returned to the māori claimants. in the event that the Waitangi tribunal’s initial recommendation is confirmed and the land is to be
returned, compensation will be paid to Contact under the provisions of the public Works act 1981.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

7. PROPERTy, PLANT AND EqUIPMENT AND INTANGIBLE ASSETS – CONTINUED

Reconciliation of the carrying amount of intangible assets

Cost
Balance at 1 July 2011
additions
Balance at 30 June 2012
Balance at 1 July 2012
additions
Balance at 30 June 2013
Amortisation
Balance at 1 July 2011
amortisation charge
Balance at 30 June 2012
Balance at 1 July 2012
amortisation charge
Balance at 30 June 2013
Carrying amount
at 30 June 2012
At 30 June 2013

group
Computer
software and
capital work in
progress
$m

group
gas storage
rights
$m

group
total
$m

parent
gas storage
rights
$m

parent
Computer
software and
capital work in
progress
$m

35
–
35
35
–
35

–
(1)
(1)
(1)
(1)
(2)

34
33

151
44
195
195
69
264

(26)
(15)
(41)
(41)
(14)
(55)

154
209

186
44
230
230
69
299

(26)
(16)
(42)
(42)
(15)
(57)

188
242

35
–
35
35
–
35

–
(1)
(1)
(1)
(1)
(2)

34
33

148
44
192
192
69
261

(23)
(15)
(38)
(38)
(14)
(52)

154
209

parent
total
$m

183
44
227
227
69
296

(23)
(16)
(39)
(39)
(15)
(54)

188
242

total computer software additions in the year ended 30 June 2013 include $63 million of internally generated assets (2012: $40 million).

Impairment

the carrying amounts of non-financial assets including property, plant and equipment, intangible assets, inventory gas, and cushion
gas are reviewed at the end of each reporting period for any indicators of impairment. if any such indication exists, the asset’s
recoverable amount or the recoverable amount of its cash-generating unit is estimated. an impairment loss is recognised whenever
the carrying amount of an asset, or its cash-generating unit, exceeds its estimated recoverable amount.

the recoverable amount is the greater of an asset’s value in use and fair value less costs to sell. in assessing the recoverable amount,
the estimated future cash flows are discounted to their net present value using a discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.

an impairment loss is recognised in respect of geothermal exploration expenditure when the area of interest to which they relate is
no longer considered prospective for economically recoverable geothermal reserves or when the decision to abandon the area of
interest is made.

the recoverable amount for all impairments recognised is the assets’ fair value less costs to sell based on the best information available
at the end of the reporting period. impairment losses of $72 million for group and $39 million for parent were recognised for property,
plant and equipment as disclosed in note 3 (group and parent 2012: $4 million). no impairment losses were recognised for intangible
assets during the year (2012: nil).

Capital commitments

at 30 June 2013, Contact had $51 million (2012: $125 million) committed under contractual arrangements, with substantially all
payments due within 1 year of the end of the reporting period. the capital expenditure commitments principally relate to generation
and software assets.

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

8. GOODWILL

goodwill represents the excess of the consideration transferred over the fair value of Contact’s share of the net identifiable assets of an
acquired subsidiary. goodwill is carried at cost less accumulated impairment losses.

For the purpose of annual impairment testing, goodwill is allocated to the cash-generating unit to which it relates. Each cash-generating
unit represents the lowest level of assets that generate cash inflows largely independent of each other. goodwill is allocated to the
following cash-generating units:

retail
Lpg

group
2013
$m

179
3
182

group
2012
$m

179
3
182

parent
2013
$m

179
–
179

parent
2012
$m

123
–
123

the amalgamation of Empower Limited into the parent resulted in the increase in the carrying amount of goodwill held by the parent –
refer to note 19.

the impairment tests for the retail and Lpg cash-generating units are based on value in use discounted cash flow valuations. Cash flow
projections are based on a 5-year financial forecast for the underlying business and are extrapolated using an average annual growth rate of
1.0 per cent to 3.0 per cent and discounted using post-tax discount rates of 8.0 per cent to 10.0 per cent.

Key assumptions in the value in use calculations for the retail and Lpg cash-generating units are as follows:

assumptions

method of determination

Customer numbers and customer churn

gross margin per customer

operating costs

review of actual customer numbers and historical data regarding movements in customer numbers.
the historical analysis is considered against expected market trends and competition for customers.
review of actual gross margin per customer and consideration of expected market movements
and impacts.
review of actual operating costs and consideration of expected market movements and impacts.

no impairment losses were recognised for goodwill during the year (2012: nil).

9. CARBON EMISSION UNITS

Carbon emission units are recognised at initial cost (purchase price) less any accumulated impairment losses. For the purpose of
impairment testing, carbon emission units are allocated to the cash-generating unit to which they relate – refer to note 7 for further detail
on impairment reviews.

Each type of carbon emission unit is surrendered on a first-in first-out basis. Where the units are expected to be surrendered to satisfy
Contact’s carbon emission obligation at the end of the reporting period and/or surrendered in respect of the obligation expected to be
incurred within 1 year from the end of the reporting period, they are classified as current intangible assets and are not amortised.

Contact recognises a liability in respect of its obligation to surrender carbon emission units (within payables and accruals). the liability is
measured at the cost of the carbon emission units and forward contracts held by Contact at the end of the reporting period on a first-in
first-out basis (according to the expected order of surrender of the units), with any remaining balance recognised at fair value. any
change in the liability is recognised within operating expenses in the income Statement.

Forward contracts to acquire carbon emission units are entered into and held to meet Contact’s compliance obligations and accordingly
are recognised on settlement of the contract. the value of these contracts at 30 June 2013 was $3 million (2012: $1 million).

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

10. BORROWINGS

Facilities

Contact utilises a mixture of term bonds, uS private placement (uSpp) notes, an export credit agency facility, bank facilities, committed
credit facilities and commercial paper to satisfy its funding requirements.

