The country's biggest power company, Contact Energy, has reported a rebound in its half year profit and is raising fresh capital to pay for a new geothermal plant.
Te Mihi power station. Photo: Contact Energy
The net profit for the six months ended December was up a third to $78 million compared with $59m last year.
It said it would raise $400m and proceed with a geothermal power station at Tauhara, near Taupō.
Contact chief executive Mike Fuge said the improvement was a result of strong management of its assets and business, which allowed it to benefit from high wholesale prices.
"We're pleased to have delivered a strong financial result despite challenging headwinds in the form of ongoing uncertainty around gas availability, and the doubt swirling around the future of the Tiwai Point smelter until the extension announced a month ago."
Its operating earnings were up 11 percent to $246m.
Contact was part of the power supply deal alongside Meridian which ensured the Tiwai Point aluminium smelter will stay open at least until 2024.
New station
Contact said work would start soon a 152 megawatt geothermal station at Tauhara, which has been on the drawing board for several years. It would cost $580m and is due for completion by 2023.
"We believe the Tauhara geothermal project is New Zealand's best low-carbon renewable electricity opportunity. It will operate 24/7, is not reliant on the weather and is ideal for displacing baseload fossil fuel generation from the national grid which will significantly reduce New Zealand's carbon emissions," Contact chair Rob McDonald said.
To help pay for the new plant and further renewable energy projects moved to raise $400m through a share issue, with $325m to be taken up by large investment funds and the $75m to be offered to existing small shareholders. The issue is underwritten and will be priced at $7 a share.
The addition of further geothermal capacity has prompted a review of Contact's remaining thermal plants.
"We believe the time is right to consider our plans for our thermal assets, including the Taranaki Combined Cycle Power Station and Peakers at Stratford, the Te Rapa Power Station and the Whirinaki Peaker Plant. We expect this review will take several months," Fuge said.
Contact cut its first half dividend to 14 cents a share from 16 cps and also revised its dividend policy. It said it expected to pay a full year dividend of 35 cps.