Contact Energy has announced a $525 million equity raise to accelerate its renewable energy projects, following a strong first half of FY26 with significant profit growth and strategic acquisitions.
- 24% increase in EBITDAF to $500 million in 1H26
- 44% rise in net profit to $205 million driven by Manawa acquisition
- $525 million equity raise to fund Glenbrook battery 2.0, Glorit solar farm, and Tauhara 2 geothermal drilling
- Equity raise expected to reduce net debt to EBITDAF ratio from 2.8x to 2.3x
- Interim dividend maintained at 16 cents per share
Strong Financial Performance Sets Stage
Contact Energy Limited has reported a robust first half of fiscal 2026, with earnings before interest, tax, depreciation, and amortisation (EBITDAF) rising 24% to $500 million, and net profit surging 44% to $205 million. This growth was underpinned by the strategic acquisition of Manawa Energy Limited in July 2025, which added significant hydroelectric generation capacity and long-term power purchase agreements to Contact’s portfolio.
The company’s renewable generation output reached 97% in the period, reflecting the integration of Manawa’s assets and the full operation of Contact’s new Te Huka 3 geothermal plant. Operating free cash flow also improved markedly, up 80% to $249 million, supported by lower maintenance capital expenditure and efficient working capital management.
$525 Million Equity Raise to Accelerate Contact31+ Strategy
In a move to capitalise on its strong position and the growing demand for renewable energy in New Zealand, Contact announced a $525 million equity raise. This comprises a fully underwritten placement of $450 million and a non-underwritten retail offer of up to $75 million, designed to provide existing shareholders with the opportunity to maintain their holdings.
The proceeds will fund key projects aligned with Contact’s Contact31+ strategy, including the construction of the Glenbrook battery 2.0, a 200MW, 400MWh energy storage system near Auckland, and the Glorit solar farm, a 150MWac development in a joint venture with Lightsource bp. Additionally, the raise will support pre-final investment decision (FID) drilling on the Tauhara 2 geothermal project, with the potential to increase capacity from 50MW to 60-70MW.
Strategic Investments to Support New Zealand’s Energy Transition
The Glenbrook battery 2.0 project, expected online by early 2028, will significantly enhance grid flexibility, helping to manage the intermittency of renewable sources and reduce reliance on natural gas during peak demand. Tesla’s Megapack 2 XL technology has been selected for this build, underscoring Contact’s commitment to cutting-edge solutions.
The Glorit solar farm, also targeted for completion in 2028, will deliver approximately 285GWh annually, primarily supporting summer-weighted demand in the dairy sector. The project is more than 70% financed through project finance arrangements, reflecting strong lender confidence.
Meanwhile, the Tauhara 2 geothermal drilling programme aims to confirm resource potential and optimise plant design, with a final investment decision anticipated in fiscal 2027. This project underscores Contact’s leadership in geothermal energy, which currently accounts for about half of New Zealand’s geothermal output.
Balance Sheet Strength and Dividend Policy
The equity raise is expected to reduce Contact’s pro forma net debt to EBITDAF ratio from 2.8x to 2.3x, providing enhanced financial flexibility to pursue growth opportunities while maintaining investment-grade credit metrics. The company reaffirmed its dividend guidance, declaring an interim dividend of 16 cents per share, consistent with the prior period, and signaling confidence in its cash flow generation.
Contact’s board emphasised the importance of this capital raising in supporting New Zealand’s transition to a renewable energy future, highlighting the company’s diversified portfolio and extensive development pipeline as key competitive advantages.
Market Context and Outlook
New Zealand’s electricity demand is forecast to grow by 3 to 5 terawatt-hours over the next five years, driven by electrification in sectors such as dairy, metals, and data centres. Contact’s investments in battery storage, solar, and geothermal generation position it well to meet this rising demand.
Despite challenges such as rising network costs and regulatory uncertainties ahead of the 2026 general election, Contact’s management remains optimistic about delivering shareholder returns through disciplined capital allocation and operational excellence.
Bottom Line?
Contact Energy’s equity raise marks a decisive step in scaling renewable infrastructure, but execution risks and market dynamics will be closely watched.
Questions in the middle?
- How will Contact manage execution risks associated with its accelerated renewable projects?
- What impact might the upcoming New Zealand general election have on energy sector regulation and Contact’s strategy?
- How will Contact balance rising network costs with competitive retail pricing to maintain market share?