Borrowings are initially recognised at fair value less directly attributable transaction costs. Borrowings are subsequently measured at
amortised cost using the effective interest method, with the exception of the uSpp notes. the uSpp notes, including uSpp notes that
Contact has committed to issue at a future date, are hedged by cross-currency interest rate swaps and are measured at fair value less
deferred financing costs from execution date – refer to note 11 for further detail on how fair value is determined.

Group and Parent

Long-term borrowings maturing within one year
Committed credit facilities
Finance lease liabilities
Total current borrowings
retail bonds
Wholesale bonds
Fair value adjustment on wholesale bonds
Capital bonds
Export credit agency facility
uSpp notes
Fair value adjustment on uSpp notes
total long-term borrowings
Finance lease liabilities
Less: long-term borrowings maturing within 1-year
Total non-current borrowings

2013
$m

670
–
1
671
548
200
(3)
196
87
452
(111)
1,369
–
(670)
699

2012
$m

98
3
1
102
545
100
–
196
–
587
(130)
1,298
2
(98)
1,202

Long-term borrowings maturing within 1 year of $670 million are comprised of the retail bonds maturing in march 2014, a tranche of
the uSpp notes maturing in may 2014 and scheduled repayments on the export credit agency facility commencing in november 2013.
in may 2013, Contact issued $100 million of wholesale bonds and in June 2013 executed a total of uS$240 million (united States dollars)
(nZ$301 million) of uSpp notes to be issued in September and december 2013. these new long-term borrowings, available committed
credit facilities and the commercial paper programme will assist in refinancing the existing uSpp notes and retail bonds maturing in
march and may 2014, respectively. a liquidity analysis of total debt is provided in note 12. total long-term borrowings include deferred
financing costs of $12 million (2012: $9 million).

USPP notes

the uS$240 million of uSpp notes to be issued in 2013 have fixed interest rates ranging between 3.5 per cent and 4.5 per cent
and maturities between 7 and 15 years. Cross-currency interest rate swaps were entered into at the same time to swap the united
States dollar principal and fixed coupon obligations to new Zealand dollar principal and floating interest rate exposures. although the
uSpp notes are undrawn at 30 June 2013, they are committed financial liabilities and therefore the cumulative change in fair value is
recognised as a component of borrowings.

Term bonds

the $100 million of wholesale bonds issued in may 2013 have fixed coupons between 4.8 per cent and 5.3 per cent and maturities
between 5 and 7 years. Contact entered into interest rate swaps at the same time that the wholesale bonds were issued to convert the
fixed coupons to floating interest payments to enable separate interest rate and capital risk management. the interest rate swaps are
a fair value hedge of the borrowings and consequently fair value adjustments are recognised as a component of borrowings.

Standard & poor’s revised the criteria used to assign equity content for credit rating purposes to hybrid capital instruments. as a result
Contact’s capital bonds no longer qualify for full equity content and under the bond’s terms and conditions Contact could redeem the
bonds at par plus accrued interest on any future interest payment date.

Contact has total committed credit facilities at 30 June 2013 of $450 million, of which nil was drawn (2012: $450 million, $3 million
drawn). at 30 June 2013, $90 million of the facilities mature in november 2015; $210 million matures between march 2016 and november
2016; $50 million matures in February 2017; and $100 million matures in november 2017. these committed credit facilities support a
$250 million commercial paper programme which is unutilised at 30 June 2013 (2012: $250 million, unutilised).

the total export credit agency facility of $105 million can be drawn as certain milestone payments are made on the te mihi geothermal
power station development. at 30 June 2013, the milestone payments made until that date resulted in an available facility of $92 million
which was fully drawn (2012: $92 million available, nil drawn). the carrying amount of the export credit agency facility is $87 million
net of deferred financing costs (2012: nil). once drawn, borrowings under the facility mature in november 2027 with fixed scheduled
repayments commencing in november 2013.

Security

all borrowings rank equally with the exception of the capital bonds which are subordinated to other borrowings. Contact’s borrowings are
unsecured, except for finance leases. Contact borrows under a deed of negative pledge and guarantee, which does not permit Contact
to grant any security interest over its assets, unless it is an exception permitted within the deed of negative pledge and guarantee.
Contact complied with all borrowings covenants during the year.

11. FINANCIAL INSTRUMENTS

the following table classifies financial instruments by type and measurement basis:

Group

2013
Carried at cost or
amortised cost
$m

2013
Carried at
fair value
$m

2012
Carried at cost or
amortised cost
$m

2012
Carried at
fair value
$m

Loans and receivables and financial liabilities held at amortised cost
Cash and cash equivalents
receivables
payables and accruals
Borrowings
Available-for-sale assets
investment in Liquigas Limited shares
Fair value hedges
Cross-currency interest rate swaps
interest rate derivatives
Borrowings designated in a fair value hedge relationship
Cash flow hedges
Cross-currency interest rate swaps – margin
Foreign exchange derivatives
Electricity price derivatives
Derivatives not designated in hedge relationships
interest rate derivatives

80
340
(315)
(932)

–
–
–

–

–
–
–
–

–

(111)
(3)
(438)

(2)
(1)
9

(29)

6
339
(404)
(847)

–
–
–

–

–
–
–
–

–

(130)
–
(457)

(4)
(3)
(2)

(41)

the carrying amounts of parent financial instruments that differ to those of the group, as presented in the above table, are as follows:

Parent

2013
Carried at cost or
amortised cost
$m

2013
Carried at
fair value
$m

2012
Carried at cost or
amortised cost
$m

2012
Carried at
fair value
$m

Loans and receivables and financial liabilities held at amortised cost
Cash and cash equivalents
receivables
payables and accruals

78
329
(352)

–
–
–

4
349
(480)

–
–
–

purchases and sales of financial assets in the ordinary course of business are recognised on trade date.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

11. FINANCIAL INSTRUMENTS – CONTINUED

Financial instruments carried at cost or amortised cost

Loans and receivables and other financial liabilities are initially recognised at fair value less transaction costs and subsequently carried
at amortised cost.

available-for-sale financial instruments are normally recognised at fair value. Contact’s investment in the unlisted shares of Liquigas Limited is
Contact’s only available-for-sale financial asset and it is held at cost because the fair value of the unlisted shares cannot be reliably determined.

the fair values of the retail, wholesale and capital bonds provided below are different to their carrying amounts. the carrying amounts of
all other financial instruments approximate their fair values.

