Good day everyone, welcome to the presentation of Contact's FY 2026 results. Delighted to have you all here. Put simply, FY 2026 was a year of delivery. We completed the acquisition of Manawa Energy and welcomed its people and the assets into Contact. We delivered renewable energy growth with renewable output up 37%. Contact was 98% renewable in this last year, up from 88% last year and just 81% in FY 2021. We took strong and pragmatic steps to support security of supply and the resilience of the electricity sector. We contracted with others, the HFO at Huntly, to ensure a strategic coal reserve for dry years. We brought our first battery online at Glenbrook and confirmed our investment in the second 200 MW, and we secured gas to support essential community services through the all-of-government contract. Meanwhile, we continue to work closely to support our customers.
This includes supplying discounted or off-peak free electricity to now around 165,000 households, supporting customers and communities most in need through the NZD 5 million The Good Initiative. The FY 2026 results reflect this delivery across the board with EBITDAF of NZD 1 billion, up 31% last year, a step up in our average return on invested capital of over 100 basis points. Given this, the Board has declared a final dividend of NZD 0.24 per share, taking the total final dividend for the year up to NZD 0.40 per share, up 3% on last year, delivering as promised to our shareholders. Go to the next slide. Market conditions in this last financial year 2026 were a significant contrast to those in FY 2025. The market was 93% renewable, the highest rate achieved since the market was introduced in the 1990s.
Yes, this reflected higher than average hydro inflows, 180% above mean this year. It also reflected the investment the sector has been making in building new renewable generation, bringing around 4 TWh online in the last five years alone, pushing out baseload thermal. Another 3 TWh is committed and expected to come online by the end of 2027. This is a cheaper supply of electricity, it builds resilience and economic independence for the nation. This investment is now being reflected in longer-term ASX future prices, up nearly 30% since the start of the year. These have settled at the lower end of our long-term wholesale price expectations, reflect the market moving back into a supply and demand balance. Demand is tracking up about 1% when you normalize for the fact that NZAS demand response was deployed last year.
The market will need to be disciplined, bring forward new renewable electricity projects backed by new demand sources. Alongside that will have to show both capital and cost discipline. Only the best projects will get through. Pricing for winter 2026 has also come down sharply since the start of the year, with market confidence backed by high energy storage across each of hydro, gas and coal. Recent market trends continue, like the ongoing decline in gas production, with Taupō reserve forecast now 24%. We continue to address this strong headwind. However, what is clear is that the market has learnt from the challenge it faced in winter 2024, has come through in a much stronger position to support Aotearoa's changing energy needs. The market has already adapted for the energy transition.
Sector investment has continued at a pace. Market settings have evolved at the same time. We have now a fast-track consenting regime in operation and further planning reforms expected to pass by the end of the year. Industry is delivering the highest rate of new renewable investment in the nation's history. We have moved as an industry to put in place dry year support across a range of mechanisms. Demand response of large industrials, the HFO with the strategic coal reserve, stored gas and AGS, and changes in the way we use hydro. Yes, there may still be a role to play for right-sized, a right-specced LNG facility to support those remaining gas customers who are finding it difficult to convert off gas and to provide for the nation a diversity of energy supply.
We also expect extended HFOs and diesel storage to play part of this resilience story. Remember, it's always been a matter of all of the above, not just one magic bullet. We have already moved the dial on this as a sector to mitigate dry year risk and deliver energy security for all. Market and regulatory settings have evolved in step and are now very clear with non-discrimination obligations now in place and the super peak product and the associated market-making obligations both now implemented. We continue to innovate for our customers as they electrify their own energy use with tools like shaped electricity supply contracts and demand flex, making conversions to electricity all the more possible. We remain focused on energy wellbeing for those most challenged by energy prices, consumer cares, and reducing barriers to access.
This year, Contact, The Good Initiative alone provided NZD 5 million of customer and community support. We expect it to grow to NZD 7.5 million in the coming year. We're advocating for a market-wide obligation to connect, to lift energy wellbeing outcomes, no matter your circumstance. We continue to deliver on our very strong renewable investment program. We have had a continuous build program on the go since 2021, with Tauhara, Te Huka III, and our first battery all now online, and Kōwhai Park Solar now in commissioning. This investment has directly contributed to the supply-demand balance that you can now see in the broader market. Coming back to the market, early works are now also underway on Glorit Solar, which together with Kōwhai Park, will help support committed dairy electrification load, the conversion of dairy off gas and coal.
