FY 2022. We're here with our Chief Executive Officer, Mike Fuge, who'll be taking us through a presentation today, and our Chief Financial Officer, Dorian Devers. Over to you, Mike.
Thanks, Matt. Obviously, very strong result to report today and following up on last week, a couple of insights from our market. Also, to take you underneath where the company is on the various strategic initiatives underway. Let's get right into it, with the presentation. The usual disclaimer, just note that and we'll move on to the next page. Look, I'll give you the performance update, and Dorian will take you a bit deeper into financials and a look ahead, and then we'll come out and invite questions. Despite the very volatile market conditions, you'll see the headline number there with our EBITDA up above 322. 322 for the half year, up 31% and obviously profit up as well.
The operating cash flow, Dorian will deal with a bit, but that's not due to anything funny. It's due to some improved investment in working capital, that's a bit of a one-off. How does the market characterize those six months? Obviously, we also had a lot of growth capital with Tauhara getting underway. The project actually on the ground is now 35%-40% complete, with the drilling campaign having wrapped up or is about to wrap up after what can only be described as a stunningly good campaign. Even for the contractor and our balance of plant contractors. The operating conditions, obviously, we had strong inflows in the Clutha. We did have the improved deliverability up at Wairakei, as I'm targeting those high availability stands.
We have seen real increases to gas and carbon costs, and I'll talk about that a little later because that's quite important. You see the elevated electricity futures as obviously TY tends to firm up, but also input thermal costs, both for coal and gas and carbon prices have all gone up. Look, we have a diverse portfolio of assets. We are investing heavily in renewable generation. We have a great development pipeline, both in geothermal, but also that's growing in wind and other technologies. We have very deliberately been spruiking these long-term offtake agreements, which we see as fundamental as the market moves from a commodity market to more of a subscription-based market to pay for these very heavy capital investments, which will be required in the longer term. On to the next one.
We set out our strategy last year. For those of you who were able to join us in late May, we had developed a number of strategic themes. As a Chief Executive Officer, it's always a delight that, one, you see a lot of hard work go over 12 months, but you also see some real, green shoots coming from the implementation of that strategy, which did fundamentally change the direction of the company. In growing demand, obviously there's our own, 10 MW Clyde data center. There's other data centers, or intents to build data centers that have been announced.
Delighted with the progress on green hydrogen that we've done in conjunction with Meridian, with the shortlist now developed, and what we can do in terms of trade and feasibility, and those long-term PPAs being agreed both with other parties who wanna decarbonize, but also industrials who intend to stay here for the long term and Fonterra who are very fundamental to ordinary Kiwis in their daily lives. Renewable development, again, haven't been idle. Tauhara underway. Resource consenting for the extension of or the redevelopment of Wairakei up by Te Mihi, and Dorian talked about last week about how that gives us more bang for buck. Same amount of steam being offtaken, but far more efficiently in terms of the MWs delivered. We also applied.
We've lodged applications for a further 50 MW geothermal development at Tauhara, taking advantage of both additional resource there, land that we have, and connection and transmission capacity that's available as of now. We've secured land access rights for 600 MW of wind projects across New Zealand, not in the lower North Island, where all other wind projects seem to be at the moment. But some very high quality Type 2 sites in both Northland and Southland that we're looking at very actively. Decarbonization. Look, the investment in afforestation has been very successful to date. We're looking how we can grow that further. ThermalCo, we released a study which basically did give some pointers for the market.
We'll continue to develop that because now the focus is what then should we do with our assets and our own gas supply contracts. We see some real opportunity there for providing surety to the market over the longer term as we all invest in less consistent wind and solar projects in particular. In that regard, the assessment of the Battery project continues, and we are targeting an investment decision within this financial year. Customer great success story. You've seen the relaunch of the brand. Underpinning that, in the heart of the customer business, we are upgrading the SAP system with S/4HANA that will enable further diversification of products and further operational efficiency gains.
You can see that on the brand trust, we've moved from being very middle of the pack to being in the range one-three and our Net Promoter Score is up again. Connections have grown both in broadband. It remains always a bit of a tongue twister. New Zealand's leading broadband brand in terms of growth. Say that quickly. Also what we were delighted with was the launch of Good Nights, which was edgy in terms of its innovation. We're delighted with the results, both in terms of the customer uptake, we hope to have the results out soon of being able to say whether the customers have actually fundamentally changed their behavior and shifted load.
If that's the case, if we've found a way to engage ordinary Kiwis in this decarbonization journey of flattening the load and moving load away from the peaks, that gives great opportunity for the future, and that should all come together once we have S/4HANA being able to launch more of those products as more and more people buy EVs and look to smart homes to save on energy. Underpinning that, the progress made on ESG, the green capital bonds at the end of last year was a huge highlight. Obviously, our scope one emissions did reduce on the back of improved renewable production with a reduction of 346,000 tons of CO2. We more than outstripped our promises on the number of native plants we planted and the pests we caught.
All of that resulted in us really coming up in terms of the scores we achieved on the DJSI. We didn't quite make the index. We were two percentage points off, but this year, getting our story right on that. This isn't greenwashing. This is trying to accurately reflect the hard work that goes on in this company, both every day and also for a very, very long time, and getting that accurately reflected and valued by both our shareholders, but also external stakeholders. Operational excellence. Look, I've personally been delighted on this, both from customer and generation. TCC availability was up at 100%. The team are working on getting its stated capacity up from 330 to 360, just through optimizing the plant, running it better.
We've seen the real benefits. We've got a cracking optimization team embedded in geothermal which has delivered some cracking gains, 6 MW. Basically again, extracting more enthalpy for a set tonnage of steam, and they've done a cracking job. You've also seen it in the customer space where our investment in digital over the last two years has allowed us to grow the best part of 60,000 customers for no additional OpEx. Those gains in broadband and those gains in customers and core electricity have not come at any significant additional OpEx costs, and that's been the investment in digital, that automation behind the scenes. We're delighted with how across the business operational excellence and investment in digital has really paid real dividends, transforming ways of working.
Look, obviously, no one's gonna pretend the elephant in the room has been COVID. That was a trigger for us to actually get after this sooner rather than later. I'm delighted with the way the company has responded to COVID. It doesn't stop there, in terms of transformed ways of working. The launch of Contact University, bringing all our in-company training courses into one place and then growing them, so we continue to grow the capability of our people. We're right-sizing tenancies, both the Wellington and the Auckland offices. Auckland office, I think, there's a karakia taking place right now to bless the new office, which is delightful and we look forward to that. Wellington, we'll redevelop these two floors.
There's gonna be a question about what we do in our other locations. Taupō-Wairakei is turning into a real center of excellence. Looking forward to doing something very special there. We've committed to becoming a founding partner of the Wellbeing Tick. Wellbeing for employees has become a recurring issue over these last two years, where I think it's time we move from just a focus on worksite safety to a more holistic focus on the wellbeing of our staff as they increasingly work both from the office and at home. Look, just around the market and what we're seeing, some insights. Electricity demand was lower than H1 2021. Obviously, we see COVID having a significant impact there, the four-month lockdown in Auckland.
