Contact Energy (CEN) H2 2024 earnings summary

Executive summary

• Underlying EBITDAF rose 16% year-over-year to $663m, with net profit at $235m, driven by higher wholesale prices, new geothermal capacity, and increased thermal generation amid low hydro inflows and tight gas supply.

• Major capital investment of $470m, double net profit, focused on renewables build-out, with Tauhara geothermal plant online and Te Huka 3 commissioning for Q4 2024.

• Retail connections grew to over 620k, with multi-product strategy driving customer growth and cost to serve per connection rising only slightly despite inflation.

• Announced increased dividend to 37c per share, up 6% year-over-year, with plans to raise to 39c in FY25.

• Market faced tight supply due to low hydrology, low wind, and gas supply challenges, but responded with price stabilization.

Financial highlights

• Underlying profit after tax up $19m year-over-year, adjusted for contract provisions, with operating free cash flow up 67% to $470m.

• EBITDAF conversion to operating free cash flow at 71%, up from 49% prior year.

• Return on invested capital at 3.7%, with expectations for improvement as new assets come online.

• Retail EBITDAF declined by $18m due to higher input costs not fully passed to customers, despite a 6.5% increase in average retail electricity tariff.

• Net debt to EBITDAF at 2.7x, maintaining investment grade credit metrics.

Outlook and guidance

• FY25 mean hydro EBITDAF guidance at $770m, up $170m from normalized FY24, reflecting full-year contributions from Tauhara and Te Huka 3.

• Dividend expected to rise to 39c per share in FY25.

• Growth capex guidance for FY25 is $450m–$550m, with continued focus on renewables and storage.

• Strategic priorities include closing the TCC gas plant, scaling up flexible demand, and advancing new wind and solar consents.

• Over 200MW of new geothermal capacity to be operational in the next 12 months, with further renewable projects under construction.