Announcement
FLLYR: CEN: CEN accelerates renewable investment with new power station
08:30am
CEN
15/08/2022 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS Contact Energy Limited
FLLYR: CEN: CEN accelerates renewable investment with new power station
15 August 2022
Contact accelerates renewable investment with new $300m power station near
Taupo
Key financial metrics
[please see table in attached announcement]
Highlights
Strong progress in FY22 on delivery of our Contact26 strategy, which is
focussed on leading New Zealand's decarbonisation by connecting customers
with our renewable development pipeline:
o A $300m investment approved to develop a new 51.4MW (0.43TWh p.a.)
geothermal power station at Te Huka, near Taupo, targeting onstream in Q4
2024
o Good progress on the 168MW (1.40TWh p.a.) Tauhara geothermal power station
development which will supply around 3.5 percent of New Zealand's total
electricity demand by the end of next year
o Growing the development pipeline by securing land access rights to support
the development of wind projects through our Roaring40s partnership and
entering a joint-venture agreement with Lightsource bp to initially develop
up to 200MW of solar
o Ongoing strategic review of thermal assets supporting the announcement of
the closure of Te Rapa next year, on track to more than halve our FY21 scope
1 and 2 carbon emissions by 2026
o Strong endorsement of Contact's refreshed retail offering over the past 12
months
- More than 50,000 new customers chose Contact for
electricity, gas, or broadband services.
- Supported customers by limiting average price increases to
households to 1.2 percent on FY21, despite sustained higher
wholesale prices and inflationary pressures.
- Saw tangible commitment to our new 'Good to be Home' brand
platform with 3 months free energy for more than 1,000 new
parents who enjoyed over 2 million hours of energy as they
welcomed the newest Kiwis into Aotearoa
o Committed to a new partnership with Women's Refuge
New Zealand renewable energy company Contact Energy ('Contact') released its
full year financial results for the 12 months to 30 June 2022 today.
Contact CEO Mike Fuge said the company had delivered a solid financial
performance in the FY22 financial year and was investing in line with its
strategy to lead New Zealand's decarbonisation efforts.
Financial performance
Contact reported a net profit of $182m, down $5m from a year ago on lower
operating earnings (EBITDAF) and higher depreciation, partially offset by
lower interest costs reflecting the capitalisation of interest to major
growth capital projects, lower tax on earnings and favourable movements to
the fair value of financial instruments against the prior year.
EBITDAF decreased by $16m to $537m, down 3 percent on the prior year on lower
wholesale electricity prices, lower sales and rising gas and carbon unit
costs, which were partially offset by more renewable generation.
Operating free cash flow for the period decreased from $371m to $325m, down
12 percent year-on-year primarily on lower operating earnings, additional
working capital investments in carbon, higher stay-in-business capital
expenditure, and higher cash tax paid on stronger earnings in prior periods.
The Board approved a final ordinary dividend of 21 cents per share (imputed
by up to 19 cents per share for qualifying shareholders) to be paid on 27
September 2022; taking the annual dividend declared for FY22 to 35 cents per
share which is in line with the prior year.
Mr Fuge said: "Contact has delivered a solid financial performance despite
unpredictable and volatile trading conditions."
"This unpredictability has been compounded by a combination of global energy
supply and security concerns, exacerbated by the impact of Russia's invasion
of Ukraine, with subsequent unprecedented increases in international energy
prices, including coal, which has also coincided with a reduction in gas
output from the domestic gas market.
"These thermal fuel challenges further support the acceleration of our
Contact26 strategy, and we continue to progress a range of renewable energy
projects across the country in our aim to lead New Zealand's decarbonisation.
Our retail business has grown its market share in electricity and broadband
through innovative retail plans and steady pricing."
Demand
In line with Contact's decarbonisation focus, Mr Fuge said demand for
renewable electricity from forward-thinking customers remains strong.
"In the year we secured long-term power purchase agreements to supply Oji
Fibre, Pan Pac, Genesis Energy and Foodstuffs with renewable electricity.
Long-term contracts underpin sustainable operations, support additional
renewable generation development, and can also displace thermal generation.
We are seeing further exciting demand growth potential with more proposed
process heat conversion projects in industry and high-quality data centre
proposals now in the public arena."
Rio Tinto is looking to continue operating its unique low carbon smelter at
Tiwai Point beyond 2024 and has announced it has begun exploring potential
pathways with electricity generators. Contact has been approached by Rio, and
we will constructively engage.
