Contact to raise $400m to build Tauhara, lifts half-year profit

Contact Energy has released its first half result. Photo / Grant Bradley, NZ Herald

Contact Energy has kicked off a $400 million equity raise to build a new 152 megawatt geothermal power station at Tauhara, near Taupō.

The company said it planned to raise $325m from an underwritten institutional placement at $7 a share - a 2.8 per cent discount to Friday's closing price - and a $75 million non-underwritten retail offer.

Trade in the company's shares have been put into a trading halt until Wednesday while it undertakes the placement.

At the same time, Contact reported a statutory first half profit of $78m, up 32 per cent on the same period last year.

EBITDAF increased by $25m to $246m, up 11 per cent on the prior year and in line with market expectations.

Operating free cash flow for the period increased from $120m to $157m in the first six months, up 31 per cent year-on-year.

Contact said it was a strong financial performance despite uncertainty of gas availability and the near-term future of major energy users.

The company announced a cash dividend of 14 cents per share, down from 16c in the previous corresponding period.

Contact said the $400m would support the $580m of further investment required to develop Tauhara.

The company also said it had undertaken a strategic review of thermal assets.

Chief executive Mike Fuge said it had been a heartening start to the year in a complex environment.

"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."

Chair Rob McDonald said market conditions now allowed Tauhara to proceed after being in the planning stages for over a decade.

"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."

Construction will begin shortly and is expected to be completed in the middle of 2023.

Japan's construction contractor Sumitomo Corporation is leading the build, in partnership with New Zealand construction company Naylor Love and Fuji Electric.

Fuge said the development would support New Zealand's transition to a low-carbon economy.

"Tauhara will provide a foundation to support New Zealand's increased electricity needs over the next decade."