Contact Energy’s March 2026 report reveals a solid rise in electricity and gas sales alongside a notable decline in generation costs, driven by increased renewable output and strong hydro storage levels.
- Mass market electricity and gas sales rose 27% year-on-year to 359GWh
- Contracted wholesale electricity sales climbed to 903GWh with unit generation costs falling to $56.24/MWh
- Key renewable projects include Kōwhai Park Solar, Te Mihi Stage 2 geothermal, and Glenbrook-Ohurua Battery 2
- South Island hydro storage at 99% of mean, North Island storage at 182% of mean
- ESG metrics show a sharp drop in greenhouse gas emissions and increased biodiversity efforts
Sales and Generation Efficiency Improve
Contact Energy (NZX:CEN) posted a robust operational update for March 2026, with mass market electricity and gas sales surging to 359GWh, a 27% increase over March 2025’s 282GWh. This growth occurred despite a slight dip in mass market netback prices, which fell to $172.45/MWh from $182.13/MWh the previous year.
On the wholesale side, contracted electricity sales jumped 29% to 903GWh, including volumes sold internally to the Customer business. More striking was the improvement in generation costs: unit generation cost including acquired generation dropped sharply to $56.24/MWh from $70.12/MWh a year earlier, with own generation costs down to $35.3/MWh from $57.0/MWh. These figures suggest enhanced operational efficiency and potentially more favourable fuel or market conditions.
Renewable Projects Under Construction
Contact’s renewable pipeline remains active and capital-intensive. The Kōwhai Park Solar project, delivered jointly with Lightsource bp, is expected online in Q3 2026 with a budget of $273 million. Meanwhile, the Te Mihi Stage 2 geothermal expansion carries a $712 million price tag and aims for Q3 2027 commissioning. Battery storage capacity is also being expanded with Glenbrook-Ohurua Battery 2 scheduled for Q1 2028 at $235 million, following the recent commissioning of Battery 1 in March.
Hydro Storage and Market Pricing Trends
Hydro storage levels remain a bright spot, with South Island controlled storage at 99% of mean and North Island storage significantly above average at 182%. The Clutha scheme storage also stands comfortably at 108% of mean. These robust water reserves underpin generation reliability and cost competitiveness.
Wholesale electricity futures prices at Otahuhu have softened somewhat, with the Q3 2026 ASX settlement price dropping from $192.10/MWh in late February to $170.95/MWh as of mid-April, reflecting market adjustments amid ample hydro supply and demand dynamics.
Rising Electricity Demand and ESG Progress
National electricity demand increased 4.1% compared to March 2025, reflecting broader economic and weather patterns. The average nationwide temperature was steady at 15.8ºC, consistent with historical averages.
Contact’s ESG performance shows tangible progress: greenhouse gas emissions from generation assets plunged from 271kt CO2-e in Q3 FY25 to 67kt CO2-e in Q3 FY26, while GHG intensity per GWh fell sharply. Biodiversity efforts ramped up with over 350 native trees planted and increased pest control activities. Gender diversity metrics reveal a modest shift with women comprising 29% of the board and 25% of key management personnel.
Operational Metrics and Market Position
Mass market electricity connections edged higher to 457,500, and gas connections rose to 77,000. Retail gas sales were up significantly year-on-year, contributing to overall volume growth. Meanwhile, Contact’s generation mix continues to balance geothermal, hydro, and thermal sources, with geothermal and hydro output increasing notably.
These operational and environmental strides come as Contact navigates a complex energy market marked by fluctuating prices and evolving demand patterns. The company’s ongoing investment in renewable infrastructure and battery storage positions it to adapt to future market and regulatory shifts.
Bottom Line?
Contact Energy’s March results underscore improved operational efficiency and a clear commitment to renewable growth, setting the stage for potential margin expansion amid evolving market conditions.
Questions in the middle?
- How will softer wholesale electricity futures prices impact Contact’s revenue in the coming quarters?
- What progress milestones can investors expect for Te Mihi Stage 2 geothermal and Glenbrook-Ohurua Battery 2 projects?
- To what extent will sustained high hydro storage levels influence generation costs and market pricing volatility?