We still see that underlying trend of growth, 1% year-on-year. It is there. We expect that to continue to grow. Obviously, Norske closing dropped 0.2 TWh, and obviously SME demand dropped, but residential demand is up with increased working from home. Obviously a lower irrigation, but the trend underneath is positive as people convert to electricity as a fuel of choice, particularly when the grid is 85%-90% renewable. Hydrology, yeah, it was a good year for hydro. The numbers there, 12.9. It was a good year for geothermal. The optimization efforts the team put in have lifted us above our usual. We were well above average for hydrology. Obviously just January took care of that.
I suspect the last few days have reversed the position again. That's one of the delights of operating in this New Zealand market with the significant penetration of renewables, in particular hydro. Watch this space. Overall, the trend, reduced reliance on gas and coal. Now, about this one for a bit, because I've seen some commentary in the market. We've shown this graph before, and particularly this diagram. Let's just focus in on this diagram. The three I want to focus your attention on, people talk aluminum and methanol prices. Yes, they're up, but they are not the significant trend that we've seen over the last six months.
Coal has gone up by roughly 122% to the point where we suspect, on a marginal basis, coal is now above gas in terms of marginal dispatch, with both the increase in international coal prices and the increase in carbon prices. The dynamic of the market has fundamentally shifted. Basically, if you're driving south and you see steam coming out of those Huntly units, means prices are up around NZD 180-NZD 190. You're seeing the demand response, which is obviously COVID has impacted, but we see that long-term growth. The positive sounds coming out of Tiwai indicates that demand, if anything, will go up. With the entry of data centers and the process heat conversions that are taking place, that is a very positive trend.
Gas and carbon prices are only going in one direction. I think as of today, NZD 80 a ton. If you think where we were a decade ago, we were at NZD 2.50-NZD 5, that's phenomenal. It is driving the right outcomes. It is driving investment in renewable energy. It is driving, and accelerating those investments. It means the interim is a bit painful, but you see the market responding and our own responses to that. You're seeing wholesale and futures prices go up. You obviously saw them temper off very quickly over December as the dry spell sequence came in the wholesale market. They ratcheted up again. The long-term ASX prices have shown a steady increase reflecting those higher thermal import costs at the margins, in particular coal prices.
Our competition remains intense. Delighted to be growing in this space. Delighted to be engaging with ordinary Kiwis in their homes. We have held back on the tariff increases, just in terms of not exposing retail customers, given everything else that's going on at the moment with COVID, probably enough that Kiwi homes have to deal with. That doesn't mean that we won't be putting through moderate increases over the near to medium term. No one needs to be exposed to the volatility people have seen in the wholesale market. We've been delighted with the growth. We've been delighted that the team have been able to maintain the profitability in the face of some pretty strong headwinds. We're delighted with the operating cost performance and being able to grow those connections at virtually no extra OpEx.
Again, it's a tough one. Electricity prices will rise over the medium term steadily. The inflationary environment that's out there at the moment we can't ignore, but we've done our very best, and we continue to do our very best to shield our retail customers from the worst of that. Regulatory, the wholesale market volatility, gas availability and the low water levels through 2021, that has created a lot of noise in the spot and hedge market. The Electricity Authority, obviously, has published a number of studies. Now, let's be clear. Well, number one, how do we respond to that? We're investing in renewable electricity. We deliberately altered the dividend policy last year.
We undertook the equity raise with a view to investing in the Kraken geothermal pipeline, particularly Heb, but also getting after wind. We have offered long-term PPAs at very, very reasonable prices to those counterparties, industrial counterparties, who share the same vision as us about the long-term renewable energy future of New Zealand and have the commercial acumen to engage in those conversations. We continue to submit to the Electricity Authority. My thesis is the market is working. The market is working well. Those price signals are attracting new investment exactly as they should, and we look forward to accelerated renewable investment over the coming years. Climate Change Commission obviously offered up its report last year. We engaged in that. We support the recommended direction of the Commission report. We continue to engage very closely with government.
That was the whole purpose of both the investment in the Southern Green Hydrogen studies and ThermalCo. It was very much directed towards providing some thought leadership with credible external parties to help, obviously, on the future direction of energy in this country. I think it's a debate we all have a duty of care to engage actively in. I would also put in there, we also engage very heavily with the Climate Change Commission on the value of geothermal in the go forward. I think New Zealand is blessed with low carbon intensity geothermal as a base load, which we talked about last week in terms of the opportunity we have. I think it's been hidden from market view.
I think we need to raise that conversation up because it's something that this country has been blessed with. It means we don't have to consider things like nuclear power or pretending that gas is a renewable energy source as the EU have. We can actually develop it and develop it well, and we should all seize that opportunity. Other regulatory matters, the battery project. Look, there's a question out there. I think we have to keep our minds open as to what the answer is. It may not be A, B, or C, it might be D, all of the above. We just ask that everything's given a fair shake of the tree. We do ask that the market and investment signals are enabled to make sure we end up with the right solution.
We put ThermalCo, the study out there as part of that discussion to stimulate debate. We'll continue to actively engage with all stakeholders on the battery project. Energy hardship, as I said, we've done our best to protect the retail arm of our business, the customers, making sure they have not been exposed to the volatility we've seen to the escalation in both gas and base load thermal coal prices, have been phenomenal. We are very proud of the offerings that we have. We're a company that prepay, we believe, is not a product, it's a service. That people that engage, for instance, with us and say, "We wanna prepay," we can still say, "Well, here's the full range of products we offer.
Prepaid just happens to be the way you choose to pay for those products." I think that's an awesome outcome. We continue to work through endeavors with the stakeholders around ensuring that energy poverty becomes a thing of the past in this country. Over there. Dorian, over to you.
Thanks, Mike. Yeah, just to highlight a few key themes which will reinforce some of the things Mike said, actually. Obviously, lots of renewable generation, which will and does translate to a strong financial performance. However, actually apart from that sort of strong renewables, we did align quite closely to that expected normalized guidance that we gave for FY 2022, which we'll talk about a bit as we go through the pack. Obviously, in light of all those extra renewables and that we are in a La Niña weather pattern, which generally means dry conditions in the South Island, we've been prudent with how we've used our fuel, which is important. As Mike said, obviously with the extra renewables, our carbon emissions have come down significantly.
You would have known that now actually because of the extra ESG reporting that we're now doing for our operating stats. Hopefully everyone appreciates that. I mean, it does show how seriously we take ESG, but how embedded it is becoming now with our sort of business performance stats and KPIs. Next topic is we appear to have a more positive view on the demand outlook, including Tiwai stay of some form or another than maybe some others in the marketplace. We are still selling to mitigate a Tiwai exit, that's reflected in our sales strategy. It's also reflected in our approach to fundings. We've gone a little bit early with that capital bond than we would have gone, say, nine months ago.
