Contact Energy performance supports renewable investment

Contact Energy reports a net profit of $235 million (up 9%) in FY24 and operating earnings (EBITDAF) of $675m (up 16%) for the year ended June 30, 2024.

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, and reduced steam revenue following the closure of Te Rapa, it says.

“Net profit was impacted by one-off write-offs of $36m after tax relating to damage to peaker assets, remediation work required at the Tauhara geothermal plant and software projects not continuing as planned.”

Highlights include final commissioning underway of the Tauhara geothermal station online since May 2024 to lift it to 152MW, the 51MW Te Huka 3 geothermal station now in commissioning and expected online in Q4 2024 (these power stations will add 1.9TWh per annum of baseload renewable output when full capacity is reached), a new long-term agreement to supply up to 46MW renewable electricity to New Zealand Aluminium Smelter (Tiwai), a start on construction of a 100MW grid-scale battery at Glenbrook, expected online Q1 2026; and confirmed investment in 168MWp Kowhai Park solar farm in Christchurch, expected online in Q2 2026.

“The result has been a demonstration of strength in our underlying performance as we managed through market volatility, while keeping the momentum to deliver existing and new renewable developments,” says Contact Energy chief executive Mike Fuge.

Operating free cash flow of $470m was up 67% on the prior year on the improved operating result, relatively lower levels of working capital due to higher thermal generation and reflecting the continued capitalisation of interest on Tauhara borrowings.

In FY24, growth capital expenditure was $470m as Contact invested twice its net profit for the year into renewable development.

The board declared a final dividend of 23 cents per share, taking the annual dividend declared for FY24 to 37 cents per share. Shareholders will have the option to participate in Contact’s dividend reinvestment plan at a 2% discount.

“This new long-term agreement de-risks investment in new renewable generation, contributes to energy security and helps to preserve an important export industry, supporting growth and decarbonisation of the New Zealand economy,” says Fuge.

 Contact Energy says emissions intensity from thermal generation was down 32% on FY23 driven largely by the closure of Te Rapa on June 30,2023, and the company says it is committed to being net zero from its generation activities by 2035.

“Contact is demonstrating its commitment to invest in new renewable technologies by executing on the best projects within its ~7TWh development pipeline, contributing to security of supply as New Zealand decarbonises,” says Fuge.

Contact is targeting a final investment decision in Q4 2024 on Te Mihi Stage 2 – a ~100MW binary plant which will be the first phase of the Wairakei A&B geothermal station replacement, to be considered alongside plans to extend ~37MW of plant capacity at Wairakei A&B to 2031.

Retail electricity net price has improved to partially recover rising energy and pass-through costs, the company says.

“Total connections were up 37,000 on FY23, driven primarily by broadband and the introduction of Contact Mobile.

Contact says it remains focused on supporting customers in energy hardship – providing $2m of support this year – collaborating with industry through ERANZ, which offers support programmes like EnergyMate, and partnering with national social services agency Women’s Refuge and community group Good Shepherd.

Fuge says the next year will see Contact operating more than 200MW of newly constructed geothermal power stations and building a diverse set of new renewable projects as the company delivers on its Contact26 strategy to be a leader in the decarbonisation of New Zealand.