Joe Hendren

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Sunday, February 20, 2005

Contact: No capital return for now, but the threat still remains

I was pleased to see that Contact Energy has informed the NZX sharemarket it has no plans to return capital to shareholders, but has instead allocated $130m for capital expenditure. See my previous posts on this issue, here and here.

But the threat of a capital return still remains. On the same day Contact's large shareholders, including its board, used their voting power to push through changes to corporate goverance at the annual meeting of the company. This will remove self-imposed restrictions on dividend payouts and capital returns to shareholders that previously formed part of the constitution. So while its good the corporate highwaymen demanding a capital return will not be getting anything soon, the changes to corporate goverance of Contact make it more likely this will happen in the future.

At the annual meeting Contact Energy's directors also came under fire for defending the donations of $90,000 the company makes to political parties on an annual basis, supposedly based on the number of seats they hold in the house. According to the NZ Herald, a majority of the about 150 shareholders at the meeting supported calls for future donations to be approved by investors. However, as the vote was based upon number of shares, it was lost, with only 11.62% of voting shares recorded in favour (88.38% against). This shows the extent by which the wishes of large shareholders dominate those of small shareholders within the company. As the right often idolise the business community, its no small wonder its usually the left who defend and extend democracy.

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