That reflects that we are now seeing the demand outlook sort of reflecting more of that upside case that we talked about at our capital markets day in May 2021. We are looking to be ready regarding that. Linked to this, we were looking to get back into the C&I market as our fuel position has improved. However, it's been super competitive, so we've actually seen more value in selling through the ASX, and I'll talk a little bit about that later on. The only exception to that is where we see C&I load as being strategic. If decarb opportunities, so to sell things like demand flex or smart plugs, intelligent plugs, then we take that opportunity if we can.
Like C&I, retail has been super competitive as well. If you actually look at the prices on Powerswitch, the sort of top quartile of price or lowest prices, and back would calculate the netback, it's interesting, you can't actually service that business off the ASX or through thermal generation. Clearly other channels are offering more value in the short term. You may therefore ask, "Well, why haven't we grown our retail market share during this period?" This is what Mike was talking about. Our Good Nights offer, which is three hours of power between 9 P.M. and midnight. It's about testing different commercial constructs with customers to see if we can influence their usage patterns.
Mike also mentioned, aligned to our strategy that, you know, we wanna sign customers on long-term PPAs, ones that sort of facilitate an orderly transition to a more renewable energy system. We had three announcements in PPAs regarding that. One was with Genesis, OMV, and Pan Pac, 0.7 TWh per year of base load electricity. We don't disclose the specifics around the price, but it's around the long run marginal cost, firmed long run marginal cost of building new wind. From our perspective, it's very, it's great because it's inflation protected, which especially in today's environment is super important, and it's about half the load of Tauhara. It de-risks that investment from a market and a price perspective.
Last sort of topic at the start is we've reclassified some metering costs that we had sitting in OpEx. We've moved them up into gross margins, which reflects the nature of them better, but we also think it reflects how others report as well, which should aid comparability across the industry. With that, onto the financial performance. Profit at NZD 134 million, profit after tax is up by NZD 56 million. We've got the usual waterfall on the right-hand side that explains why the EBITDA is up by NZD 76 million. The first thing I'd start with though, we had a record July, NZD 81 million, which is the highest that Contact had from an EBITDA perspective ever. That builds on that topic that I talked about in the full year results.
Because we have been lowering our sales position, because we've got very strong risk management in place here, and we have access to other fuels, that does put us in a relatively good position to service other market participants via the wholesale market. That's actually quite a valuable position to be in terms of the market. That's feeding into some of that profit growth that you can see. From a renewable perspective, it wasn't just about hydro. As Mike said, our geothermal also grew year on year. Remember we had that statutory outage of Tauhara in the prior corresponding numbers. And that allowed us to dial back thermal generation and save NZD 43 million of cost there, but also reduce carbon emissions.
We've seen a lot of cost inflation around gas and carbon, NZD 18 million to be precise. We are buffered from this to a little bit because we've obviously got those contracts in place with OMV, which has got fixed. It's a fixed price with escalations already built in. Even so, you can see it's quite a significant amount of inflation. The fixed price variable volume channel saw just NZD 6 million of price increase. This is mass market C&I and the like. As Mike said, largely buffered from the increases in the wholesale market. That translates to just a 2% increase. We do continue to see value in selling short-term through the wholesale market to other market participants, allowing them to cover their own positions around C&I and retail.
We saw EBITDA associated with that go up by NZD 34 million a year. These are largely short-term CFDs. If you actually look at the futures market, it moved up quite considerably year-on-year, reflecting the risk around Pohokura deliverability, but also the higher cost of thermal, which is obviously the insurance if the hydro and the wind isn't there. I keep calling it a risk around Pohokura, but actually it's not really a risk because the volumes have dropped since it's actually here, anyway, reflected in those numbers. In terms of other, eleven million dollars favorable. Biggest component of that, I'm very happy to say this, is broadband. Six million dollars of additional margin growth year-on-year. In terms of our depreciation, it's up by fifteen million dollars.
We have said that we most likely now go and build a big plant up at Tauhara where the quality of the steam is better, so some of those assets down at Wairakei become redundant. Also our SAP upgrade project, S/4HANA, some of the components of the existing SAP system won't be required in the new one. Again, we're aligning our depreciation behind that. Interest costs are coming in lower by NZD 7 million. Capitalized interest is NZD 4 million of that. That's just as you get further through your build process with Tauhara, the construction progress goes up, and therefore your capitalized interest does too. Underlying interest has dropped by NZD 3 million, and that reflects the cash that we got in with our equity raise at the beginning of 2021.
Tax is higher than entire profits, and the fair value of financial instruments was favorable, NZD 9 million. Remember this is our ineffective part of our hedging. We want it to be as small as possible. For us it is relatively small and it's a non-cash item. Onto the performance across our three segments. From an EBITDA perspective, wholesale up by NZD 86 million, reflects increased renewables, reflects repricing of channels, and reflects that, active channel management. The retail business was down by NZD 14 million, so very tight margins in electricity. You're seeing increases in network costs, you're seeing increases in electricity costs, but the tariffs aren't going up to pass that through. That's a combination. Obviously, there's a lot of regulatory focus, it goes without saying, but also it is very competitive as well.
In terms of our corporate costs that come down by NZD 3 million, we've had a one-time benefit, which I think everyone will be pretty aware of with Matrixglass winning that appeal case. Well done to them. It means we can all release our Holidays Act provisions and that for us, that was NZD 6.8 billion. Then going the other way, we've got some inflation there. Biggest component of that is insurance. Onto the wholesale business. The costs have dropped by NZD 25 million year-over-year. If you look on the chart on the left-hand side, the amount that we've produced or acquired has stayed flat year-over-year.
That does demonstrate just the favorable inflow of hydro can do in terms of your financial performance. If you look at what's driving that cost down, it's clearly thermal costs. You know, if you look at cost of natural gas, natural gas storage, carbon, and diesel, that's a NZD 24 million reduction. But interestingly, thermal generation dropped by 56%. The difference between those two numbers is cost inflation, but it's also plant efficiency. We only ran TCC for one month in the period. TCC, as you all know, is our most efficient plant, and that meant the overall heat rate went from 8.9 for our thermal assets for the prior corresponding period up to 10.6. That's a 19% loss of efficiency.
We were comfortable with that. It was deliberate, because the assets that we were running were more flexible. That enabled us to dispatch into higher prices and then turn them down when prices dropped below the short-run marginal cost of those assets, and importantly, to conserve fuel. In terms of geothermal, great performance. You know, obviously some of it just naturally because we didn't have the statutory outage. As Mike mentioned, the most positive thing was the specific energy which we defined what that actually means last week for everyone. That was up by 4%. Remember it's 4% more generation of the same, fluid take, which is all the great work that's going on with that team around steam field optimization. Great job there by the team.
At hydro, obviously, volumes up considerably, 20% up on mean, and at 470 gigs up on the prior year. Actually the really key thing here is we were down a pipe unit because we had the transformer replacement program happening, which meant we'd lost 25% of our capacity down there. The team have done a fantastic job, meaning that actually spill has been kept down to an absolute minimum. The way they've done that is when they had to do maintenance in the period, they kept it to as short a period as possible, which has allowed them to then leverage the flexibility in the head ponds to avoid spill. Great job there by the team.
