Contact Energy’s March 2026 operating report reveals a company navigating improving wholesale economics amid softer retail margins. The wholesale business unit generation cost fell to $56.24/MWh from $70.12/MWh year-on-year, driven by lower own generation costs of $35.3/MWh compared to $57.0/MWh in March 2025. This substantial 38 percent reduction in unit costs reflects better hydro availability and operational efficiency, yet the company’s retail electricity netback contracted to $172.45/MWh from $182.13/MWh despite higher sales volumes of 359GWh versus 282GWh the prior year.
The divergence between improving wholesale costs and declining retail margins points to softening electricity prices in the consumer market, a trend corroborated by falling ASX futures prices for Otahuhu. The forward price for the third quarter of 2026 has declined from $192.10/MWh on 27 February to $170.95/MWh as of 14 April, suggesting wholesale prices are moving lower. For Contact, this creates a mixed picture: cost advantages flow through to improved wholesale profitability, but the company’s retail business faces headwinds from competitive pressure and lower market prices that outweigh the benefit of higher sales volumes.
Hydro storage levels provide some reassurance on supply-demand dynamics. As of 14 April, South Island controlled storage stood at 99 percent of mean while North Island storage was at 182 percent of mean, indicating healthy reserves. The total Clutha scheme storage, which represents a significant portion of Contact’s generation capacity, was at 108 percent of mean. March inflows into the Clutha catchment were 85 percent of mean, continuing a pattern of below-average rainfall that extends back to January, though still adequate to maintain storage levels above historical means.
Contact’s renewable development pipeline remains on track. The Kลwhai Park Solar project, delivered through a 50/50 joint venture with Lightsource bp, is expected online in Q3 2026. The Te Mihi Stage 2 geothermal project carries total approved costs of $712 million and should commence generation in Q3 2027. Most significantly, the Glenbrook-Ohurua Battery 2 project moved into the construction phase with expected completion in Q1 2028 at a cost of $235 million. The completion of Glenbrook-Ohurua Battery 1 in March adds valuable grid firming capacity to Contact’s asset base.
Investors should monitor several indicators in coming months: the trajectory of wholesale electricity prices, which have declined notably from February levels; retail margin progression as the company balances volume growth against pricing pressure; and progress on the renewable development projects, particularly the solar and geothermal additions that will diversify Contact’s generation profile. Hydro inflow trends bear watching, as a sustained period of below-mean rainfall could tighten storage levels. 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.
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