Contact Energy says unprecedented hydro inflows depressed market prices and saw greater price separation between the North and South Islands. Photo: RNZ / Nate McKinnon
The country's biggest energy company, Contact, has reported a first half loss, hit by provisions for an onerous contract, as well as a drop in wholesale prices, increased costs and lower thermal and renewable generation.
Key numbers for the six months ended December compared with a year ago:
- Net loss $7 million versus $134m net profit
- Revenue $994m versus $1.14b
- Underlying profit $246 versus $126m
- Underlying net profit was $79m excluding $120m one-time cost
- Pre tax loss $9m versus $187m
- Interim/final dividend unchanged at 14 cents a share
Contact chief executive Mike Fuge said the first-half was hit by a number of factors, including soft short-term wholesale market conditions, which cost the company $76m.
"We saw unprecedented hydro inflows which depressed market prices and saw greater price separation between the North and South Islands. We responded running less thermal generation and positioned our portfolio to benefit from expected improved market conditions in the second half," Fuge said.
In addition, Contact made a one-time provision of $120m ($86m after tax) to cover the cost of an onerous contract associated with the Ahuroa Gas Storage Facility (AGS).
Contact advised the market in December about 4 petajoules of gas owned by Contact and currently stored in AGS might only be available for extraction at the end of the contract in 2033.
On the plus side, Fuge said Contact had made strong progress on delivering to its 2026 strategy to decarbonise and develop renewable energy, with a number of opportunities in the pipeline.
"We have a clear strategy, strong balance sheet with supportive shareholders and a host of opportunities in front of us to lead the decarbonisation of the New Zealand economy over the next decade," he said.
"Contact is focused on five key areas for demand growth, being large scale 24/7 data centres, industrial process heat, major industrial energy users, road transport and green chemicals.
"While still early days, we are excited about opportunities to work with major energy users pursuing their own decarbonisation strategies."
Examples included working with NZ Steel, and with HW Richardson Group to assess a trial use of hydrogen for heavy transport.
"These have the potential to lead to large scale sources of new demand," Fuge said, adding the company was also working toward new commercial arrangements with Rio Tinto, which was looking to continue operating Southland's Tiwai Point smelter.
In addition, he said there had been a strong response to its retail offer over the past six months, with the addition of 20,000 new connections.
He said working capital continued to be elevated with more gas and carbon in inventory, though free cash flow dropped by $71m to $60m.