Contact Energy’s December Sales Surge to 340GWh; Generation Costs Climb to $31.60/MWh
Contact Energy's December 2025 report reveals stronger mass market sales and wholesale contracts alongside increased generation costs and ongoing renewable project developments.
- Mass market electricity and gas sales rose to 340GWh, up from 274GWh in December 2024
- Contracted wholesale electricity sales surged to 950GWh versus 699GWh a year earlier
- Own generation costs increased to $31.60/MWh from $26.30/MWh in December 2024
- Hydro storage levels remain well above average, supporting supply stability
- Major renewable projects Glenbrook-Ohurua BESS, Kowhai Park Solar, and Te Mihi Stage 2 geothermal progressing on schedule
Stronger Sales and Market Demand
Contact Energy's December 2025 monthly operating report highlights a notable increase in both retail and wholesale electricity sales compared to the same period last year. Mass market electricity and gas sales climbed to 340GWh, a significant rise from 274GWh in December 2024, reflecting growing consumer demand. On the wholesale side, contracted electricity sales, including those sold internally to the retail business, jumped to 950GWh from 699GWh, underscoring robust market engagement.
These sales gains occurred alongside a modest 1.8% increase in national electricity demand year-on-year, supported by slightly warmer average temperatures in December 2025. The North and South Islands both reported hydro storage levels well above their historical means, providing a strong buffer for generation capacity and supply reliability heading into 2026.
Rising Generation Costs and Operational Changes
Despite the sales growth, Contact Energy faced rising generation costs. The unit cost of own generation rose to $31.60 per megawatt-hour, up from $26.30 the previous December. This increase partly reflects the decommissioning of the TCC plant, which was removed from the offer as of 1 January 2026, with decommissioning activities now underway. The overall unit generation cost, including acquired generation, climbed to $38.18/MWh compared to $30.68/MWh a year earlier.
Wholesale electricity and steam net revenue also improved, reaching $103.94/MWh, up from $98.75/MWh in December 2024. However, futures market prices for the first quarter of 2026 showed volatility, with the Otahuhu settlement price dropping sharply from $140/MWh at the end of December to $69.50/MWh by mid-January.
Progress on Renewable Energy Projects
Contact Energy continues to invest heavily in renewable energy infrastructure. The Glenbrook-Ohurua Battery Energy Storage System (BESS) is expected online in the first quarter of 2026 with a project cost of $163 million. The Kowhai Park Solar project, a joint venture with Lightsource bp, is on track for completion in the second quarter of 2026, with a budget of $273 million. Meanwhile, the Te Mihi Stage 2 geothermal expansion, the largest of the three projects, is scheduled for the third quarter of 2027 and carries a price tag of $712 million.
These developments align with Contact’s broader strategy to reduce greenhouse gas emissions and enhance sustainable generation capacity. The company reported a reduction in greenhouse gas emissions from its generation assets compared to the previous year, alongside ongoing environmental and community initiatives.
Looking Ahead
Contact Energy’s December report paints a picture of a company navigating a complex energy landscape marked by rising costs and fluctuating market prices, yet underpinned by strong demand and strategic investments in renewables. The decommissioning of the TCC plant marks a shift in generation mix that will require close monitoring, especially as new renewable projects come online to fill the gap.
Investors and market watchers will be keen to see how these dynamics play out in upcoming quarterly results, particularly in relation to cost management and the impact of hydro storage levels on supply stability.
Bottom Line?
Contact Energy’s balancing act between rising costs and renewable growth sets the stage for a pivotal 2026.
Questions in the middle?
- How will the decommissioning of the TCC plant affect overall generation capacity and costs in the coming quarters?
- What impact will the volatility in wholesale futures prices have on Contact’s revenue and hedging strategies?
- Can the renewable projects under construction deliver on time and within budget to offset rising generation costs?