We also finished the period with 260 gigawatt-hours of stored water in Hawea, which is getting on to sort of max capacity for that time of year, which has proved pretty useful as you'd expect in the dry season that we've seen in January. Last but not least, thermal generation obviously wasn't needed as much with all of the water. A couple of things to call out, as Mike mentioned already, TCC, we got up to 160 MW. It had been capped out at 330 due to the vibration issues.
That's really important because the marginal heat rate on that extra 30 MW is very low, so it's very efficient from both the cost perspective, but also for a thermal asset from a carbon perspective as well. The one negative with thermal is we lost a peaker at the end of 2021. Accelerated wear and tear on some rotor blades. It's covered under warranty. GE will fix it. They're trying to get to the bottom of what the problem is. Something probably to do with natural frequency and resonance, so I won't get into detail around that topic. We are likely to get it back by April, which is in time for winter, which is obviously important.
In terms of our contracted wholesale revenue, up by NZD 89 million reflects the repricing and the active channel management between C&I and CFDs. Our CFDs, we've got a largely short term, so less than 12 months. If you look at the futures pricing they've gone up considerably linked to, as I said earlier, hydro risk or reality and higher thermal fuel costs. That's reflected in that channel pricing where it's gone up by NZD 43/MWh. We have also been shifting volume as it comes off contract out of C&I into CFD. There's a couple of interesting insights here. The C&I market, as I said, is very competitive. You know, at least one competitor is looking to really grow market share in that channel.
We've seen more value in selling through the ASX. You can actually get the same tenure selling through the ASX now as you can through a C&I contract. The value comes from, believe it or not, price. But also we can shape our load. We can shape our sales positions to better align to our renewable generation portfolio, which means we have less need to turn on thermal generation in the winter, which saves on carbon emissions, which is important. The other topic is, we are seeing more value in shorter term sales than the medium term view. In our view, the market is underpricing fuel risk into the future, and that's reflected in our sales strategy.
Just to balance our overall portfolio, we've got our strategic fixed price channel where we sell to customers, you know, five to 10-year contracts. These are customers that want to manage their own risks by having a sort of fixed electricity price. It is inflation protected as a channel, with the exception of TY, which again is something this industry hasn't been very good at historically, getting inflation protection. We want to do more and more of that. We see this channel growing. Those PPAs that we announced associated with Tauhara will go through this channel.
As we said at our capital markets day, we actually see the industry moving to more of a position that as new generation is built, PPAs are announced alongside those, so you eliminate to a certain extent over and under supply issues because the demand and the generation are being built concurrently. There's an effect on our contracted revenue of the revenue or the transitional Tiwai deal, and obviously the new contract we have with Meridian associated with that, and that sees our contracted revenue drop by NZD 10 million year-on-year. The last topic I would say is we have minimal price risk in the second half of the year because most of our CFDs are contracted. We've got a repricing opportunity because we've got about 200 GWh of C&I that's dropping off contract.
Wholesale trading and merchant income. As expected, this is down NZD 28 million. The location losses for us have gone up because obviously you've got a lot more hydro generation on the South Island than you turn your North Island thermal generation down. Also because of the high carbon prices pushing up the cost of thermal generation and actually the cost of swaption as well, you have less opportunities to actually run merchant plant and actually make a margin on that, which is why merchant plant value is down as well. In terms of our greenhouse gas emissions, as Mike said, Scope one emissions down considerably reflecting the renewables and less thermal generation. Scope three emissions are up, and that reflects the building of Tauhara. You know, the embedded emissions within that.
We'd use the standard New Zealand construction emission factor. As we get more into this, we'll start bespoke it for the project itself. In terms of our retail business, the electricity gross tariff is up by 1.6%. Now that was diluted down to 1.6% by that Good Nights offer. It was a relatively cheap product within the marketplace, which is why our electricity connections went up by 4%. However, this was a trial. Because we see value coming from shifting customers loads, as Mike outlined, also getting the cost of serve per connection down and also through adjacencies. That's where we see value coming from this business, which is why we're doing this trial.
Clearly, the consumers saw some value in it because of the response. We just need to make sure we're getting some value out of it as well, and I'm sure we will into the future. There's a couple of sort of key externalities which impact this business, which we need to consider as well. Obviously, the increases that we're seeing in the inflation environment, but also, people had been expecting Tiwai to leave, and therefore the cost of energy into retail as potentially dropping and then retail margins widening. In our view now is that Tiwai isn't leaving and therefore it would seem that retail margins are gonna remain slim up for longer. We need to reflect on those two externalities and just check that we've got the right settings to deal with that.
Just onto adjacencies and broadband in particular.
I said gross margin was up by NZD 6 million. EBITDA was too, because although there were additional costs to growth, we've got some great productivity going on in the back office, which has offset that. Number of connections up 73% on an average basis, up to 58,000. In terms of our cost to serve, we have obviously restated these numbers for that shift to those metering costs, so you're looking at like for like. It's come down by NZD 10. Cost to serve per connection per year is now down to NZD 122. NZD 10 lower than the prior corresponding period. We do think that is a standout performance within the industry, which is quite a strategic point of difference for us.
If you actually want to look at it in another way, if you just look at the absolute operating cost for the business, NZD 33 billion stayed fixed year on year, even though across all three of our products we've actually got 46,000 more connections. We've got inflation to deal with, and we've also invested NZD 1.9 billion more in our brands in this business as well. That just goes to show the level of productivity we have going on in our retail cost to serve. Overall OpEx from a Contact total perspective, on an adjusted basis, it's up by just 0.8 million, which is 1%. Some of the things driving that, we've obviously got an impact of the Western and Simply Energy acquisitions because there's some OpEx obviously with those businesses.
We didn't have a full six months of those businesses in our numbers in the prior corresponding periods. We've had some one-timers. I mentioned a NZD 6.8 million reduction in provision associated with the Holidays Act, but we've had some others who've gone the other way. NZD 1.4 million of assets we've had to write off associated with that accounting change for software as a service, which is actually a relatively small number compared to some others. We've also written off NZD 1.5 million of consenting associated with building a second peaker at Stratford, which now looks less likely to happen. Staff incentives were expected to be lower year-on-year. We had obviously an outstanding performance in the prior year.
Financial performance this year is looking obviously good too, but it does show that our bonuses are paid out on a broader set of measures than just financials, which is important. When you get to the underlying performance, we've still got some high quality cost savings coming through here, largely from digital, which has been focused on the retail area. You know, we talk about end-to-end journeys of customers and automating those, which reduces back office costs. We are actually going to point our digital team at our generation and trading business going forward because there's some really exciting opportunities there. However, these cost savings have been offset by the inflation environment, which everyone will be familiar with. Sort of general inflation is looking at about 6%. Insurance, you're looking at 10%.
Wages and salaries, which is obviously the biggest component of our OpEx, is only 2%, but that's based on historic increases. We do see pressure on that going forward. I'm just calling out that we have invested in our brand extra NZD 1.9 million. We have typically invested less than the industry norm, which is reflected in our strong cost to serve. In light of the role that we're going to play in decarbonizing New Zealand and the fact that the brand transcends the whole business, it's not a retail, just a retail thing. We think it's important to get the message out there about what Contact is about and the time is right. In terms of growth, we're still investing for growth.
