\u201cAnd it\u2019s a signal of confidence in New Zealand and in investment in New Zealand, because every one of those dollars will be spent here building critical infrastructure.<\/p>\n
\u201cThe equity raise itself is a signal of confidence in New Zealand and New Zealand\u2019s renewable energy sector.\u201d<\/p>\n
Contact Energy chief executive Mike Fuge says the company is committed to investing in new renewable energy generation. Photo\/Supplied<\/p>\n
Capital raisings among the power companies have been a possibility since late last year when the Government said it would take part in future fundraising events among its three 51% owned firms \u2013 Genesis, Mercury and Meridian.<\/p>\n
Of the three, market analysts see Genesis, which reports its first-half profit on February 23, as being the most likely candidate for a capital raise.<\/p>\n
The electricity sector came under the spotlight in the winter of 2024 when dry conditions and a gas shortage drove wholesale prices to $820 per megawatt hour (MWh), against a winter average of about $160\/MWh.<\/p>\n
At the time, part of the problem was put down to a lack of investment in new projects from the big generators.<\/p>\n
Salt Funds managing director Matt Goodson said the Contact result was \u201cfine\u201d but the capital raise came as a surprise.<\/p>\n
\u201cBut look, there\u2019s reasonable interest in it, and I\u2019m sure it will go just fine.<\/p>\n
\u201cIf everyone today went ahead with all of their generation plans then there would be huge oversupply but, of course, not everyone is going to do that, so it\u2019s just a question of the ordering of them.<\/p>\n
\u201cThey probably did not have to do it [raise capital] \u2013 they could have done it on their balance sheet \u2013 but they have opted for a degree of conservatism around their capital structure,\u201d Goodson said.<\/p>\n
Fuge said Contact\u2019s fundraiser was not motivated by being the first cab off the rank to raise funds.<\/p>\n
He said the exercise was aimed at expediting the company\u2019s \u201cContact31\u2033 strategy \u201cand going at that with purpose\u201d.<\/p>\n
Fuge said Contact31 was designed to drive growth in renewable energy transition through to 2031.<\/p>\n
The funds would cover Contact\u2019s investment in a new 200MW battery, Glenbrook battery 2.0 and a 150MW solar farm joint venture at Glorit, near Auckland.<\/p>\n
The capital raise would also fund drilling on Tauhara 2 geothermal to advance steamfield development and to explore upsizing the target capacity to 60-70MW from 50MW.<\/p>\n
Contact last year bought the smaller power generator, Manawa, putting it in the No 2 generator spot behind Meridian.<\/p>\n
Fuge said the result showed the company had \u201clanded the synergies\u201d with Manawa and that the acquisition had gone \u201cextraordinarily well\u201d.<\/p>\n
Chief financial officer Matt Forbes said new projects would help customers get off gas supply from New Zealand\u2019s rapidly declining indigenous gas reserves and on to electricity.<\/p>\n
\u201cWe have a very ambitious growth agenda over the next five years worth $2 billion to $2.5b and we are looking to see if we can bring any other projects into that plan with the support of this equity rise,\u201d he said.<\/p>\n
Fuge said Contact\u2019s future investment in renewables would be across the full range of wind, geothermal and solar.<\/p>\n
\u201cThere is a wide range of renewable energy development options and we\u2019re very confident that we can build into this new electricity demand as it comes online.\u201d<\/p>\n
The company had resolved its issues with the Forest and Bird Society, which initially opposed the solar farm at Glorit<\/a>.<\/p>\n