Contact Energy has dropped plans to invest in power stations overseas in favour of paying investors a $367 million special dividend.
The company said a review found no suitable investment opportunities that would adequately reward shareholders.
Apart from the special dividend of 50 cents a share to be paid on June 23, Contact would lifts its regular dividend payout from 80 percent of the company's underlying profit to about 100 percent.
The decision may please investors upset with the company's initial suggestion earlier this year it would invest in geothermal power stations overseas rather than return capital, which led to a slump in its share price.
Chief executive of Contact, Dennis Barnes, said it had listened to shareholders.
"Essentially we said we are going to keep our eye out for the long term on international opportunities, but very much focussed in the short term to medium term on cash flow generation and return to shareholders," he said.
At midday, Contact's share price had soared 78 cents, or 14 percent, to $6.33 each.