You know, we've got money going into the Southern Green Hydrogen project. Mike mentioned that we've got land access agreements for 600 MW of wind, so there's cost associated with that. There's the continued cost of, you know, growing our broadband business. While there's cost efficiencies coming into the previous topic, you know, you've got that's offset by the volume growth. We've got other adjacencies that we're looking at in that retail business too. I won't dwell on this slide in terms of the reconciliation between our expected and normalized versus our actual. You can see the waterfall on the right-hand side that most topics, the variances are quite small.
The one where the variance isn't small is obviously the 435 extra gigs of renewable generation, which allowed thermal to be turned down, saving NZD 52 million there. I will spend a bit more time actually on this slide than I normally do in terms of our cash flow performance. 'Cause normally you would expect NZD 322 million of EBITDA to translate to a higher amount of operating free cash flow than just NZD 131 million. That's a cash conversion of 41%. The reason why it hasn't is because we've invested trade working capital. You can see there on the cash flow trade working capital movement, it's gone up trade working capital by NZD 69 million.
We've invested NZD 40 million in carbon units and fuel for natural gas, which is obviously to mitigate fuel risk going forward, but it's also to mitigate carbon price risk. We've got 500,000 more carbon units that we purchased than our liability in the period, and we've got 2 PJs of additional gas stored in AGS. Those are very deliberate and will serve us well in the future regarding managing fuel risk. The other sort of more major topic is with the strong financial performance in the prior year, we paid a bonus in the first half of this year, which was NZD 13 million. That obviously has an impact too.
What I hope you understand is the reduction in our cash conversion was very deliberate, and in terms of managing future risks, and I think this sets us up well. In terms of the performance or cash conversion in the second half of the year, we expected to revert back to normal and then end at about 60% for the full year. In terms of our balance sheet, I guess it's no coincidence that the two gentailers most impacted by a Tiwai exit have got the strongest balance sheets. We obviously think Tiwai's not going anywhere, so we see this being a positive because in a positive demand outlook, we've got the capability to build. You know, I'm very happy about how our balance sheet's evolved over the last couple of years.
We've got net debt to EBITDA down of 1.5 on a spot basis. You've now got to the situation where the company that's got the highest quality undeveloped renewable resource now has one of the strongest balance sheets and therefore the ability to build as and when required. As Mike said, with that demand outlook now looking more favorable, we think that's gonna be required sooner rather than later. You can see the impact of the equity raise it had, and I did signal this when we did it. It's pushed our interest rate up 50 basis points, and that's because some short-term capital inefficiency that we had to pay off our flexible debt, which tends to be the cheaper. Our floating debt has gone from 27% to 13% of our portfolio.
That's gonna be short-lived obviously, because we're building through Tauhara, we'll be taking out more variable debt. From an ESG perspective, on our balance sheet at least, we're doing everything we can. We've got sustainability-linked loans with all of our banks. All of our borrowings are certified green against our geothermal investments that we've done historically. We're looking to certify our hydro assets green, which is gonna give us even more green borrowing potential. Just looking at any innovations, green innovations within the debt capital markets that we can look to into the future. You know, I noticed that over in Australia, Wesfarmers did a sustainability linked bond recently. You know, we might look at innovations like that too.
In terms of our dividend, it shouldn't be a surprise. We've guided to NZD 0.35 for the full year, and that's where we're sort of still at. Remember that in terms of our dividend policy, which is to pay out 80%-100% of our average operating free cash flow for the previous four years, so that's FY 2018, 2019, 2020, and 2021. We're sitting at 83% at that level, so in the range. Interim dividend for us is 40% of the full, so that's NZD 0.14 per share, and it's gonna be imputed by 71%. We're continuing with our dividend reinvestment plan, continuing not to discount it, which means if you don't participate, you're not disadvantaged. Obviously, we're keen for all people to participate.
It's an easy way to increase your exposure to Contact, but to avoid transactional costs. If you haven't applied already, applications need to be in by the March 14th . The price for the share will be set based on the VWAP between the tenth and the March 16th, and we announce that on the March 17th . In terms of guidance, not a great deal here. We've reduced our operating cost guidance, and that's by NZD 13 million. What this reflects, that's the impact of the reclassification of those metering costs out of OpEx and into gross margin. What happens, you've obviously got that Holidays Act provision release of NZD 6.8 billion, but that's offset by the software-as-a-service and the PICA consenting costs that we've written off.
It's also offset by the investment that we're putting into our brand that I mentioned, which we expect to be about NZD 4 million for the full year. That wasn't in our previous guidance. We've also guided down on stay-in-business CapEx as well. We spent a lot less than the first half of the year. As you'd expect, you know, the people at our critical sites, we were focused on making sure they were operating in bubbles to manage Omicron. Therefore, what that meant is they were less able to do the maintenance and the, you know, more stay-in-business CapEx. We are expecting to catch that up in the second half of the year, but not fully. Again, these are important capital projects.
However, I mean, my personal opinion is there's a chance we might even undershoot that number, as well. That's to Mike for the strategy.
Yeah. Just to remind people of the strategy, I think, it's always good as the Chief Executive Officer when you see the strategy both implemented but also, delivering, real tangible results. We believe the strategy as it stands that we put in place last year, it is the right focus. It's certainly we can see those. Growing demand, we'll continue to put our efforts into how we can help, industrial New Zealand convert, through Simply Energy as a primary vehicle for that, but also in terms of the broader narrative.
Renewable development, you saw last week and again this week, our talk around the potential we have in geothermal to almost double over the next decade the amount of electricity we produce from our geothermal resource, but also the efforts we're putting into wind and other renewable technologies. Decarbonization, we're not being idle in this space. We certainly are continuing to work. The way I term it with the team, we've produced the market thought piece, the thermal cost study which we released last year, that got broad support. Now the question is: how then does Contact play in that space? Those are the questions we'll be addressing over the next half or so. The customer experience, we've seen wonderful engagement with ordinary Kiwis, both broadband and the new electricity products.
We will continue to grow both the product base and our connection with ordinary Kiwis and helping them decarbonize their homes. Those enablers underneath, we will continue the journey. We fundamentally believe that ESG, operational excellence, and transforming the way we work, particularly in this post-COVID world, we wish it was post-COVID world, is critical. With that, look forward to your questions.
Brilliant. Thanks, Mike and Dorian. We'll go to questions through our various channels. We'll start on the phones today. Then we'll go to those of you that are in the building, and then we'll go through the Q&A chat function. You know, please take advantage of this opportunity that's been provided today. First of all, we'll go to online, and we've got Grant Swanepoel from Jarden. Grant, if you're there, go for it.
Good morning, team. Thank you. Can you hear me?
Yes.
Yes.
Fantastic. Just on this forward curve, it seems a bit elevated. I know you did talk through that coal could be having some sort of impact on that. But my question is really about Contact's behavior in this. Why are you not buying wholesale gas, which is sitting in the low tens, and filling up, and then selling into this forward curve more aggressively to bring it back down to something that works for you and bring back TCC?
