Contact Energy recorded strong volume growth across both retail and wholesale operations in May, with mass market electricity and gas sales reaching 461GWh against 365GWh in the prior year period, representing a 26 percent increase. The company’s contracted wholesale electricity sales climbed 34 percent to 1,027GWh, demonstrating robust demand capture across the portfolio. More encouragingly, the unit generation cost across the portfolio declined substantially to $37.11/MWh from $49.26/MWh in May 2025, while own generation costs fell to $24.31/MWh from $42.27/MWh, indicating meaningful operational improvements and favorable hydro conditions.
The challenge for investors lies in the wholesale pricing environment. Despite the operational improvements, electricity and steam net revenue declined to $159.86/MWh from $169.49/MWh on a per-unit basis. More significantly, Otahuhu futures prices for the third quarter of 2026 have compressed sharply from $144/MWh on 30 April to $111.85/MWh as of 11 June, a decline of 22 percent in just six weeks. This forward price weakness suggests the market is pricing in abundant supply from improved hydro storage levels. The retail netback of $148.13/MWh, while improved marginally from $145.13/MWh, masks the underlying pressure from lower wholesale reference prices flowing through the system.
Storage levels provide context for the pricing action. As of 11 June, the South Island controlled storage stood at 120 percent of mean while the North Island reached 149 percent of mean. Contact’s Clutha scheme storage sat at 127 percent of mean, though May inflows into the Clutha catchment moderated to 89 percent of mean after stronger levels in prior months. The inflow normalization warrants attention, as sustained above-average storage is supporting both market supplies and the optionality in Contact’s generation portfolio.
The company’s substantial capital deployment agenda remains a long-term focal point. Contact has four significant renewable projects under construction totaling approximately 1.5 billion dollars in approved project costs. The Kลwhai Park solar project is expected online in the third quarter of 2026, followed by Te Mihi Stage 2 geothermal in Q3 2027, the Glenbrook-Ohurua battery in Q1 2028, and Glorit Solar in Q4 2028. These projects, with the solar assets delivered through a joint venture with Lightsource bp, represent the company’s response to decarbonization trends and should position it well for medium-term market structure.
Investors should monitor forward wholesale price movements closely over the coming months, as the recent compression in Q3 2026 futures suggests a shift in supply-demand expectations. Additionally, the sustainability of retail volume growth and any margin compression warrant observation as wholesale prices feed through customer contracts. New Zealand electricity demand grew 1.5 percent year-on-year in May but remains 4.8 percent below May 2024 levels, indicating structural demand challenges that will be relevant to volume trajectories. This announcement is price sensitive and has been flagged as material by the ASX.
View the full ASX announcement (PDF)
About Contact Energy Limited (ASX: CEN)
Contact Energy Limited generates and sells electricity and natural gas in New Zealand through both wholesale and retail segments. The company owns and operates hydro, geothermal, and thermal power stations that produce more than 25% of New Zealand’s electricity, and retails these services along with broadband to nearly half a million customers.
If you would like to discuss this announcement or how it might affect your portfolio, request a callback or call us on 1300 889 603.
