Contact Energy nails $153m half-year profit and $354m operating earnings

A strong first half 2024 net profit of $153.5 million (up 70% on 1H23) has been reported by Contact Energy, which is also progressing its renewable energy developments.

“We have a clear strategy, strong balance sheet with supportive shareholders and stand ready to deliver on the opportunities in front of us to lead the decarbonisation of the New Zealand economy over the next decade,” says Contact chief executive Mike Fuge.

Underlying full year net profit is expected to be $620m.

The improved operating result was driven by closer alignment of channel pricing to the wholesale market and greater thermal efficiency, partially offset by lower hydro generation, reduced steam revenue following the closure of Te Rapa and one-off write-offs of $8m relating to damage to Peaker assets and the CRM system upgrade programme not continuing as originally planned, says Contact Energy.

Operating free cash flow of $187m was up 163% on the prior year on the improved operating result, relatively lower levels of working capital due to higher thermal generation and lower tax paid on FY23 profit, partially offset by accelerated stay in business capex.

The board declared an interim dividend of 14 cents per share, in line with 1H23, says Contact Energy in a statement to the NZX.

Contact Energy also expects Rio Tinto to sign a long-term agreement to keep the aluminium smelter at Tiwai.

“A new long-term agreement would de-risk investment in new renewable generation, contribute to energy security and help to preserve an important export industry, supporting growth and decarbonisation of the New Zealand economy,” says Fuge.

He says remediation works at the Tauhara geothermal development are progressing, with the site expected to come online in Q3 2024 at the initial design capacity of around 152MW, with Te Huka 3 likely to follow in Q4.

Work is also underway to prepare for a final investment decision on the replacement of the 65-year-old Wairakei, as well as the 100MW North Island battery storage project and the Kowhai Park solar development.

“These investments in new renewable technologies will contribute to security of supply as New Zealand decarbonises,” says Fuge.

He says the next six months will see Contact reaching significant milestones in the delivery of its strategy to lead New Zealand’s decarbonisation.

Fuge says retail energy pricing is improving with total connections up 20,000 on 1H23, while Contact Energy has set aside more than $1m to directly support customers suffering energy hardship.