Contact Energy's January 2025 report reveals steady mass market electricity sales and improved netback prices, despite a notable decline in total electricity generation and national demand.
- Mass market electricity and gas sales steady at 271 GWh
- Netback prices rise to $167.65/MWh from $144.04/MWh year-on-year
- Total electricity generation down to 690 GWh from 755 GWh in January 2024
- New Zealand electricity demand falls 5.4% compared to January 2024
- Te Huka 3 project nearly on target; Battery Energy Storage System lags behind
Stable Retail Sales Amid Market Shifts
Contact Energy's January 2025 Monthly Operating Report paints a nuanced picture of the company's operational performance. Mass market electricity and gas sales held steady at 271 GWh, nearly unchanged from 272 GWh in January 2024. This stability in retail sales comes alongside a significant improvement in netback prices, which climbed to $167.65 per MWh from $144.04 the previous year, suggesting better margins despite challenging market conditions.
Declining Generation and Demand Signal Market Headwinds
However, the wholesale side tells a different story. Total electricity generated or acquired dropped to 690 GWh, down from 755 GWh in January 2024. This decline coincides with a 5.4% fall in New Zealand's overall electricity demand compared to the same month last year, reflecting broader economic or seasonal factors. The unit generation cost increased to $45.95 per MWh, up from $41.66, indicating rising operational expenses that could pressure future profitability.
Project Progress and Infrastructure Investments
On the infrastructure front, Contact Energy's Te Huka 3 geothermal project is progressing well, achieving 99.5% of its January target, closely tracking the planned schedule. Conversely, the Battery Energy Storage System (BESS) project is lagging, reaching only 47% completion against a 53% target. These projects are critical to Contact's strategy for renewable energy expansion and grid stability, making their timely completion essential for long-term growth.
Wholesale Price Volatility and Hydro Storage Levels
Wholesale electricity prices have shown marked volatility, with the Otahuhu futures settlement price for Q2 2025 rising sharply from $190.55/MWh in December 2024 to $357.75/MWh by mid-February 2025. Meanwhile, hydro storage levels remain healthy, with South Island controlled storage at 87% of mean and North Island at 117%, although inflows into key catchments like Clutha were only 44% of mean in January, potentially impacting future hydro generation capacity.
Environmental and Social Governance Highlights
Contact Energy continues to report on its environmental and social governance metrics, including greenhouse gas emissions and water usage. The company recorded 132 kilotonnes of CO2-equivalent emissions from generation assets, maintaining a relatively low GHG intensity of 0.060 kt CO2-e per GWh. Community initiatives and biodiversity efforts also remain a focus, underscoring Contact's commitment to sustainable operations.
Bottom Line?
As demand softens and generation costs rise, Contact Energy’s ability to manage project timelines and market volatility will be pivotal in shaping its 2025 outlook.
Questions in the middle?
- How will declining electricity demand affect Contact Energy’s revenue and margins in coming quarters?
- What are the implications of the Battery Energy Storage System project delay on Contact’s renewable energy targets?
- Can rising wholesale prices offset the impact of higher generation costs and lower output?