Contact delivers solid financial performance

Contact delivers solid financial performance to support renewable generation investment

Highlights

· Launched Contact26 strategy focused on leading New Zealand’s decarbonisation by connecting customers with our renewable energy development pipeline.

Development of new 152 megawatt Tauhara geothermal power station on track after $580m investment approved in February.

Completed $400m equity raise to support the Tauhara project and the significant expected medium-term growth capital investment programme.

Milestone of 50,000 broadband connections reached after rapid growth this year. Average electricity tariff to mass market electricity customers only up by 1.4% on FY20 despite sustained higher wholesale prices.

Ongoing strategic review of thermal assets, including ‘Thermal Co’ proposal to reduce New Zealand’s cost and carbon intensity of thermal generation while ensuring security of supply.

Southern Green Hydrogen project launched with Meridian Energy to assess New Zealand’s near-term hydrogen potential.

· Guided by our tikanga and pricing principles, we proactively worked with customers that were struggling to pay their bills, helping reduce both disconnections and bad debt.

· Solid financial performance, with operating earnings (EBITDAF) up 24% year-on-year to $553m and profit up by 50% to $187m.

Underpinned by strong asset availability and a disciplined approach to managing fuel in FY20 to support the market in FY21.
Final dividend of 21 cents per share will be paid on 15 September 2021, bringing the full year declared dividend to $272m.

New Zealand’s largest privately-owned energy company Contact Energy (‘Contact’) released its full year financial results for the 12 months to 30 June 2021 (‘FY21’) this morning.

Contact Chair Rob McDonald said Contact had delivered a “solid” financial result.

“Contact has performed ahead of expectations after successfully navigating the potential departure of major energy users, short-term issues around low rainfall in the hydro catchments, and ongoing challenges around reliable gas supply. FY21 has been a year in which we have continued to deliver solid returns for our shareholders and made significant moves to ensure the company is well-positioned for the future by spending $177m on capital investments.”

The results are underpinned by Contact’s “decisive” channel management, as it supported fuel-constrained competitors with its flexible portfolio of gas-fired and renewable assets.

Mr McDonald said the company had refreshed its strategy and was on a path to invest to meet the anticipated market growth for low-cost renewable generation.

“Contact is preparing for a time of significant change and is positioned for growth as we focus on leading New Zealand’s decarbonisation. It’s pleasing to see evidence of the strategy in action in significant ways too.

“This includes investigating the potential for hydrogen production in the lower South Island, the development of the world-class Tauhara geothermal power station in the central North Island, and the $400m equity raise for our capital investment programme as we look ahead to further renewable generation developments.”

He said it was pleasing to deliver investors a 35 cents per share annual dividend, down slightly from 39 cents per share in FY20. “This is in line with the dividend policy we updated in February this year where we target a pay-out ratio of between 80 per cent and 100 per cent of the average operating free cash flow of the preceding four financial years.”

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