Contact Energy Limited

Contact reported FY26 EBITDAF of $1.011 billion, up 31% on underlying FY25, operating free cash flow of $648 million, up 49%, and underlying profit of $423 million, up 62% from $261 million. Underlying profit per share rose from $0.327 to $0.415, while FY26 return on invested capital reached 7.5%. Retail average tariffs increased by around 12%, and electricity gross margin was approximately $5 million lower even after those price rises. On the balance sheet, net debt was $2.2 billion at 30 June and S&P adjusted net debt to EBITDAF improved from 2.3x to 2.1x. For FY27, management guided to normalized EBITDAF of approximately $1.045 billion, or about $1.064 billion before $19 million of remaining integration and platform investment. They expect retail net price to reduce by about 2% from $174 to $171 per megawatt hour, FY27 repricing to be about 97% confirmed, and the FY27 dividend to increase to $0.42 per share.

Michael Fuge framed FY26 as a “year of delivery,” highlighting the Manawa acquisition, renewable buildout, and stronger sector resilience. He emphasized that Contact’s strategy is to lead New Zealand’s renewable future through geothermal, batteries, hydro flexibility, wind, solar, and long-term partnerships with industrial customers. His tone was confident and constructive, especially around demand growth opportunities such as data centers, dairy electrification, and Southland Wind, while repeatedly stressing that growth must remain disciplined and backed by customer demand.

Matthew Forbes said the stronger FY26 results came from more renewable generation and the sales it supported, not from higher average electricity prices. He pointed to $225 million of EBITDAF uplift from renewable generation, a $53 million pricing headwind, $40 million from lower gas/carbon/acquired generation costs, and $51 million from other income, partly offset by higher fixed costs and integration spend. He also highlighted cash conversion improving to 64% of EBITDAF, standard business capex of $145 million versus $170 million to $185 million guidance, BAU spend of $82 million versus $115 million to $125 million guidance, and the $2.2 billion net debt / 2.1x adjusted leverage position. He said the board’s $0.40 FY26 dividend and expected $0.42 FY27 dividend are supported by cash generation and balance sheet capacity.

Analysts focused on the proposed Stratford data center, asking about likely build cost, Contact’s potential equity exposure, timing, and whether the company would be taking on too much risk. Management said New Zealand costs should carry a slight premium to Australian benchmarks, that equity participation would be capped at a 50-50 level from Contact’s perspective, and that the project is still early stage and subject to consent, customers, financing, and final investment decisions. Questions also centered on lower ASX futures, FY31 EBITDAF targets, hydro output, and gas security; management said FY31 targets remain intact, that the demand side is the main swing factor, and that gas volumes are reasonably well covered by existing supply arrangements. Analysts also pressed on retail pricing and the SaaS/platform spend, and management said FY27 retail prices still need to recover costs while maintaining customer trust, and that the software spend is being estimated ahead of final investment decision.