Contact Energy (ASX:CEN) told investors its first half of FY26 was “transformational,” pointing to the integration of the Manawa Energy acquisition, a step-up in renewable generation, and an improvement in earnings and cash flow. Management also outlined a NZD 525 million equity raising intended to accelerate elements of its “Contact Thirty-One” growth strategy, including geothermal, battery, and solar investments.
Manawa acquisition drives scale and renewables mix
Management said the NZD 2 billion Manawa acquisition, completed on 11 July 2025, added capability and scale while “materially reducing portfolio risk from day one.” The company said integration was progressing well and that it had already secured more than 80% of the announced cost synergy target on a run-rate basis within the first six months of ownership. In-period, Contact reported a NZD 7 million reduction in operating costs and reiterated a broader operating cost savings target of NZD 38 million by FY27, including NZD 28 million from Manawa synergies.
Market conditions: high hydro inflows, lower prices, gas scarcity persists
In the wider market, Contact highlighted “significant hydro inflows” across New Zealand, with inflows at 128% of mean, contributing to lower spot electricity prices. The company said hydro storage ended the period at 128% of mean, and that gas storage at Ahuroa Gas Storage (AGS) was nearly full, while the Genesis stockpile had been replenished—factors it said reduced “fueling risk” entering winter 2026.
However, management said gas scarcity remained a key issue, citing gas production down 16% in the first quarter of the financial year versus a year earlier. Contact also noted demand rose 4% in the first half (or 1% when normalized for prior-year demand response at New Zealand Aluminium Smelters). The company added that line costs increased from 1 April 2025, creating upward pressure on tariffs as these costs pass through to customers.
Financial results: higher EBITDAF and profit, dividend maintained
For 1H26, Contact reported EBITDAF of NZD 500 million, up NZD 96 million from the prior period. Management attributed the increase primarily to additional geothermal generation and the Manawa acquisition, partly offset by “normalization of pricing” versus the “unusually stressed conditions” in 1H25.
- Renewable volumes: Renewable generation volumes rose 1.5 TWh, contributing NZD 123 million to EBITDAF versus 1H25, which management said reflected structural portfolio changes rather than short-term hydrology.
- Pricing headwinds: Long-term contracted channels reduced EBITDAF by NZD 13 million, while market-linked pricing reduced EBITDAF by NZD 37 million, which Contact tied to a greater proportion of volumes in long-dated PPAs and lower market-linked prices versus the prior-year half.
- Other income: Other income increased by NZD 42 million, driven by higher retail gas margins, Manawa income streams, insurance proceeds, and the absence of a Methanex gas loss recorded in the prior period.
- Costs: Fixed operating costs rose NZD 68 million, primarily reflecting Manawa’s cost base and transaction/integration costs.
Net profit after tax increased by NZD 63 million, with management pointing to the higher EBITDAF as the main driver. Depreciation and interest increased following the Manawa acquisition, and Contact noted fair value movements were positive year over year and were non-cash.
By segment, wholesale EBITDAF rose NZD 110 million to NZD 577 million, reflecting higher renewable volumes and Manawa’s contribution, partially offset by lower achieved prices. Retail EBITDAF was a loss of NZD 25 million, consistent with the prior period, despite NZD 79 million of network and energy cost inflation; Contact said it recovered about 90% of those higher costs through pricing and margin management.
The board declared an interim dividend of NZD 0.16 per share, consistent with Contact’s stated target of NZD 0.40 per share for FY26. Management said the full-year target represents a 3% increase on FY25, and that the interim dividend represents 40% of the full-year target.
Projects and operations: battery commissioning, geothermal and solar builds progress
Contact said its renewable build program was “tracking well,” with 1.1 TWh of renewable generation and 100 MW of battery capacity under construction. Construction was complete on the Glenbrook Ohura Battery, with transmission system integration nearing completion; commissioning began in early February and the company expected the battery to be online around the end of March.
At Te Mihi Stage 2, Contact said construction was progressing to schedule. For Kowhai Park, its joint venture with Lightsource bp, the company said more than 50% of solar panels had been installed and it expected the solar farm online around the end of June. Management also said Te Huka had generated above its business case and that planned statutory outages, including at Tauhara, were well managed.
Contact also highlighted efforts to strengthen its gas position, contracting an additional 7 petajoules annually from Greymouth Gas on top of existing OMV gas.
Equity raise: NZD 525 million to accelerate Contact Thirty-One
Contact announced a NZD 525 million equity raising, structured as a fully underwritten NZD 450 million placement and a non-underwritten retail offer of up to NZD 75 million (with the ability to accept oversubscriptions at the company’s discretion). New shares under the placement will be issued at NZD 8.75 per share, which management said represented a 7.2% discount to the dividend-adjusted last close and a 7.9% discount to the ex-dividend adjusted five-day VWAP.
The retail offer will be priced at the lower of the placement price and a 2.5% discount to the five-day VWAP (up to and including the last day of the offer period). Eligible shareholders can apply for up to NZD 100,000 in New Zealand or AUD 41,000 in Australia, subject to eligibility requirements described in the company’s materials. Contact said the retail offer would open 19 February and close 6 March, with trading of new shares expected 16 March.
Management said the capital would be used to advance and potentially upsize renewable projects, including:
- Tauhara 2 geothermal: NZD 30 million for pre-FID drilling to advance steam field development and assess upsizing from 50 MW to 60–70 MW, ahead of a final investment decision targeted for FY27. Contact said updated reservoir modeling suggested 50–70 MW could be supported.
- Glenbrook Battery 2.0: Expected NZD 235 million investment, increasing Contact’s battery capacity to 300 MW, with a “fully ramped” EBITDA contribution of around NZD 35 million to NZD 40 million per year.
- Gloria Solar: Around NZD 45 million to fund Contact’s share of an off-balance-sheet project. Management said Gloria would provide 230 GWh per annum of contracted output under a PPA to Contact.
Contact said the equity raise was expected to reduce its 1H26 S&P net debt to EBITDA ratio from 2.8x to 2.3x, enhancing its capacity to bring forward other development opportunities. Management said FY26 expected reported EBITDA guidance increased to NZD 965 million, up NZD 15 million from what was announced in August, and emphasized that the upgrade was driven by first-half delivery with no change to second-half assumptions.
About Contact Energy (ASX:CEN)
Contact Energy Limited generates and sells electricity and natural gas in New Zealand. It operates through two segments, Wholesale and Retail. The Wholesale segment sells electricity to the wholesale electricity market, and commercial and industrial customers. The Retail segment delivers electricity, natural gas, broadband, and other products and services to mass market customers. The company offers electricity, natural gas, and bottled gas generated through its 11 hydro, geothermal, and thermal power stations.