Group and Parent

retail bonds
Wholesale bonds
Capital bonds

2013
Carrying amount
$m

2013
Fair value
$m

2012
Carrying amount
$m

(548)
(197)
(196)

(575)
(209)
(202)

(545)
(100)
(196)

2012
Fair value
$m

(589)
(112)
(210)

Financial instruments carried at fair value

Financial instruments recognised at fair value are categorised based on the level of judgement involved in determining their fair value
as described below.

(1) Level 1: fair value is determined using unadjusted quoted prices from an active market for identical assets and liabilities.

(2) Level 2: fair value is derived from inputs other than quoted prices that are observable either directly (i.e. from prices) or indirectly

(i.e. derived from prices).

(3) Level 3: fair value is derived from inputs that are not based on observable market data.

at 30 June 2013, all financial instruments carried at fair value were categorised as level 2, except for $1 million of cash flow
electricity price derivatives categorised as level 3 financial instruments (2012: $5 million). Contact had no level 1 financial instruments
at 30 June 2013 (2012: nil).

all derivatives are recognised at fair value. Changes in fair value of derivatives not designated in a hedge relationship are recognised
in the income Statement. the effective portion of changes in the fair value of derivatives designated as cash flow hedges is recognised
in the cash flow hedge reserve. the gain or loss relating to any ineffective portion is recognised immediately in the income Statement.
amounts recognised in the cash flow hedge reserve are transferred to the income Statement or Statement of Financial position
according to the nature of the hedged item. Changes in the fair value of derivatives designated as fair value hedges are recorded in
the income Statement together with any changes in the fair value of the underlying hedged borrowings.

the change in the fair value of derivatives and borrowings designated in a fair value hedge relationship is provided below:

Group and Parent

Favourable/(unfavourable)

Fair value hedges
Cross-currency interest rate swaps
interest rate derivatives
Borrowings designated in a fair value hedge relationship

Cash flow hedges
Cross-currency interest rate swaps – margin
Foreign exchange derivatives
Electricity price derivatives
tax on change in fair value
Derivatives not designated in hedge relationships
interest rate derivatives

ContaCt EnErgy LimitEd annuaL rEport 2013

2013
income
statement
$m

2013
Cash flow
hedge reserve
$m

2012
income
statement
$m

2012
Cash flow
hedge reserve
$m

19
(3)
(16)
–

–
–
(1)
–

12
11

–
–
–
–

2
2
12
(4)

–
12

20
–
(20)
–

–
–
(1)
–

(10)
(11)

–
–
–
–

2
11
23
(7)

–
29

the cross-currency interest rate swaps have been split into two components for the purpose of hedge designation. the hedge of the
benchmark interest rate is designated as a fair value hedge, and the hedge of the margin is designated as a cash flow hedge.

the period over which the cash flow hedges are expected to affect profit matches the period that the cash flows are expected to occur,
which for cross-currency interest rate swaps is over a period of 2 months to 15 years, for foreign exchange derivatives is over a period of
1 month to 3 years and for electricity price derivatives is over a period of 1 month to 4 years (2012: 1 month to 5 years, 1 month to 3 years
and 1 month to 3 years respectively).

Further detail on the movement in the cash flow hedge reserve is as follows:

Group and Parent

Balance at the beginning of the year
Effective portion of cash flow hedges recognised
transferred to revenue
transferred to change in fair value of financial instruments (ineffectiveness)
transferred to property, plant and equipment
transferred to deferred tax
Balance at the end of the year

2013
$m

(8)
7
2
1
3
(1)
4

2012
$m

(37)
20
8
–
3
(2)
(8)

12. FINANCIAL RISK MANAGEMENT

Contact’s overall financial risk management system mitigates the exposure to capital, liquidity, market and credit risks by ensuring that
material risks are identified, that the financial impact is well understood and reported, that appropriate tools and limits are in place to
manage exposures, and that collective and individual responsibilities are assigned and well understood.

the overall financial risk management system is supported by written policies covering specific areas, such as liquidity risk including
capital risk, foreign currency risk, price risk, interest rate risk, credit risk, and the use of derivative financial instruments and non-
derivative financial instruments. these policies provide a framework for identifying, monitoring and managing financial risks.

Capital risk

Contact’s capital includes share capital, reserves, retained earnings and net debt. Contact’s objective when managing capital is to
safeguard Contact’s ability to continue as a going concern so that it can continue to provide returns for shareholders, benefits for other
stakeholders and to maintain an optimal capital structure. Contact manages its capital structure to ensure it can continue to attract
capital from investors and lenders on reasonable terms.

in order to maintain or adjust the capital structure, the Board may adjust the amount and nature of distributions to shareholders,
return capital to shareholders, issue new shares or sell assets. the Board reviews the capital structure on a regular basis.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

12. FINANCIAL RISK MANAGEMENT – CONTINUED
Contact monitors capital on the basis of the cash flow metrics required to sustain an investment grade credit rating and seeks to retain
a gearing ratio suitable to the nature of Contact’s business. Contact’s gearing ratio is calculated as follows:

Group

Net debt
Current borrowings (excluding current portion of term borrowings)
new Zealand dollar equivalent of notional borrowings – after foreign exchange
hedging and before deferred financing costs:

retail bonds
Wholesale bonds
Capital bonds
Export credit agency facility
uSpp notes

other non-current borrowings
Cash and cash equivalents
Total net debt
Equity
Shareholders’ equity
remove net effect of fair value of financial instruments after tax
Adjusted equity
Total capital funding
Gearing ratio

2013
$m

(1)

(550)
(200)
(200)
(92)
(452)
–
80
(1,415)