We're looking at Grant. We've been looking at all those options. I mean, I thought the way the team responded, we're obviously concerned about the dry sequence, which led us in January to run our thermal plant more than we expected. Certainly in the go forward, those are options that we're looking at. Dorian, you wanna comment further?
Yeah. I mean, I saw there was an article, Grant, in The New Zealand Herald, and I was reflecting on that. I mean, as to why prices are so high, which we've sort of talked a bit about already around, you know, thermal fuel costs going up a lot. I mean, I've been looking at some of the analyses, and carbon prices are up by 228% over the last three years. Natural gas, 67%. Coal, 250%. You know, petrol is up by 50%. You know, it's all feeding through not just for insurance, but also, you know, in winter, thermal still makes up 35% of the base load.
I am thinking there may be an element of swaption in this as well because swaption expires at the end of this year. The people involved with that don't know whether they have a risk mitigation around swaption after that. Obviously Genesis don't know whether they can be running their plants through merchant as well. That's probably having a bit of an impact on this. In terms of you know our position we. Well sorry the other thing I would say on this topic is with insurance costs i.e. thermal being so high as well it actually impacts people's risk management tests.
You know, we have a limit to how much exposure we can take, you know, for dry years. That calculation is done by saying, you know, if it is a dry year, what's the cost of the mitigations, i.e., you know, swaption, using your gas or buying off the wholesale market or running Whirinaki. With those costs of thermal going up so considerably, it means that insurance or those risks tests are being hit quicker, which means we can't sell as much into the future as we would have been able to do under previous scenarios, you know, where you had cheap thermal generation.
I don't know how others operate within the industry, but I suspect they've got similar tests as well, which may be stopping people selling as much into the future as they have done historically. I mean, the other thing I'm just reflecting on, there's also parts of the market who now won't be selling into the forward because they can't. Like I say, if your business is backed by thermal generation, you can't make a spread on selling at the futures prices into the future. So ironically, they need to be higher so that those people can participate and actually make some money out of it. So, lots of things going on there. I think there's also just the human nature around this stuff.
There has been a lot of volatility in the last few years. Probably the risk premium is a bit higher than it has been historically to reflect that as well.
Thanks. That was quite elaborate. In context view, this can be explained if the EA or the government did decide to look at why wholesale prices are so-
Yes.
Elevated over the next nine months.
Absolutely. I think the elevated prices you see with the combination of people assessing the Tiwai, but also the input costs for thermal, have risen dramatically. Even though we are very comfortable that the gas book that we negotiated with OMV two years ago, the reality is gas is not in an abundant supply. There isn't a lot of surplus gas in New Zealand, particularly with those external commodity prices for methanol. Yeah, I think they're very explainable, particularly that 122% jump in thermal coal costs. If you combine that with the carbon cost, and if there's coal expected to be in the market, you're looking at NZD 180-NZD 190.
Thanks. Mike, and then a quick second question just on the resource consenting that you guys are busy with. The Wairakei extension beyond 2026, is that for this year futures-
Yes.
...upgrade?
Yes.
Is it just to try and keep the dirty part continue running for a few more years?
Oh, no. The application we've submitted is for the replacement of Wairakei, which is on the river, with a Te Mihi-type plant, which will or might likely be bigger than Te Mihi, by Te Mihi. No, that's for investing to get a far more efficient extraction of energy from the Wairakei resource.
Thanks. My final question is just on your dividend. I know you have guidance to 35 cents, but this year you're making 60+ million extra cash. Is there any chance you could potentially take the 83% that you are indicating as a payout of 4-year trailing up a little bit to reward investors for sticking it out?
I'm looking at Andrew, he'd probably have the same question. I think at the moment. The reason we introduced the dividend policy when we did was to give certainty and balance. The reality is, we have yes, we recognize the improved operational performance, which is fantastic, but we also recognize that there is a high chance we'll bringing our future forward in terms of investment in geothermal and potential wind, and it's balancing those opportunities. The idea of bringing in this dividend policy structure was to give everyone absolute clarity and certainty about the way we would behave. We're not jumping around as we might have done in the past. Dorian?
Yeah, the other thing I'd say is, while the operational performance has been very good, you know, we've set up five-year NZD 76 million. The other side of that growth capital is up, let's say, more because of the COVID environment and the borders being shut, tight labor markets, all that stuff that we outlined last week. So the non-capacity part of the increase at Tauhara was all unexpected and to do with changes in the environment as well. That does offset a lot of that extra cash that's coming in due to the operational performance. Doesn't mean it's not a fantastic investment, and it is. But we do need to take things like that into account as well.
Thanks for those answers. Great result. Moving on.
Thanks.
Thanks.
We'll go to the room now. Any questions from the room?
A couple of questions if I may.
Yeah, go ahead.
First question from me is just around that 520, the normalized hydro EBITDA number. Obviously you've gone well above that in the first half, just 'cause hydro's been so great. I guess the question is, given how your business is structured at the moment, is it an asymmetric upside to more water versus less water? Or is it more of a normal curve? If you have similar amount of water less in a dry period, do you end up with NZD 70 million less? Or I'm assuming, or I'm hoping the answer is gonna be that you've got risk management. We do actually have an asymmetric upside.
Yeah, it's asymmetric 'cause obviously you've got the thermal that provides a hard stop.
Yeah.
On the downside. Yeah, we're pretty comfortable about that. That's why we shifted that from four up to 520. Comment, Dorian.
Because as you say, you've got in a downside scenario where hydrology drops, you've got basically just your cost of energy goes up. And then you've got upside potential if you know, the scenario arises where you know, you end up with more fuel than others, and therefore you know, you can call the swap option, run your generation, and get some legs into those higher prices. Which is actually what we have been seeing historically, which has supported our financial performance. The 520 doesn't really assume a great deal of that because you know, that's a non-mean, non-normal scenario.
Yeah. All right. A second question for me was just around just inflation and I guess what we're seeing at the moment. In this first half, hasn't been much inflation come through in terms of guidance. Obviously not really seeing a huge amount hitting FY 2022. I guess the question is really sort of beyond that, what should we be thinking? I know you've alluded to a few things around labor costs and those sorts of things, but what’s your sort of initial thinking at the moment?
Yeah. Actually, Dorian and the team have done quite a bit of work on that. Obviously there's two sides to that. Obviously getting inflation-linked PPAs was critical. Also looking at the contracts that we have in place which have inflation links in them. You've got salary costs. It's fair to say the two we regard as balancing each other. Dorian, you might wanna comment further.
Yeah. It's where we've got inflation linkage in our costs. I mean, you've got things like the networks costs coming through, which in theory should be passed through to the retail sector. We know as an industry, you know, pass-through is difficult in that area. We've obviously got inflation or escalations linked into our gas contracts. Carbon risks can go up, but I mean, that should be passed through to the wholesale market. We don't actually have an explicit contract. We've built in escalations on insurance, but it manages us to
It seems to be going more than its way.
