Contact Energy 1H25: EBITDAF Up 12% to $404m, Profit Falls 7% to $142m

Financial Performance Highlights

Contact Energy Limited has delivered a mixed financial performance for the six months ended 31 December 2024 (1H25). The company’s earnings before interest, tax, depreciation, amortisation, and fair value adjustments (EBITDAF) rose 12% to $404 million, reflecting strong operational momentum. However, net profit declined 7% to $142 million, impacted by market volatility, fair value losses on unhedged electricity contracts, and one-off costs related to the proposed acquisition of Manawa Energy.

The increase in EBITDAF was underpinned by the commissioning of two new geothermal power stations, Tauhara (174MW) and Te Huka 3 (51MW), which together contribute approximately 1.9 terawatt-hours of renewable electricity annually. These assets have enhanced Contact’s renewable generation profile and supported improved channel pricing through long-term contracts and Contracts for Difference (CFDs).

Strategic Growth and Market Support

Contact’s strategic focus on renewable development continues apace with construction underway on a 100MW grid-scale battery energy storage system (BESS) at Glenbrook and a 168MWp solar farm at Kowhai Park in Christchurch, in partnership with Lightsource bp. These projects align with the company’s commitment to supporting New Zealand’s energy transition and enhancing grid flexibility.

In a significant commercial development, Contact entered a 10-year electricity supply agreement with Fonterra to provide approximately 415 GWh annually to its Whareroa dairy site. This contract supports the electrification of industrial process heat in the dairy sector, with demand expected to ramp up between 2026 and 2028 as transmission upgrades are completed. The deal is weighted towards summer demand, complementing Contact’s renewable generation portfolio.

During the challenging winter of 2024, Contact played a pivotal role in market security by facilitating access to around 3.5 petajoules of gas from Methanex and maintaining generation at the Taranaki Combined Cycle (TCC) gas plant, which remains available in 2025 to support supply if needed. This operational agility was crucial amid historically low hydro inflows and volatile wholesale electricity prices.

Preparing for Manawa Acquisition

Contact is progressing its proposed acquisition of Manawa Energy, having entered into a Scheme Implementation Agreement in September 2024. The combination aims to create a more diversified and resilient energy business better positioned to manage dry year risk and accelerate renewable investments. Integration planning is underway, with transaction and related costs of $10 million impacting the current period’s results. The acquisition remains subject to regulatory and shareholder approvals, with completion targeted in the first half of 2025.

Operational and Retail Developments

On the retail front, Contact grew its customer connections by approximately 39,000 compared to 1H24, driven by multi-product offerings and growth in Time of Use 'Good' plans, which now serve over 133,000 households with free off-peak energy. The company also expanded its Hot Water Sorter programme, shifting around 2MW of electricity load away from peak periods daily, and enhanced support for customers facing energy hardship.

Despite rising wholesale and network costs squeezing retail margins, Contact declared an interim dividend of 16 cents per share, up 14% from the prior year, reflecting confidence in its cash flow generation. Shareholders are offered participation in a dividend reinvestment plan with a 2% discount.

Outlook

Looking ahead, Contact expects to deliver full-year EBITDAF of approximately $790 million, excluding acquisition-related costs. The company remains focused on advancing its renewable project pipeline, including the Wairakei extension and Te Mihi Stage 2 geothermal projects, while maintaining operational flexibility to support New Zealand’s energy security and decarbonisation goals.