(3,537)
(17)
(3,554)
(4,969)
28.5%

2012
$m

(4)

(550)
(100)
(200)
–
(587)
(2)
6
(1,437)

(3,418)
(36)
(3,454)
(4,891)
29.4%

Liquidity risk
Contact’s liquidity risk arises from its need to ensure that it has access to sufficient committed financing to meet its committed
expenditure and debt repayment obligations, normal periodic fluctuations and unexpected funding requirements.

prudent liquidity risk management requires Contact to maintain sufficient liquidity, which can comprise cash, marketable securities
and/or the availability of funding through undrawn committed credit facilities. to reduce refinancing risk, debt maturities are spread
over a number of years and any new financing or refinancing requirements are addressed with an appropriate lead time. Liquidity risk
is monitored by continually forecasting actual cash flows and maintaining a liquidity buffer based on a financial risk capacity analysis.

the liquidity analysis provided below is based on the contractual maturities of all financial liabilities including derivatives, and the uSpp
notes yet to be issued. as the amounts presented are contracted, undiscounted cash flows and include the uSpp notes yet to be issued,
the totals will not reconcile to the Statement of Financial position.

Group
2013

outflow/(inflow)

payables and accruals
Borrowings
– inflow
– outflow
Finance lease liabilities
net settled derivative financial instruments:

Electricity price derivatives
interest rate derivatives

gross settled derivative financial instruments:

Foreign exchange derivatives
– inflow
– outflow
Cross-currency interest rate swaps
– inflow
– outflow

Total

ContaCt EnErgy LimitEd annuaL rEport 2013

total
contractual
cash flows
$m

315

(301)
2,419
1

(8)
(34)

(34)
35

(1,113)
1,333
2,613

Less than
1 year
$m

315

(301)
768
1

(7)
(8)

(29)
29

(438)
482
812

1-2 years
$m

–

–
192
–

(1)
(9)

(5)
6

(156)
213
240

2-5 years
$m

–

–
386
–

–
(15)

–
–

(136)
192
427

more than
5 years
$m

–

–
1,073
–

–
(2)

–
–

(383)
446
1,134

Group
2012

outflow/(inflow)

payables and accruals
Borrowings
Finance lease liabilities
net settled derivative financial instruments:

Electricity price derivatives
interest rate derivatives

gross settled derivative financial instruments:

Foreign exchange derivatives
– inflow
– outflow
Cross-currency interest rate swaps
– inflow
– outflow

Total

total
contractual
cash flows
$m

404
1,942
3

2
44

(76)
80

(486)
651
2,564

Less than
1 year
$m

1-2 years
$m

2-5 years
$m

404
190
1

2
9

(70)
74

(119)
156
647

–
745
2

–
10

(3)
3

(128)
171
800

–
324
–

–
23

(3)
3

(152)
205
400

more than
5 years
$m

–
683
–

–
2

–
–

(87)
119
717

the liquidity analysis provided above is the same for both group and parent with the exception of payables and accruals. payables and
accruals for the parent are expected to be paid within 1 year of the end of the reporting period and totalled $352 million at 30 June 2013
(2012: $480 million).

Market risk

Foreign currency risk

Contact is exposed to foreign currency risk arising from:

•

future commercial transactions such as the purchase of capital equipment and payments for maintenance denominated in
currencies other than the new Zealand dollar (primarily australian dollar, united States dollar, Japanese yen and Euro)
future interest and principal payments on the uSpp notes.

Contact uses foreign exchange derivatives to manage foreign exchange risk arising from committed future commercial transactions.
Cross-currency interest rate swaps are used to manage foreign exchange risk arising from future interest and principal payments
relating to the uSpp notes.

the exposure to foreign exchange risk arising from future commercial transactions is measured as the new Zealand dollar equivalent
notional principal amount of foreign exchange derivatives. these contracts are intended to hedge 100 per cent of known material foreign
currency exposures. the notional principal amount of the outstanding foreign exchange derivatives at 30 June 2013 was $36 million
(2012: $80 million).

the exposure to foreign exchange risk arising from future interest and principal payments is measured as the new Zealand dollar
equivalent of the notional principal amount of outstanding cross-currency interest rate swap contracts which, including forward starting
contracts was $759 million at 30 June 2013 (2012: $587 million).

Price risk

Contact is exposed to commodity price risk arising from forecast sales and purchases of electricity from the electricity market. Contact
uses electricity price derivatives that effectively fix the price at which it will buy or sell electricity to support the natural hedge provided
by the integrated generation and retail business to mitigate its electricity price risk.

the aggregate notional volume of the outstanding fixed volume electricity price derivatives at 30 June 2013 was 1,463 gigawatt hours
(gWh) (2012: 731 gWh). the aggregate notional volume of the outstanding variable volume electricity price derivatives at 30 June 2013
was nil (2012: 195 gWh).

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

13. NOTE TO THE STATEMENT OF CASH FLOWS

Cash includes cash on hand, at bank and short-term deposits net of outstanding bank overdrafts. the table below provides a
reconciliation of profit for the year to cash flows from operating activities.

Profit for the year
Adjustments to reconcile profit to net cash inflow from operating activities:
depreciation and amortisation
Change in fair value of financial instruments
asset impairments
gain on sale of property, plant and equipment
Exit of investment in oakey power Holdings pty Limited
non-cash share of equity accounted earnings of associate
net interest expense
Bad debt expense
movement in provisions
movement in deferred tax
Share-based compensation
Changes in assets and liabilities, net of non-cash, investing and financing
activities:
receivables and prepayments
inventories
payables and accruals
tax payable
other
Net cash inflow from operating activities

group
2013
$m

199

195
(11)
72
(50)
–
–
66
15
(6)
31
4

49
(7)
(74)
(13)
(1)
469

group
2012
$m

190

193
11
4
(2)
(26)
(2)
72
13
2
13
3

(104)
(17)
69
29
(8)
440

parent
2013
$m

183

190
(11)
65
(50)
–
–
66
17
(6)
37
4

77
(8)
(87)
(13)
(1)
463

parent
2012
$m

186

189
11
4
(2)
(36)
–
72
13
2
15
3

(110)
(19)
84
29
(8)
433

12. FINANCIAL RISK MANAGEMENT – CONTINUED

Interest rate risk

Contact is exposed to interest rate risk primarily as a result of floating rate term borrowings either directly or indirectly through the
use of interest rate derivatives. Floating rate new Zealand dollar exposures are mitigated by use of new Zealand dollar interest rate
derivatives within policy limits set by the Board.

