Contact Energy gains momentum from stronger sales and cheaper generation

Sales growth meets softer customer returns

Contact Energy Limited (ASX:CEN) sold substantially more energy into its mass-market business in September, but earned less per unit from those customers. Electricity and gas sales reached 484GWh, up from 372GWh a year earlier, while the customer netback fell to $145.99/MWh from $150.12/MWh.

The increase was driven by both sides of the retail book. Mass-market electricity sales rose to 321GWh from 312GWh, while retail gas sales climbed to 163GWh from 61GWh. Electricity sales prices increased to $352.39/MWh, but higher direct pass-through costs and energy costs limited the benefit to the customer margin. Contact ended the month with 715,000 total customer connections, compared with 659,000 a year earlier.

Generation costs fall despite lower output

The wholesale business produced a more favourable cost signal. Electricity generated or acquired fell to 1,069GWh from 1,106GWh, while contracted electricity sales edged down to 978GWh from 986GWh. Yet unit generation cost, including acquired generation, dropped to $37.83/MWh from $48.79/MWh, with own-generation cost broadly stable at $27.57/MWh.

Hydro and geothermal supplied most of the month’s generation, at 520GWh and 416GWh respectively. Thermal generation was just 3GWh, compared with 28GWh in September 2025. Contact’s earlier July operating performance also showed higher sales and lower generation costs, making September’s figures part of a recurring operating pattern rather than a one-month improvement in isolation.

Renewable pipeline reaches $1.263 billion under construction

Contact disclosed three renewable developments currently under construction, with total approved project costs of $1.263 billion. The portfolio includes the $712 million Te Mihi Stage 2 geothermal project, expected online in the third quarter of calendar 2027; the $235 million Glenbrook-Ohurua Battery 2 project, targeted for the first quarter of 2028; and the $316 million Glorit Solar project, due in the fourth quarter of 2028.

Glorit is being delivered through Contact’s 50/50 joint venture with Lightsource bp. The build-out follows the company’s previously reported renewable investment programme, but this monthly report does not provide a revised earnings or cash-flow forecast, so the figures are best read as construction commitments rather than a direct projection of future returns.

Hydro conditions split as forward prices strengthen

Water conditions remained uneven. As at 13 October, South Island controlled storage stood at 135% of mean, while North Island storage was 78% and total Clutha scheme storage was 81%. September inflows into Contact’s Clutha catchment were 123% of mean, down from 164% in August but still above average.

At Otahuhu, the ASX-settled wholesale price for the first quarter of 2027 rose to $115.50/MWh on 13 October, from $102.25/MWh at the end of September and $88.50/MWh at the end of August. That price movement offers a stronger revenue backdrop, but the month’s softer wholesale net revenue of $147.46/MWh, down from $162.48/MWh a year earlier, shows that forward-market strength does not automatically translate into current-period margin expansion.