Contact Energy buys stake in Simply Energy to speed emission reduction effort

Contact Energy chief executive Dennis Barnes. Photo / Supplied

Contact Energy is to invest $10.7 million in Simply Energy as part of its strategy to help commercial and industrial customers adopt new energy technologies and reduce their emissions.

New Zealand's second-largest generator and retailer will make the investment over three years to acquire a 49.9 per cent stake in Simply Energy, which provides hedging and tariff services for industrial power users and market services for independent generators and start-up retailers.

The sum includes a $2m injection to fund development of Simply's systems and technology to enhance its range of products and services.

"Our commercial and industrial customers have told us they want to transition to a lower carbon future through a partnership that goes beyond the competitive electricity price we already offer," Contact's chief generation and development officer James Kilty says.

"This is an exciting venture for Simply Energy and Contact to provide more sustainable energy solutions for customers," Simply managing director Murray Dyer says. "We have an aligned business plan and structure to ensure our customers have access to some of the most innovative energy solutions."

Contact shares last traded at $7.57 and have gained about 30 per cent in the past year.

Contact makes more than 80 per cent of its power at dams and geothermal fields. It is planning further geothermal investment to reduce its emissions while retaining enough gas-fired generation to cover its customers from dry-year and other supply risks.

As part of that emission-reduction goal, it aims to remove about 60,000 tonnes of CO2 by 2022 by helping its industrial customers displace about one petajoule of fossil fuels with electricity.

Wellington-based Simply has operated for almost 12 years and manages power supply for about 2,100 commercial and industrial sites, according to Electricity Authority figures. It specialises in data management and reconciliation and part-owns Axos Systems, which provides data and billing products to energy and utility networks.

Contact says Simply will continue to operate independently as a service partner to its existing customers but will have full access to add innovative products to Contact's commercial and industrial customer base.

The transaction will be funded from existing credit facilities and should be completed by the end of the month. It is expected to add to Contact's earnings from the 2021 financial year.

Depending on the venture's success in meeting its decarbonisation targets, Contact has the option to increase its shareholding in two years