You know, we are looking at stuff we don't have capped in. Others in the industry have it capped in. We're looking at things like that. Also, I think gas storage as well, you know, has got an escalation built into it as well, which that's probably not quite like gas and carbon in terms of the ability to recover that from the wholesale market. I think the big one that's a bit unknown at the moment is sort of wages and salaries, but that's a pretty big chunk of our OpEx, and where that's gonna go into the future, you know, with CPI sitting at 5.9%.
As like I said, we're doing a good job here in trying to get more inflation protection into our business than the industry has had historically through the PPAs that we are signing. Not just some of the PPAs. Within that strategic fixed price channel that we've got, there's other stuff in there as well, which is fixed price contracts, you know, with escalations built into them too. This is, you know, a very hot topic for us actually. What we'd like to do is actually get ourselves to a position where the business evolves so that we've got some good quality inflation protectors in there, which means we're sort of protected through a cycle.
I think the other one, Andrew, and this is where the operational excellence is. The whole idea of operational excellence is that you're actively and visibly investing in productivity improvements across the whole of business that counteracts that salary pressure. The examples we gave both in generation but also in customer, we were able to grow the connections by 10%, holding OpEx flat. We're not stopping on that journey. We'll continue to look for those productivity improvements across the board, which I'm reasonably confident that we can offset those inflationary increases. We have demonstrated that in the past, and we'll continue to do so.
Just the last question from me. You mentioned investment in here in carbon afforestation. I'd just be interested if you could give a rough idea of what is the current abatement cost going down that route. Clearly carbon costs are NZD 75-NZD 80 a ton. I'm hoping you can answer us somewhat less than that.
Oh, significantly.
Significantly less than that, yes.
We can't give a precise number because it's still not signed, sealed, and delivered. It will be obviously significantly below the market price of carbon.
Okay.
So-
Yeah, it does come down to, I mean, obviously farmers' view of land and their forward view of carbon prices as well.
Yeah.
You know, eventually when sort of everyone has absolute clarity on where your carbon prices were headed, all the value could be captured in the land. We've got a-
Yeah.
A couple years, where there's sort of still uncertainty and volatility before that translates into land prices. You know, we do believe that this is a, you know, significantly above WACC project returns at this stage, but it definitely, yeah.
If you assume you're going into permanent forest here as opposed to.
Yeah.
That's all from me.
Great. My turn. Thank you. Three from me as well. Just to start off with, I'm interested, what was the size of your Good Nights trial, and what do you think its eventual scale will be? So we acquired about 20,000 customers. 20,000 people signed up to it, which is about 0.25% of our total customer base. We obviously, as we went through it, we modified the pricing that was in market, and the customers continued to sign up to it, which was fantastic. And it's a question now of sitting down and doing the analysis. 'Cause where we see it wasn't an end. It was, well, can we shift load? What does that mean for EV applications?
What does it mean for smarter homes when you shift the times when your refrigerator, your air conditioning, your water heating is operating, can we automate that? There's a whole range of things now and products that we can now cascade onto that if we can get that people, one, with the right signal, they will shift their load. It's a fairly dramatic signal, but number two is what next?
Yeah, well, and how large do you think that will be? Is that still to be determined from the-
Oh, look, in terms of your market metrics, we hope all Kiwis engage in the decarbonization journey, and load shifting is a key part of that. If you think of the volatility we have in wind, but also base load geothermal, you know, the most efficient outcome is that everyone doesn't come home at 6:00 P.M., turn on all the heating and the electricity and the lights, that we are able to shift those loads. The reality is that at this stage in the market development, as with EVs, you've got the innovators, the early adopters, as we call them. Typically, I think markets 10%-15% of mass markets always fit in that market capability. They wanna get on board. They're always the first ones to buy the latest iPhone.
They're always the one to take on the tech. We're looking at that segment of the market at the moment.
Great. In terms of how we think about that might be a lower net back channel, but also a lower LRMC channel.
That's exactly right.
Anyway.
Yeah. There's an end-to-end value delivery there.
Second question. What kind of engagement have you had now from ThermalCo? I guess the key players would be interested in Todd, Genesis and the government.
Well, no. Look, it's across the industry. Remember, thermal in this country is based on both what we renewable operators need as thermal, but also what those who don't have thermal assets to bank their increased investment in renewable generation. It's fair to say across the market, without going into too many details, we've had good engagement. Some of our competitors haven't engaged quite as enthusiastically. I think there's very public comment on that. That doesn't mean other stakeholders haven't gone, "Actually, that looks like a damn good idea," because there's only one direction this industry is going. That's increasing amounts of volatile wind. We have to find a collective solution to that, which thermal, I think, will for a very long time underpin. It will be in smaller and smaller amounts.
All that means is that thermal transitions from actively in the market every day to, hey, here's an insurance policy sitting behind what is increasingly a 90%, 95%, 99% renewable electricity market.
Just one thing on. If you actually look at the market, I mentioned in my presentation, you can't back into the current price of carbon and fuel. You can't back into C&I or retail sales by running thermal generation. That entire part of the market, you can't profitably back into thermal generation at current market prices. You might be able to continue in it if you've got legacy backs. I mean, you could argue, well, you could be extracting the value separately from that, right? You could sell cheap coal and make money on that. I think what's happened now with the market, people are. You're gonna see thermal assets are just gonna be actually sitting there idle because they can't be dispatched into making money. That's, I think, will start forcing.
I think the last six months will start forcing people to logically look at thermal assets and go, "They're not just not being dispatched at all from a baseline perspective. You know, we can't back our retail business or our C&I business by it. What are we gonna do?" I think that's probably gonna force structural change around thermal sooner rather than later.
No change in timing then for a ThermalCo decision that's right into this calendar year.
Yeah.
Cool. Great. Thank you. Last question from me is just to scratch a little bit more on the sort of market prices. I guess the question in my mind is why, as you'd presume, coal prices have gone up and obviously the carbon attached to that lifts the marginal cost for Huntly much higher. Why have we not seen the gas market, spot gas market prices rise? They've actually fallen even since, and quite considerably, since the middle of last year. They're now in that sort of NZD 10, NZD 8 space. You know, why have they been bid up? Can you explain that?
Again, what's happened, and the interesting thing is our gas market isn't as connected with international LNG prices as, say, other markets are, whether it is our coal prices, you know, there's direct input via Tauranga. There is a connection with international prices. I think what you're seeing within the domestic gas market is probably a stronger link, linkage back to methanol, which you saw on that slide, showed a lower percentage increase in international price of methanol. That's where you can't put your gas, that's where it ends up. You're seeing an improvement in the domestic supply situation with both tide filling and the very successful intervention by OMV on Maui, which they've extended to Māui B . They've now got the jack up on Māui B and will do that low permeability sand campaign.
You've seen an improvement in the short-term outlook for gas, which is unique to the domestic market here, whereas coal, they're very much connected to those international markets. Our, you know, the gas connection is through methanol, which probably is set in islands.
We should expect to see more gas generation out of the generators this year.
Depends on.
