Contact Energy raises dividend as profit jumps 85%

Monday, 19 August 2024

Contact Energy has reported an 85% jump in its net profit to $235 million for the year to the end of June and upped its total annual dividend to shareholders.

It has also forecast a further rise in its pay-out to investors next year.

The NZX-listed firm is the first of the big four “gentailers” to report its annual result, which are arriving amid growing hand-wringing over the state of the industry and the risk of an energy crunch next year.

Contact Energy chief executive Mike Fuge said the heavy rainfall over the past two days was “always welcome”, but there was long way to go to refilling the country’s hydro lakes.

“Kawea when I looked this morning was 12% full. We need a lot more of that type of rainfall over the coming months.”

In a media statement accompanying its annual result, Contact put the emphasis on a smaller 9% rise in its underlying profit and the additional investments it is making in renewable generation.

Its operating profit, before one-offs, rose 16% to $663m.

Fuge said its result demonstrated the strength of Contact’s underlying performance “as we managed through market volatility, while keeping the momentum to deliver existing and new renewable developments”.

Contact’s recent activities include the construction of the Te Huka 3 geothermal power station which it expects to be online by the end of the year, and its decisions to invest in a 100 megawatt “grid-scale battery” at Glenbrook and a solar farm near Christchurch airport, both of which it expects to complete in 2026.

However, the results indicate investment will not come at the expense of any decline in shareholder pay-outs.

Contact’s dividend for the year to the end of June is rising 2 cents to 37c a share and the company forecast a further 2c-per-share rise in its total pay-out next year.

Fuge denied current fears of an energy shortages and a spike in wholesale pricing made it an embarrassing time to be raising dividends, saying the increase should be viewed in the context of Contact having held its dividend flat over the past four years.

“Our net profit this year is about $235m. We invested more than $470m in capital investment last year; you would expect our profits to rise with investments.”

The Major Electricity Users Group, which represent major power users, estimated in 2021 that the country’s largest power firm, Meridian Energy, had made $3.5b in excess profits over the previous 20 years, a finding Meridian disputed.

However, in a subsequent study, it found no evidence of Contact Energy making excess profits.