Contact’s interest rate risk exposure is measured as the notional value of the floating rate borrowings which was $366 million at
30 June 2013 (2012: $397 million).

Sensitivity analysis

the table below summarises the impact on post-tax profit and the cash flow hedge reserve component of other comprehensive income
at 30 June 2013 and 30 June 2012 of possible changes in electricity forward prices, foreign exchange rates and interest rates. the
analysis assumes that all variables were held constant except for the relevant market risk factor.

Group and Parent

Favourable/(unfavourable)

Electricity forward prices 1
impact on post-tax profit
impact on other comprehensive income
Foreign currencies 2
impact on other comprehensive income
Interest rates 3
impact on post-tax profit

2013
$m

+10%
–
(5)

+10%
(2)
+100bps
4

2013
$m

-10%
–
5

-10%
2
-25bps
(1)

2012
$m

+10%
(1)
(4)

+10%
(6)
+100bps
9

2012
$m

-10%
1
2

-10%
6
-25bps
(2)

1. assumes an increase/decrease of 10 per cent in the relevant electricity forward prices. the change arises from the change in fair value of electricity derivatives.
2. assumes that the new Zealand dollar strengthened/weakened by 10 per cent against the currencies that Contact is exposed to. the change arises from unrealised foreign

exchange gains/losses on the revaluation of foreign exchange derivatives.

3. assumes that interest rates were 100 basis points higher or 25 basis points lower. the change arises from the fair value change in interest rate derivatives that are valid

economic hedges but do not qualify for hedge accounting.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to Contact. Contact is
exposed to credit risk in the normal course of business arising from cash, short-term deposits, trade receivables, other receivables and
derivative financial instruments.

Contact minimises its exposure to credit risk of receivables through the adoption of counterparty credit limits, a policy of only dealing
with creditworthy counterparties and obtaining sufficient collateral, where appropriate.

derivative counterparties and cash transactions are limited to high-credit-quality financial institutions and other organisations in the
relevant industry. Contact’s exposures and the credit ratings of its counterparties are continually monitored, and the aggregate value of
transactions is spread amongst approved counterparties.

the carrying amounts of financial assets, as disclosed in note 11, best represent Contact’s maximum exposure to credit risk at the end of
the reporting period without taking account of the value of any collateral obtained.

Contact does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar
characteristics. Concentration of credit risk with respect to receivables is limited due to Contact’s large customer base in a diverse
range of industries throughout new Zealand. Contact has no significant concentration of credit risk with any one institution, despite
there being significant sales to nZX Energy. nZX Energy acts as an electricity market clearing agent and the counterparty risk sits with
the market participants. Contact, as a participant in the electricity market, has issued letters of credit to Energy Clearing House Limited
under the electricity market’s security requirements. these letters of credit are issued as part of normal trading conditions and ensure
that there is no significant credit exposure to any one market participant, should another participant default.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

14. RECEIVABLES AND PREPAyMENTS

16. PROVISIONS

trade receivables
unbilled receivables
Less: provision for impairment

prepayments
other receivables
advances to subsidiaries

note

group
2013
$m

163
115
(7)
271
3
69
–
343

group
2012
$m

232
103
(6)
329
12
10
–
351

parent
2013
$m

147
113
(6)
254
3
69
6
332

parent
2012
$m

211
98
(5)
304
12
10
35
361

unbilled receivables represent Contact’s best estimate of retail sales for unread electricity and gas meters at the end of the reporting
period. this involves estimating consumption for each unread meter based on the consumption history of the customer’s meter.

Contact recognises an impairment loss when there is objective evidence that Contact will not be able to collect amounts due according
to the original terms of the receivable. the amount of the impairment loss is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate.

For retail receivables that are not significant on an individual basis, collective impairment is assessed on a portfolio basis, based on
historical delinquency rates and losses. Bad debts net of recoveries of $12 million for group and $15 million for parent (group and parent
2012: $10 million) were recognised during the year. this includes write-offs of $3 million of the parent’s advances to subsidiaries as a
result of the deregistration of the australian subsidiaries during the year. advances to subsidiaries are presented net of a $26 million
provision for impairment to the Contact Wind Limited receivable – refer to note 3.

included in trade receivables are receivables that are past due but not impaired as follows:

0-30 days past due
30-90 days past due
over 90 days past due

15. PAyABLES AND ACCRUALS

Electricity purchases accrual
other trade payables and accruals
Employee benefits
interest payable
advances from subsidiaries

group
2013
$m

18
7
3
28

group
2013
$m

54
227
26
12
–
319

group
2012
$m

21
7
2
30

group
2012
$m

112
261
24
12
–
409

parent
2013
$m

16
7
3
26

parent
2013
$m

54
215
26
12
49
356

parent
2012
$m

17
6
2
25

parent
2012
$m

107
242
24
12
100
485

note

Balance at 1 July 2012
provisions made during the year
provisions used during the year
provisions released during the year
unwind of discount
Balance at 30 June 2013
Current
non-current

group
restoration/
environmental
rehabilitation
$m

60
–
(1)
(6)
5
58
4
54

group
other
$m

9
2
(3)
(2)
–
6
2
4

parent
restoration/
environmental
rehabilitation
$m

57
–
(1)
(6)
5
55
3
52

group
total
$m

69
2
(4)
(8)
5
64
6
58

parent
other
$m

9
2
(3)
(2)
–
6
2
4

parent
total
$m

66
2
(4)
(8)
5
61
5
56

the restoration and environmental rehabilitation provision includes estimates of future expenditure for the abandonment and restoration
of areas from which natural resources are extracted, removal of asbestos from generation properties and the expected cost of
environmental rehabilitation of commercial sites. Cash outflows are typically expected to coincide with the end of the useful lives of the
sites, with the exception of asbestos removal costs, which are expected to be incurred within the next 5 years.

other provisions cover a range of commercial matters, including the expected cost of restructuring activities in progress at the end of
the reporting period.

