Contact Energy profit falls, plans new $300m geothermal station

Contact Energy's net profit fell by $5 million in the June year. Photo / File

Contact Energy said lower operating earnings and higher depreciation drove its net profit down by $5 million, or 3 per cent, to $182m in the June year.

The decline was 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.

The company's ebitdaf - earnings before interest, tax, depreciation, amortisation and financial instruments - fell to $537m in the June year, against market expectations of $545m.

Contact declared a final dividend of 21 cents per share, taking the annual dividend to 35 cents per share - in line with the prior year's.

The power generator and retailer runs the Clyde Dam on Lake Dunstan and has extensive geothermal capacity in the central North Island.

It also has the Taranaki Combined Cycle Power Station (TCC), which has two fast-start gas turbine peaking units.

Separately, the company said it planned to invest $300m to develop a new 51.4 megawatt (MW) geothermal power station at Te Huka, near Taupō, which it expects to be operating by the fourth quarter of 2024.

It said good progress on the 168MW Tauhara geothermal power station development which will supply around 3.5 per cent of New Zealand's total electricity demand by the end of next year.

Growing the development pipeline by securing land access rights to support the development of wind and solar projects.

Operating free cash flow for the period decreased from $371m to $325m, down 12 per cent year-on-year due to lower operating earnings, additional working capital investments in carbon, higher capital expenditure, and higher cash tax paid on stronger earnings in prior periods.

Chief executive Mike Fuge said it was "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."

Fuge said the retail business had grown its market share in electricity and broadband through innovative retail plans and steady pricing.