Contact issues shares to build new station

Power generator and retailer Contact Energy’s six-month profit jumped 32 per cent and it is raising $400 million towards building its Tauhara geothermal project.

Contact’s net profit for the six months ended on December 31 rose to $78 million, up $19m on the same period a year earlier.

The company said yesterday that construction would begin ‘‘shortly’’ on its $580m geothermal power station on the Tauhara field near Taupo¯ .

Contact decided in July to delay investment in the 152-megawatt power station because of uncertainty over the potential closure of the energy-hungry Rio Tinto aluminium smelter near Bluff.

After the Labour Party said in September it would seek a deal to extend the life of the smelter, Contact said it was ready to restart work on the Tauhara station.

Contact chairman Rob McDonald said yesterday that construction was expected to be finished by the middle of 2023.

‘‘We are absolutely delighted market conditions now allow us to proceed with this important development for New Zealand – one which has been in the planning stages for over a decade,’’ he said.

‘‘We believe the Tauhara geothermal project is New Zealand’s best low-carbon renewable electricity opportunity.

‘‘It will operate 24/7, is not reliant on the weather and is ideal for displacing baseload fossil fuel generation from the national grid which will significantly reduce New Zealand’s carbon emissions.’’

Japanese company Sumitomo Corporation was leading the build, in partnership with New Zealand construction company Naylor Love, and Fuji Electric.

The company hoped to raise $400m by offering new shares.

Mike Fuge

Contact Energy chief executive

That would cut debt and fund the Tauhara station along with work on another $800m worth of projects, including the potential replacement and expansion of Contact’s Wairakei geothermal station.

Of the $400m equity, $325m would be raised through an underwritten placement to institutions of $7 per share, and up to $75m would be raised from New Zealand and Australian shareholders in a non-underwritten offer between February 18 and March 5.

Chief executive Mike Fuge said Tauhara would contribute to the central North Island’s economic recovery and help the country meet increased electricity needs.

‘‘Geothermal . . . plays a crucial role in our generation mix and the transition away from fossil fuels.’’

Contact shareholders will receive a 14 cent per share interim dividend, imputed up to 9c per share, on March 30. Shares in Contact were on a trading halt but closed on Friday at $7.20 each.

‘‘Geothermal . . . plays a crucial role in our generation mix.’’