17. TAXATION

tax expense comprises current and deferred tax. income tax is recognised in the income Statement except when it relates to items
recognised directly in the Statement of Comprehensive income, in which case the income tax is recognised in the Statement of
Comprehensive income.

deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. the amount of deferred tax is based on the expected manner of realisation of the
carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the end of the reporting period. a deferred tax
asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

tax expense is determined as follows:

profit before tax
tax thereon at 28%
plus/(less) tax effect of adjustments:

gas meter assets sale
decommissioned new plymouth power station sale
Clutha asset impairment and land sales
asset impairments
Exit of investment in oakey power Holdings pty Limited
prior period adjustments
other differences

Tax expense
Comprising:
Current tax
deferred tax

group
2013
$m

263
74

(7)
(6)
(4)
8
–
(2)
1
64

33
31

group
2012
$m

256
72

–
–
(1)
–
(6)
1
–
66

53
13

parent
2013
$m

249
70

(7)
(6)
(4)
13
–
(2)
2
66

29
37

parent
2012
$m

250
70

–
–
(1)
–
(6)
1
–
64

49
15

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

17. TAXATION – CONTINUED

deferred tax assets and liabilities are offset on the face of the Statement of Financial position and presented as a net deferred tax
liability. the movement in deferred tax asset and liabilities is provided below:

Group

Balance at 1 July 2011
recognised in the income Statement
recognised in other comprehensive income
Balance at 30 June 2012
Balance at 1 July 2012
recognised in the income Statement
recognised in other comprehensive income
Balance at 30 June 2013

Parent

property,
plant and
equipment
$m

(716)
(22)
–
(738)
(738)
(19)
–
(757)

property,
plant and
equipment
$m

(711)
(21)
–
(732)
(732)
(25)
–
(757)

inventories
$m

Employee
benefits
$m

provisions
$m

derivative
financial
instruments
$m

3
–
–
3
3
(3)
–
–

6
–
–
6
6
–
–
6

12
2
–
14
14
(2)
–
12

17
3
(7)
13
13
(3)
(4)
6

inventories
$m

Employee
benefits
$m

provisions
$m

derivative
financial
instruments
$m

3
–
–
3
3
(3)
–
–

6
–
–
6
6
–
–
6

11
2
–
13
13
(2)
–
11

17
3
(7)
13
13
(3)
(4)
6

other
$m

(2)
4
–
2
2
(4)
–
(2)

other
$m

1
1
–
2
2
(4)
–
(2)

total
$m

(680)
(13)
(7)
(700)
(700)
(31)
(4)
(735)

total
$m

(673)
(15)
(7)
(695)
(695)
(37)
(4)
(736)

imputation credits available for use in subsequent reporting periods are 238 million (2012: 246 million). these are available to
shareholders through the consolidated imputation group.

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

group
2013
$m

6
15
12
33
(3)

group
2012
$m

6
13
8
27
(4)

parent
2013
$m

5
12
8
25
(3)

parent
2012
$m

5
9
4
18
(3)

18. OPERATING COMMITMENTS

Operating leases

not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total operating lease commitments
Total operating lease income

operating leases relate to the rental of buildings, plant and equipment and vehicles and are on normal commercial terms and conditions.
the lease commitments above are stated exclusive of goods and Services tax.

Gas

Maui Development Limited

Contact has contracts with maui development Limited giving Contact rights to gas from the maui gas field until 31 december 2014.
under these contracts, Contact has agreed to make fixed annual payments for the right to take gas. the contracts require Contact to
have arrangements in place to transport the gas in the maui pipeline.

OMV New Zealand Limited

Contact has a contract with omV new Zealand Limited giving Contact rights to gas from the pohokura gas field until 31 december 2013.
under the contract, Contact has agreed to make fixed annual payments for the right to take gas. the contract requires Contact to have
arrangements in place to transport the gas in the maui pipeline.

Gas transmission contracts

Contact has contracts with Vector gas Limited relating to the transportation of natural gas. under these contracts, Contact is committed
to pay minimum fees for reserved pipeline capacity.

Gas sale and repurchase arrangement

Contact has entered into a sale and repurchase arrangement to deliver a fixed amount of gas between 1 July 2012 and 31 december 2013
and to receive a fixed amount of gas from 1 January 2014 to 31 december 2015. the contract requires Contact to have arrangements in
place to transport the gas in the maui pipeline.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

19. RELATED PARTIES

Ultimate parent entity

the ultimate parent entity of Contact is origin, an australian incorporated company. at 30 June 2013, origin Energy pacific Holdings
Limited is the majority shareholder in the parent, owning 52.3 per cent (2012: 52.2 per cent) of the ordinary shares of the parent. Further
shares amounting to 0.8 per cent (2012: 0.8 per cent) of the parent’s ordinary shares are held by origin Energy universal Holdings
Limited and origin Energy new Zealand Limited. all three companies are ultimately wholly owned by origin.

Group related parties

Contact’s related parties include subsidiaries of origin, key management personnel and rockgas timaru Limited which is an associate
of the group.

