Buffett InvestorsNZX
Back
CEN.NZ

Contact Energy's Profit Jumps 44% to $205M — And It's Raising $525M to Build More

The Gentailer With a $2.5 Billion Growth Agenda

Contact Energy (NZX: CEN) just delivered one of the strongest results on the NZX — first-half net profit jumped 44% to $205 million, EBITDAF surged 24% to $500 million, and management raised full-year EBITDAF guidance to $995 million. But Contact isn't just banking the profits. The company simultaneously announced a $525 million equity raise to fund a pipeline of renewable energy projects worth $2 billion to $2.5 billion over the next five years. For Contact Energy NZX stock investors, this is a company that's playing offence at scale.

Recent Performance: Steady Climber

Contact has traded in a tight 52-week range of $8.41 to $9.90 NZD, currently sitting around $9.21–$9.45. That's a modest 5% gain over the past year — not flashy, but solid for a utility. The stock dipped briefly on the equity raise announcement (the placement was priced at $8.75, a 7.2% discount) but has since recovered as the market digested the growth story behind the capital call.

Key Metrics at a Glance

  • •Share price: ~$9.21–$9.45 NZD
  • •Market cap: ~$9.0 billion NZD
  • •P/E ratio: ~23x (trailing)
  • •Dividend yield: ~4.2%
  • •H1 EBITDAF: $500 million (up 24%)
  • •H1 net profit: $205 million (up 44%)
  • •FY2026 EBITDAF guidance: $995 million
  • •FY2026 dividend guidance: 40 cents per share (FY2027: 41–42 cps)
  • •Analyst consensus target: ~$10.37 NZD (Buy)

The 4.2% dividend yield is attractive for an infrastructure stock, and management has committed to lifting the payout to 40 cents this year and 41–42 cents in FY2027. That's a clear signal of confidence in the earnings trajectory. Contact has paid dividends for 20 consecutive years.

The Geothermal Advantage

What sets Contact apart from its NZX peers is its geothermal generation fleet. Geothermal runs 24/7 regardless of weather — unlike hydro (rain-dependent) or wind. Contact's crown jewel is the $924 million Tauhara 1 plant, a 174MW geothermal facility near Taupo that's now fully operational and generating cheap, reliable baseload power.

But Contact isn't stopping there. It has committed $30 million to pre-FID drilling on Tauhara 2, targeting 60–70MW of additional geothermal capacity, with a final investment decision expected in FY2027. Meanwhile, the Te Mihi Stage 2 geothermal plant (101MW) is on track for completion in Q3 2027.

The Growth Pipeline: Solar, Batteries, and More

The $525 million equity raise is funding an ambitious slate of projects:

  • •Glenbrook Battery 2.0: A 200MW/400MWh battery storage system near Auckland ($235 million), which combined with an existing 100MW facility will give Contact 300MW of storage capacity. Operational by early 2028.
  • •Glorit Solar Farm: A 150MWac solar plant on the Kaipara Coast in joint venture with Lightsource bp ($305 million). Operational by Q3 2028.
  • •Tauhara 2 drilling: 60–70MW geothermal exploration as noted above.

CFO Matt Forbes described the ambition: "We have a very ambitious growth agenda over the next five years worth $2 billion to $2.5 billion." In the last five years alone, Contact has committed $2.4 billion to renewable investment.

What to Watch

  • •EBITDAF delivery: The raised guidance of $995 million is a big number. Hitting it will validate the growth thesis; missing it could spook investors who've accepted dilution from the equity raise.
  • •Tauhara 2 FID: A positive final investment decision in FY2027 would add another significant geothermal asset to the fleet.
  • •Wholesale electricity prices: Elevated prices have been a major earnings tailwind. Any normalisation would pressure margins.
  • •Regulatory risk: The NZ electricity market is politically sensitive. Government intervention to cap prices would directly hit generator earnings.
  • •Data centre demand: New Zealand is emerging as a potential data centre destination, which would drive significant new electricity demand — and Contact's diversified generation portfolio is well-positioned to capture it.

The Bottom Line

Contact Energy is delivering strong earnings growth, investing aggressively in renewable generation, and raising dividends — a rare triple in the NZX utilities sector. The $525 million equity raise introduces some dilution, but the projects it's funding should drive material earnings growth over the next 3–5 years. At ~23x earnings with a 4.2% yield and a consensus Buy rating, Contact is arguably the best-positioned gentailer on the NZX for investors who want both income and growth.

*This article is for informational purposes only and does not constitute financial advice. Always conduct your own research or consult a licensed financial adviser before making investment decisions. Past performance is not indicative of future results.*