Rising Costs Challenge Contact Energy Despite Strong Sales and Renewable Growth

Stronger Demand and Sales Growth

Contact Energy’s November 2025 monthly operating report highlights a solid uptick in both retail and wholesale electricity sales compared to the same period last year. Mass market electricity and gas sales reached 319GWh, up from 290GWh in November 2024, reflecting a 10% increase. This growth aligns with a 4.1% rise in national electricity demand, supported by a warmer-than-average November temperature of 15.9ºC, which likely boosted consumption.

On the wholesale side, contracted electricity sales climbed to 845GWh, a notable increase from 733GWh a year earlier. This expansion underscores Contact’s strengthened market position and growing customer base amid a dynamic energy landscape.

Rising Generation Costs Amid Increased Output

Despite higher sales volumes, Contact faced rising unit generation costs, which increased to $39.62 per megawatt-hour (MWh) from $34.43/MWh in November 2024. Own generation costs also rose to $32.1/MWh, reflecting inflationary pressures and possibly higher fuel or operational expenses. Electricity generated or acquired surged to 1,014GWh, up from 741GWh, indicating a significant ramp-up in production to meet demand.

Wholesale electricity and steam net revenue softened slightly to $106.16/MWh from $115.81/MWh the previous year, suggesting margin pressures despite volume gains. The fluctuating Otahuhu futures prices, which fell from $165.65/MWh in October to $148/MWh in early December, add complexity to revenue forecasts.

Robust Hydro Storage and Renewable Investments

Hydro storage levels remain comfortably above historical averages, with South Island storage at 157% and North Island at 129% of mean as of early December. This bodes well for hydroelectric generation stability and cost management in the coming months.

Contact is actively advancing its renewable energy portfolio with three major projects under construction – the Glenbrook-Ohurua Battery Energy Storage System (BESS) expected online in early 2026 with a $163 million budget; the Kowhai Park Solar project, a $273 million venture due mid-2026; and the substantial Te Mihi Stage 2 geothermal expansion, projected to cost $712 million and come online in late 2027. These investments reflect Contact’s commitment to sustainable growth and decarbonisation.

Environmental and Operational Highlights

On the environmental front, Contact reported a significant reduction in greenhouse gas emissions from generation assets compared to the previous year, alongside improvements in freshwater usage efficiency. These metrics reinforce the company’s ESG credentials amid increasing stakeholder scrutiny.

Contracted gas volumes for the next 12 months stand at 9.2 petajoules, including a recently secured All of Government contract, though some optionality remains. This flexibility may help navigate market volatility and supply risks.

Looking Ahead

Contact Energy’s November operating report paints a picture of a company balancing growth with rising costs and strategic investments in renewables. The interplay between wholesale price fluctuations, generation costs, and project execution will be critical to watch as the company moves through 2026.