Contact Energy Profit Climbs 62 Percent on Manawa Acquisition and Renewables

Profit Soars on Manawa Acquisition and Renewable Growth

Contact Energy Limited (ASX:CEN) delivered a standout FY26 result, with net profit surging 62% to NZD 423 million, propelled by the full-year impact of its Manawa Energy acquisition and a significant lift in renewable generation. The company’s earnings before interest, tax, depreciation, amortisation, and fair value adjustments (EBITDAF) rose 31% to NZD 1.01 billion, reflecting both operational scale and improved portfolio mix.

The Manawa deal, completed in July 2025, added 25 hydro sites and 0.8TWh of renewable output under long-term power purchase agreements, contributing 2.4TWh of renewable generation in FY26. Combined with new geothermal capacity from Te Huka 3 and the commissioning of the Glenbrook Ohurua 100MW battery, Contact’s renewable output climbed 37% year-on-year to nearly 98% of total generation.

Strategic Shift Away from Thermal Generation

FY26 marked a milestone with the closure of Contact’s last baseload gas plant, the Taranaki Combined Cycle (TCC), in January 2026. This retirement is expected to reduce Contact’s Scope 1 and 2 CO2e emissions by an average 41%, underpinning its commitment to net zero emissions from generation operations by 2035. The company has also invested heavily in flexibility, bringing online its first grid-scale battery and starting construction on a second 200MW unit, enabling it to reduce reliance on thermal peaking plants.

Contact’s strategy to manage dry-year risk includes a 10-year 50MW Huntly Firming Options agreement with Genesis Energy and medium-term gas supply contracts, ensuring security of supply for essential public services like schools and hospitals. These moves reflect a pragmatic approach to balancing decarbonisation with reliability.

Robust Cash Flow and Shareholder Returns

Operating free cash flow surged 49% to NZD 648 million, supported by improved earnings and positive working capital movements. Despite higher interest and tax payments linked to the expanded asset base, Contact declared a final dividend of 24 cents per share, bringing the full-year dividend to 40 cents per share with a 2% discount available under the dividend reinvestment plan.

The company’s balance sheet remains solid post a NZD 575 million equity raise in February 2026, which reduced net debt and will fund accelerated renewable projects aligned with the Contact31+ strategy. Net debt to EBITDAF was a manageable 2.1x at year-end, and the weighted average debt tenor extended to 7.2 years.

Advancing the Contact31+ Strategy and Renewable Pipeline

Building on the five-year Contact26 strategy, Contact launched Contact31+ in November 2025, with a bold ambition to lead New Zealand’s renewable energy future. The strategy focuses on extending geothermal leadership, accelerating battery and hydro flexibility, scaling wind and solar developments, and empowering customers to shift energy use.

FY26 saw progress on multiple fronts: commissioning Kōwhai Park solar farm, financial close on the Glorit solar project, advancing Te Mihi Stage 2 geothermal construction, and drilling for Tauhara 2 geothermal development. Together, these projects represent over NZD 1.7 billion in construction cost and add approximately 0.5TWh of net new generation capacity.

Contact is also exploring a potential 250MW data centre development at Stratford in partnership with CDC Data Centres, leveraging the site’s strategic location and infrastructure.

Climate Leadership and Comprehensive Risk Management

Contact’s FY26 Climate Statement underscores its commitment to net zero by 2035 and details governance structures overseeing climate risks and opportunities. The Board actively considers climate impacts in strategic decision-making, supported by scenario analysis covering Coordinated Decarbonisation, Disorderly Decarbonisation, and Hot House pathways.

Physical risks such as changing rainfall patterns and extreme weather are mitigated through diversified generation assets, advanced forecasting, and asset resilience plans. Transition risks including regulatory changes, technology access, and fuel supply are managed via diversified portfolios, strategic partnerships, and active engagement with regulators.

Contact’s greenhouse gas emissions inventory shows a 73% reduction in Scope 1 and 2 emissions since 2018, driven by asset retirements and renewable investments. Scope 3 emissions have increased in line with business growth, notably due to the Manawa acquisition. All emissions disclosures are externally assured by Ernst & Young.

What to Watch Next

Contact’s FY27 outlook anticipates further growth in EBITDAF to around NZD 1.045 billion, supported by advancing renewable projects and continued integration benefits from Manawa. The company targets a 42 cents per share dividend, reflecting confidence in cash flow generation.

Investors should monitor progress on key projects like Te Mihi Stage 2 and Glenbrook Ohurua Battery 2, developments in regulatory frameworks affecting market structure and fuel supply, and the evolution of demand response and electrification contracts. How Contact navigates these factors will shape its role in New Zealand’s energy transition and its financial trajectory.