Contact entered into the following material transactions with related parties during the year:

Group

Transactions with related parties – received/(paid)
Origin and its subsidiaries
ahuroa gas storage facility development and operation expenses
Sap infrastructure and data services costs
purchase of Lpg
Sale of electricity
Key management personnel
directors’ fees
Chief Executive officer seconded from origin
Leadership team (excluding Chief Executive officer)

Salary, other short-term benefits and share-based compensation
termination benefits

Associate of the Group
Sale of Lpg
Balances receivable/(payable) at the end of the year
origin and its subsidiaries
Key management personnel

2013
$m

(8)

(6)

(42)

(1)

(2)

(7)

(1)

–

(5)

(2)

2012
$m

(10)

(4)

(43)

(1)

(5)

–

(8)

(1)

the Leadership team, including the Chief Executive officer, received share-based compensation during the year of $2 million (2012: $1 million),
which has been included in the amounts disclosed above.

new Zealand based directors and members of the Leadership team purchase electricity and gas from the group for domestic purposes
on normal commercial terms and conditions with staff discount.

Contact paid a cash dividend to its origin shareholders of $43 million on 26 march 2013. Contact also issued 9,367,110 ordinary shares
to its origin shareholders under the pdp on 21 September 2012 (2012: 8,201,342 ordinary shares on 27 September 2011 and 8,279,521
ordinary shares on 30 march 2012) and repurchased 641,765 ordinary shares on 21 September 2012 (2012: 644,212 ordinary shares on
27 September 2011 and 631,513 ordinary shares on 30 march 2012).

Contact and origin have a master Services agreement for the provision of professional, consulting and administrative services. during
the year ended 30 June 2013, five members of staff were seconded from origin to Contact, and one staff member was seconded from
Contact to origin. these secondments are undertaken on a cost recovery basis.

Parent related parties

the parent’s related parties are the same as those of the group with the addition of the following subsidiaries:

interest held by parent

name of entity

Contact aria Limited
Contact Wind Limited
rockgas Limited
Empower Limited
Contact australia pty Limited
Contact operations australia pty Limited

2013

100%
100%
100%
–
–
–

2012

principal activity

Country of
incorporation

100%
100%
100%
100%
100%
100%

new Zealand
investment holding company
new Zealand
Wind generation development
new Zealand
Lpg retailer
new Zealand
Electricity retailer and gas wholesaler
investment holding company
australia
management company for australian interests australia

all subsidiaries have a balance date of 30 June. the australian subsidiaries were deregistered during the year.

Empower Limited was amalgamated into the parent on 30 april 2013. until the date of amalgamation Empower Limited had been wholly
owned by the parent. under the amalgamation, the parent took control of all of the assets of the amalgamated company and assumed
responsibility for its liabilities. Empower Limited has been deregistered.

Summary of the effect of Empower Limited amalgamation

net assets of Empower Limited at 30 april 2013 (including goodwill and intercompany eliminations arising on consolidation)
Elimination of investment in Empower Limited
Balance recognised in the Statement of Changes in Equity

2013
$m

118
(64)
54

the assets and liabilities have been brought into the parent’s financial statements at their carrying amounts. the operating results
of Empower Limited have been included in the income Statement of the parent from and including 1 may 2013. the balance on
amalgamation has been recognised in the Statement of Changes in Equity of the parent.

in addition to the group related party transactions, the parent charged its subsidiaries $18 million (2012: $16 million) for management
services. the parent also pays operating expenses on behalf of its subsidiaries, which are on-charged directly to those subsidiaries.

advances to/from subsidiaries are included in notes 14 and 15, respectively. advances are repayable on demand and are interest free.

20. SHARE-BASED COMPENSATION

Contact provides a long-term incentive award to certain eligible employees under the Share option Scheme. the long-term incentive
award is comprised of share options and performance share rights granted to eligible employees at nil cost. the share options and
performance share rights are unlisted, cannot be traded and do not entitle the employee to distribution or voting rights. on exercise,
the performance share rights convert to ordinary shares at no cost to the employee.

performance hurdles are measured on three annual test dates, the first of which is 3 years after grant date. the share options and
performance share rights will only be exercisable to the extent that Contact’s total shareholder return (tSr) is in the upper half of
the tSr of companies in the nZX50 index over the relevant period from grant date. if they became exercisable, share options and
performance share rights must be exercised within 2 years and 2 months of the first test date. the share options and performance
share rights may also be exercised if a change of control of the parent occurs, the parent’s shares cease to be listed on the nZX or
at the discretion of the Board.

the share options and performance share rights will lapse if the performance hurdles are not met, if they are not exercised by the
lapse date or if an employee ceases to be employed by Contact, other than on redundancy. the Share option Scheme continues
on redundancy but the number of share options and performance share rights the employee is entitled to will be recalculated on a
proportionate basis.

ContaCt EnErgy LimitEd annuaL rEport 2013

CONTACT ENERGy LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2013

Independent
Auditor’s Report

20. SHARE-BASED COMPENSATION – CONTINUED

the movement in the number of share options and performance share rights outstanding is summarised below:

To the shareholders of Contact Energy Limited

Report on the company and Group financial statements

Group and Parent

Balance at 1 July 2011
granted
Lapsed
Balance at 30 June 2012
Balance at 1 July 2012
granted
Lapsed
Balance at 30 June 2013

Share options

number
outstanding

Weighted average
exercise price

6,515,499
2,835,114
(571,551)
8,779,062
8,779,062
4,852,273
(1,275,310)
12,356,025

$6.10
$5.40
$6.43
$5.85
$5.85
$5.22
$6.20
$5.57

performance
Share rights
number
outstanding

872,443
1,010,094
(55,341)
1,827,196
1,827,196
662,408
(232,538)
2,257,066

no share options were exercisable at 30 June 2013 (2012: nil). the range of exercise prices for share options outstanding at
30 June 2013 was $5.22 to $8.53 (2012: $5.40 to $9.07) and these options have a weighted average remaining contractual life of
3.1 years (2012: 3.4 years). a further 167,033 share options have lapsed since 30 June 2013.

no performance share rights were exercisable at 30 June 2013 (2012: nil). performance share rights outstanding at 30 June 2013 have
a weighted average remaining contractual life of 3.0 years (2012: 3.4 years). a further 24,355 performance share rights have lapsed since
30 June 2013.