Mr Fuge said, "It's still early days, but we are encouraged that the
smelter's owner recognises the renewable advantages of our electricity system
and Contact supports their engagement approach with key local stakeholders."
The Southern Green Hydrogen project is also progressing well with two
Australian companies, Woodside Energy and Fortescue Future Industries,
entering the final stage of negotiations to become lead developer. The two
companies will provide more detailed proposals to the joint Contact and
Meridian Energy (Meridian MEL:NZ) project team by the end of September.
Renewable development
Contact has announced today it will be building a new 51.4MW geothermal power
station adjacent to its existing Te Huka power station.
Te Huka Unit 3 is the latest investment commitment into Contact's world-class
geothermal development pipeline after Tauhara. Once both stations are
operational, they will produce clean, low carbon, renewable electricity that
operates 24/7 and is not reliant on the weather. This combined investment
will increase Contact's renewable electricity generation by 25 percent from
what is produced today and increase New Zealand's total renewable electricity
supply by over 5 percent on average per year.
Earlier in the year, Contact announced an upgrade to the Tauhara power
station's expected capacity by 11 percent, from 152MW to 168MW following the
outstanding results from the drilling campaign. It is expected to be
completed in the second half of 2023.
"While COVID-19 has had an impact on the project's progress and cost, we
continue to assess all options to deliver more output and reinforce returns.
Once completed, Tauhara will be a world-class renewable development that will
be a foundation for New Zealand's increased renewable electricity needs over
the next decade," Mr Fuge said.
As part of Contact's exclusive relationship with wind generation experts
Roaring40s, it has secured land access rights to potentially develop wind
projects across the country. Contact has also entered a joint-venture
partnership with global solar developer Lightsource bp to collaborate on a
series of grid-scale solar generation projects.
Contact has also completed the economic assessment of a 100MW battery energy
storage system investment. Mr Fuge said while current battery commodity costs
make the project economically challenging, the project has been progressed
and is ready for development when conditions allow.
Decarbonising our portfolio
Contact has signed an electricity 'swaption' contract with Meridian Energy
for 2023 and 2024 as part of its strategy to lower New Zealand's carbon
emissions. Mr Fuge said Contact has been saying for some time that the role
of thermal assets will change from running baseload to providing risk
management support; backed by fixed insurance-style payments. "Contracts like
this one show the merits of Thermal Co - an industry-wide entity that could
provide the risk management support the market needs, at the lowest cost with
the lowest carbon emissions while new renewable generation is built." This
arrangement with Meridian demonstrates the efficiency of the market and will
reduce the use of coal.
Contact also announced that its 44MW Te Rapa power station will close in June
2023. The closure of this station will ultimately reduce Contact's scope 1
and 2 greenhouse gas emissions by ~20 percent per annum or 200 000 tons per
annum - the equivalent of taking 44,000 vehicles off the road.
"The closure of the Te Rapa power station is aligned with Contact's strategy
to decarbonise New Zealand and demonstrates that we don't just talk about
decarbonisation, we deliver on our commitments by decarbonising the assets in
our portfolio," said Mr Fuge. "We remain focused on growing our development
portfolio to help meet demand for renewable electricity from thermal plant
closures in the near-term or new customers over the longer-term."
Retail
Mr Fuge said Contact's retail business has continued to grow strongly over
FY22. "We have seen total connections increase by 51,000 across electricity,
gas and broadband and we successfully launched our new Good Nights plan which
has proven popular with customers who are keen to have three hours of free
power every night from 9pm.
"As part of our commitment to build a better future for Aotearoa, we launched
our 'Fourth Trimester' initiative. So far, we have given more than 1,000 Kiwi
families with newborn babies a small but powerful gift of three months free
power.
Outlook
Looking ahead to the next year, Mr Fuge said Contact remains committed to
leading the decarbonisation of New Zealand.
"We are excited about the future. 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."
-ends-
MORE INFORMATION
1/ Enquiries
Investors
Matthew Forbes, matthew.forbes@contactenergy.co.nz, +64 21 072 8578
Media
Leah Chamberlin-Gunn, leah.chamberlin-gunn@contactenergy.co.nz, Ph +64 21 227
7991
2/ Conference call
A conference call to support the interim results announcement will be held at
10am, NZ (New Zealand) time on 15 August 2022.
If you would like to attend the live presentation, please see the details
below to view the webcast off your chosen device:
Click here to enter the webcast: LIVE EVENT LINK
Or access this link via our website:
https://contact.co.nz/aboutus/investor-centre
End CA:00396941 For:CEN Type:FLLYR Time:2022-08-15 08:30:47
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