Contact Energy has named Sumitomo Corp as the preferred contractor for a $600 million generation project on the company's Tauhara geothermal field.

Sumitomo has partnered with local construction group Naylor Love for the civil engineering components of the project, and with Fuji Electric for the supply of the steam turbine.

Contact chief executive Mike Fuge said the early works contract it has signed with Sumitomo will enable the Japanese company to commence plant design and advance its site investigation and planning.

"It also provides the contractual basis to procure long-lead time turbine and generator components. The Tauhara development is now technically shovel-ready and only subject to a final investment decision as soon as market conditions allow," Fuge said in a statement.

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Contact shares rose 0.5 per cent to $6.41, trimming their loss so far this year to about 10 per cent.

Keen on geothermal

Contact, the country's second-largest energy retailer, operates a mix of hydro, geothermal and gas-fired generation. It has been looking to expand its geothermal generation and trim its gas interests as part of a strategy to help its biggest industrial customers reduce their carbon emissions.

The firm has had consents for a 250-megawatt project at Tauhara since 2010 but dusted off plans for a smaller development there in recent years amid flat demand but increasing gas and emission costs at its gas-fired operations.

Former chief executive Dennis Barnes said the company was unlikely to commit to the Tauhara project until it knew whether the Tiwai Point smelter – the country's biggest electricity user - was to continue operating. But it also wanted the new plant available before it shuts its 377-megawatt gas-fired Taranaki Combined Cycle plant in 2023.

Fuge said four appraisal wells the firm has just completed at Tauhara have confirmed the company's belief that it is a world-class renewable source.

The field's very low carbon-dioxide content means it can play an important role in the country's decarbonisation efforts, he said.

Lower emissions

Fuge noted that coal-fired generation creates about 18-times the emissions that the new Tauhara project would, while a gas-fired peaking plant would create about eight-times the emissions.

Contact is not the only generator planning or building new plant, but it has been working closely with Meridian Energy to offer a lower energy price for the Tiwai smelter to try and keep it operating here.

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Mercury NZ is building its Turitea wind farm near Palmerston North, while Genesis Energy has contracted all the output from the Waipipi wind farm Tilt Renewables is building near Waverley.

Nova Energy earlier this year commissioned a 100 MW gas-fired peaker near New Plymouth. Last month, Meridian Energy said it was close to selecting a turbine supplier for its Harapaki wind project north of Napier.

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