On a normalized basis.
On a normalized basis, you'd expect to see more generation from gas. We're expecting the supply side to be a bit calmer this year.
Very good. Thank you. Cool.
Thanks, Neil. Into Q&A, through the chat. First one is from Cameron Parker from Craigs Investment Partners. With the potential for demand growth cited +2% might stay, at what stage do you expect to pass through costs to customers? Any thoughts on your strategy around retail pricing? Appreciate it.
The trick with retail is always that any price increases that you are gonna put through, you do signal them well, that obviously you do them steadily, that you don't expose customers to the volatility. We expect our retail prices to increase gradually at or below inflation over the next in the short to medium term. What we then see is that even with Tiwai staying, you still see a flattening of the ASX, which should bring the situations, the relative situations that we see today back into good order. There is a challenge on the retail market at the moment in that input prices have risen significantly, and consumers have to a large degree been protected from that.
We are gonna have to address that and go forward as Dorian said.
Yeah. That's the reason why I highlighted, you know, we need to look at the settings that we've got in line with that. As I said, it is very competitive. If you look at Powerswitch, you know, you've got lots of tier twos all up there with low prices. You know, we're still making money as well. If you want to continue with a certain amount of volume going through that channel, you have to be able to compete, you know, to offset the natural level of churn. No matter how good you are, you need to win to offset that. If you wanna maintain a certain amount of volume through the channel, that's just what you have to do.
As we said, I don't think we're highlighting that our price is gonna be going up with CPI, based on what CPI is at the moment. We do need to look at things like this in terms of what's going on with the external environment.
What we wanna avoid is what happened in the C&I market, where prices were suppressed for a very long time. Margins. It was intensely competitive. Margins went to 1.5%. As large-scale entities came out of that, they just hit dramatically increased prices, which has created a lot of noise in the market. Now, you know, benefit of hindsight, they could have hedged better, they could have signed up to longer contracts, all those good things, but that's the reality of what happened with C&I. You don't want that to happen in the mass market retail. I think, prudent steps towards the increased prices.
Just as in C&I, you know, our advocacy is that large scale C&I users move into more of a subscription with very long-term deals that will finance these incredible new renewable assets that everyone needs to get on and build. I think that's the same proposition that could be very successful in the retail space.
Second question from Cam . Do you see any regulatory impacts on retail price tariff changes in your intentions?
We always obviously our engagement with government, we have a very positive engagement with government stakeholders. That's again why our own behavior in the market is so important, that there is a very steady, calm response to different changing market conditions. The regulatory response is more measured. It's important, you know. I'll enroll on that. It's so important. There has been obviously a lot more noise in the C&I space. Again, all I can point to is our own behavior is signing up those long-term PPAs. It's something we keep an eye on. It's something we actively manage. We fundamentally believe the market is working well, that the right price signals are coming through for significant investment in renewable energy. That's a great outcome.
We don't wanna see an own goal in terms of tipping up market settings, tipping them up upside down, and you completely ruin the regulatory settings. You add a whole lot to the interest rates that we pay on these projects in terms of sovereign risk. That would be a really unfortunate outcome. What's important is that the market now responds with new investment.
Good. Thanks. Next question is a series of questions from Stephen Hudson from Macquarie. He says, "Thanks. Do you view your net price assumptions and normalized EBITDA calc as conservative given exit rates in the first half of 2020? Second question: How is staff retention and engagement looking over the first half of the financial year? And the third one is: Why are tier twos still so aggressive?
Right. I'll leave the first one to Dorian, and then I'll comment on the second.
Well, I think we said it when we've analyzed our actual performance against the normalized guidance that we gave. With the exception of the renewables, we've come in largely aligned to that. I think, you know, some of our contracting pricing is coming in a little bit lower. It feels we've been shifting slower than recontracting C&I, and pushing the aggregate price up. We've been pushing that volume through CFDs, for example. We've seen retail pricing coming in a little bit lower. The dilution effect of Good Nights. In terms of the sort of channels, it's we've finished there or thereabout.
That was, remember, the guidance for FY 2022, and we'll need to reassess at the end of FY 2022 whether some of that needs to change for FY 2023, 'cause you'll have the continued repricing of C&I, 'cause we've got some legacy stuff in there that we'll need to reflect for the next financial year.
Questions two and three. Actually, thank you for that question, 'cause it's not something we've made a fuss of. Our staff engagement over the last two years has risen steadily and consistently through COVID and everything. The actual score itself has risen by about 10%. It's now sitting over 8.1. Remember, for us, the way we measure engagement, we use a moving average, not a snapshot in time. That's an awesome result. We've just done that. We regularly monitor. The eNPS, Employee Net Promoter Score, has come up almost 18 points over that same period. We're delighted with the staff engagement, and we see that playing out in the retention stats.
You know, to be fair, when you've got such a strong growth story across the business, in both the retail arms of the business and the acquisitions we've got in terms of Simply and Western and the core generation arm, but also in the development and project arm, who wouldn't be enthused by that story? Who wouldn't wanna come on board, and who wouldn't wanna stay on board? It's a great story. So yeah, we're delighted with the staff engagement. As an energy company who very unusually for this time has set out a journey of growth, I think it's understandable. Now, the last one is why are the tier twos so active? Well, they are there to compete, so good on them, they're competing.
If you're running a tier two and you've had a sudden escalation in your input costs in the wholesale market, you have no choice. You have to compete. You have to innovate. That's what you're seeing in the tier two market, which is, I think, very healthy for all of us.
Final set of questions comes from Jeremy Kincaid from UBS. First of all, he asks, "Enesys has indicated they may be able to provide demand response. Do you expect that to change your discussions around portfolio flexibility, in particular discussions regarding the swap option?" The second one is: "When should we expect a decision on ThermalCo?
We've already signaled with Samsung that the ThermalCo will continue to be a work in progress over the full FY calendar year, and we'll keep people updated on where we're getting to with that. That relates in a way to the first part of Jeremy's question. Obviously, what Enesys can provide in terms of demand flexibility has a knock-on effect to what insurance cover is needed to provide and by remaining thermal assets in the market over the long term. There's gonna be a bit of an interplay, you know, the degree to which we can get flexibility in the short term from Enesys, in the medium term from investments in hydrogen and process heat, demand flex from Meridian alliance.
If that sort of deal in place, then that in turn, you will leave a residual part of the market. Well, it may not even be thermal plant that runs, but providing that insurance product to the rest of the market will be then become increasingly important. He's right. There's a very dynamic interplay that goes with that will need to go on. It's gonna be a very interesting 12 months ahead.
Just one other thing I'll add on the thing with Enesys. It also depends whether it's dry cover or seasonal cover. That has quite a big impact. I mean, my preference would be seasonal cover, so you know, they turn something down in the winter every year to free up generation or displace thermal. That obviously has quite a big impact on the need for swap option and things like that as well. Obviously, if it's dry cover, it's obviously a different product completely. Yeah, that obviously would need to be bottomed out as and when discussions begin.
Cool. Well, thanks everyone for joining us today, and we look forward to catching you on the road.