Fair value of share-based compensation

the fair value of employee services received in exchange for the grant of the share options and performance share rights is recognised
as an expense, with a corresponding increase in equity over the vesting period. the fair value of the services received is based on the fair
value of the share options and performance share rights granted.

Contact revises the amount to be recognised as an expense to reflect the number of share options and performance share rights that
are expected to become exercisable or vest. the total expense recognised under the Share option Scheme during the year ended
30 June 2013 was $4 million (2012: $3 million).

the fair value of share options and performance share rights granted during the year were $0.43 (2012: $0.80) and $3.15 (2012: $3.70)
respectively. the fair values were based on the following assumptions:

Group and Parent
risk-free interest rate
Expected dividend yield
Expected share price volatility

2013

3%
5%
18%

2012

3%
5%
24%

Volatility is based on the historical volatility in Contact’s share price. the performance hurdles noted above are included in the valuation
model used in determining the fair value of share options and performance share rights issued during the year.

21.

CONTINGENT LIABILITIES

Contact has contingent liabilities in respect of claims and warranties arising in the ordinary course of business and as a result of the gas
meter assets sale (refer to note 3). Contact’s net exposure to the warranties provided under the gas meter assets sale is $2 million. it is
not anticipated that any material liabilities will arise from these claims and warranties.

22. SUBSEqUENT EVENTS

on 19 august 2013, the Board declared a final distribution of 14.0 cents per share, to be paid on 16 September 2013.

We have audited the accompanying financial statements of Contact Energy Limited (‘the company’) and the group, comprising
the company and its subsidiaries, on pages 70 to 98. the financial statements comprise the statements of financial position as at
30 June 2013, the income statements and statements of comprehensive income, changes in equity and cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information, for both the company and the group.

Directors’ responsibility for the company and Group financial statements

the directors are responsible for the preparation of company and group financial statements in accordance with generally accepted
accounting practice in new Zealand and international Financial reporting Standards that give a true and fair view of the matters to
which they relate, and for such internal control as the directors determine is necessary to enable the preparation of company and group
financial statements that are free from material misstatement whether due to fraud or error.

Auditor’s responsibility

our responsibility is to express an opinion on these company and group financial statements based on our audit. We conducted our
audit in accordance with international Standards on auditing (new Zealand). those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the company and group financial
statements are free from material misstatement.

an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the company and group financial
statements. the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant
to the company and group’s preparation of the financial statements that give a true and fair view of the matters to which they relate in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company and group’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates, as well as evaluating the presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

partners and employees of our firm do also deal with the company and group on normal terms within the ordinary course of trading
activities of the business of the company and group. these matters have not impaired our independence as auditor of the company
and group. the firm has no other relationship with, or interest in, the company and group.

Opinion

in our opinion the financial statements on pages 70 to 98:

• comply with generally accepted accounting practice in new Zealand;
• comply with international Financial reporting Standards;
• give a true and fair view of the financial position of the company and the group as at 30 June 2013 and of the financial performance

and cash flows of the company and the group for the year then ended.

Report on other legal and regulatory requirements

in accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial reporting act 1993, we report that:

• we have obtained all the information and explanations that we have required; and
•

in our opinion, proper accounting records have been kept by Contact Energy Limited as far as appears from our examination of
those records.

19 august 2013
Wellington

ContaCt EnErgy LimitEd annuaL rEport 2013

Corporate
Directory

Board of Directors
grant King (Chairman)

phillip pryke (deputy Chairman)

david Baldwin

Bruce Beeren

Whaimutu dewes

Karen moses

Sue Sheldon

Leadership Team
dennis Barnes
Chief Executive officer

ruth Bound
general manager – Sales and Customer Experience

graham Cockroft
Chief Financial officer

mark Corbitt
general manager – information and Communication technology

peter Kane
general manager – operations

James Kilty
general manager – trading, development and geothermal resources

tania palmer
general manager – Health, Safety and Environment

paul ridley-Smith
general Counsel

nicholas robinson
general manager – Customer insight, marketing and Communications

annika Streefland
general manager – people and Culture

Registered office
Contact Energy Limited

Harbour City tower

29 Brandon Street

Wellington 6011

new Zealand

phone: +64 4 499 4001

Fax: +64 4 499 4003

Website: www.contactenergy.co.nz

Postal address
po Box 10742

the terrace

Wellington 6143

new Zealand

Auditor
Kpmg

po Box 996

Wellington 6140

new Zealand

100

ContaCt EnErgy LimitEd annuaL rEport 2013

Share registrar
Link market Services Limited

Level 7, Zurich House

21 Queen Street

auckland 1010

new Zealand

Website: www.linkmarketservices.co.nz

Shareholder/bondholder enquiries
to view your investment portfolio, supply your email address, change your
details, or update your payment instructions relating to Contact, please
contact our registry, Link market Services Limited, by either:

Email: contactenergy@linkmarketservices.co.nz

mail: Link market Services, po Box 91976, auckland 1142, new Zealand

Fax: +64 9 375 5990, or

phone: + 64 9 375 5998

please provide your CSn/holder number on any correspondence
with our registry.

Direct crediting of dividends/interest payments
to minimise the risk of fraud and misplacement of dividend/interest
payment cheques, shareholders/bondholders are strongly recommended
to have all payments made by way of direct credit to their nominated bank
account in new Zealand.

Electronic shareholder communication
We encourage investors to elect to receive investor communications
electronically as it keeps costs down, delivery of our communication
to you is faster and it is better for the environment. please visit the Link
market Services website www.linkmarketservices.co.nz or contact them
directly to update your information.

Investor relations enquiries
Fraser gardiner

Head of investor relations and Strategy

Email: investor.centre@contactenergy.co.nz

phone: +64 4 499 4001

Stock exchange listings
nZSX trading code: CEn

nZdX trading codes: CEn010 and CEnFa

Company number
660760

this report is printed on an environmentally responsible paper
produced using Elemental Chlorine Free (ECF) pulp sourced from
Sustainable & Legally Harvested Farmed trees, and manufactured
under the strict iSo14001 Environmental management System.

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