Contact Energy's December 2024 report reveals a nuanced performance with slightly lower mass market sales but stronger netback prices and significantly reduced generation costs, underscoring operational efficiencies amid evolving market dynamics.
- Mass market electricity and gas sales dipped slightly to 274 GWh
- Customer netback rose to $156.56/MWh from $145.23/MWh year-on-year
- Wholesale electricity sales increased to 699 GWh with generation costs falling to $30.68/MWh
- Te Huka 3 and Battery Energy Storage System projects near completion targets
- Forward wholesale prices surged to $174/MWh for Q1 2025, reflecting market tightening
December Performance Snapshot
Contact Energy's December 2024 Monthly Operating Report paints a picture of steady operational performance with subtle shifts in sales volumes and pricing metrics. Mass market electricity and gas sales recorded a slight decline to 274 GWh compared to 279 GWh in December 2023, signaling a modest contraction in retail demand. However, this was offset by a notable increase in customer netback prices, which climbed to $156.56 per megawatt-hour (MWh), up from $145.23/MWh the previous year, indicating improved revenue per unit sold.
Wholesale Business Strengthens
The wholesale segment demonstrated growth with contracted electricity sales rising to 699 GWh, surpassing last year’s 692 GWh. More impressively, the unit generation cost dropped sharply to $30.68/MWh from $40.03/MWh in December 2023, reflecting enhanced operational efficiencies and possibly favourable fuel or acquisition costs. Own generation costs also fell significantly to $26.3/MWh, underscoring Contact’s ability to manage production expenses effectively amid fluctuating market conditions.
Project Progress and Market Outlook
Infrastructure development remains on track with the Te Huka 3 geothermal project achieving 98.5% of its December target and the Battery Energy Storage System (BESS) project reaching 39% progress against a 41% target. These projects are critical to Contact’s long-term generation mix and energy storage capabilities, positioning the company well for future demand and renewable integration.
Market pricing signals also suggest tightening conditions. The Otahuhu futures settlement price for the first quarter of 2025 surged to $174/MWh as of January 20, up sharply from $124/MWh at the end of December. This price escalation may reflect supply constraints, increased demand, or broader energy market volatility in New Zealand.
Environmental and Operational Metrics
Contact continues to report on its environmental footprint, with greenhouse gas emissions from generation assets and water usage metrics remaining consistent with prior periods. The company’s commitment to sustainability is evident in ongoing biodiversity efforts and community initiatives, aligning operational performance with environmental and social governance (ESG) priorities.
Overall, Contact Energy’s December report underscores a stable yet dynamic operating environment. The company’s ability to reduce generation costs while capturing higher netback prices bodes well for near-term profitability, even as market prices and demand patterns evolve.
Bottom Line?
Contact Energy’s December results highlight operational resilience and cost discipline, setting the stage for navigating rising market prices and advancing key projects.
Questions in the middle?
- How will rising forward wholesale prices impact Contact’s profitability in 2025?
- What are the potential risks or delays to the completion of Te Huka 3 and BESS projects?
- How might changes in New Zealand’s electricity demand, especially post-NZAS demand response, affect Contact’s retail volumes?