Construction also got underway on our second battery at Glenbrook in March, which will ultimately take our battery capacity at that site to around 300 MW, helping us to free up natural gas used in peak periods and supply this to customers. It's worth noting that the role that batteries have played in these last few weeks in keeping the country safe through those morning and evening demand spikes, which were at record levels with significant amount of conventional generation offline, and yet as a nation, we got through that. Construction has well progressed on our Te Mihi Stage 2 geothermal project, with the steam field separator, heat exchangers, and turbines for the first unit already installed. Te Mihi 2 is scheduled to be online quarter three next year and will replace Wairākei to a degree, which has been running since the 1950s.
We have an extremely experienced team there on the ground, continuing to demonstrate that project delivery and geothermal development expertise is so core to our value proposition as a company. With Manawa, it's been a transformational year for Contact. Having completed the acquisition of Manawa on the 11th of July last year, welcoming Manawa's people and the 26 generation sites into the Contact fold. It has truly been a merger of two great companies. We're delighted to have already delivered the benefits of the integration. One of the pleasant surprises has been the quality of the development options acquired, including the Huriwaka and Kaihiku wind projects and Argyle Solar. These have been actively advanced, enhancing the optionality within Contact's already high-quality pipeline. Cost synergies have already been secured at 100% of the upper end of the range we signaled.
That's NZD 28 million on a run rate basis. Together with the net repricing benefits that have already been confirmed going into FY 2027, we have secured an NZD 84 million uplift for FY 2027, up 35% on the long-run benefit announced at the acquisition. This is before the expected value from long-run generation normalization, with the Highbank and Coleridge upgrades ongoing and expected to come online in the coming year, and hydrology varying year-on-year. The delivery of Manawa has just, however, been one part of the story this year. FY 2026 has seen an impressive delivery of our in-year strategic targets across the board. As we closed out the Contact26 strategy, which was, remember, to lead New Zealand's decarbonization, we decommissioned our final base load gas plant, TCC, after 30 years of service to the nation.
We met both our run rate and in-year Scope 1 and Scope 2 emission targets that we committed very publicly years ago. We beat our contract demand targets. Importantly, almost all new demand contracted in-year had a favorable shape, being summer-weighted. Our CO2 commercialization project hasn't quite met the project time frames we set, but we continue to see this as an important part of the future of the Auahi geothermal field. The project remains under development with a pilot-scale test planned for Auahi later this year. I've covered our renewable investment activity in detail. Again, a very good result against the ambition set at the start of the year here. Noting that Kōwhai Park is now in commissioning, with the energy to the grid later this month. In fact, in the coming weeks.
In retail, we've over-delivered on our multi-product customer and net price targets. We're broadly in line with our cost to serve targets. Finally, we've met all of the targets, as I outlined above, that we set ourselves for Manawa delivery. On that note, I'll hand over to Matt now to take us through the financial results.
Thank you very much, Mike, and [Non-English content] everyone. I'm Matt Forbes, Contact CFO. Before I talk about the numbers, it's just worth remembering they're a product of thousands of decisions made every day across Contact, and we're enabled by the 1,400 + people who operate our assets, serve our customers, and deliver change across the business. It's our job to turn those efforts into long-term strategic value for shareholders, FY 2026 is the year the strategic choices made through Contact26 and the Manawa acquisition have clearly translated into strong financial performance. FY 2025 tested Contact's resilience through dry hydrology, fuel constraints, and high replacement energy costs, FY 2026 shows what the expanded portfolio can deliver in a more balanced market. There are three key takeaways from the result. The business has performed through very different conditions. Manawa and recent investments are now delivering measurable financial benefits.
The resulting cash generation and balance sheet capacity support our forward investment program and give us confidence in further dividend growth. The headline for FY 2026 is that earnings growth came through more renewable generation and the additional sales it supported, not higher average electricity prices. EBITDAF was NZD 1.011 billion, up 31% on underlying FY 2025, and operating free cash flow increased 49% to NZD 648 million. FY 2026 return on invested capital reached 7.5%, lifting the four-year average from 4.9%- 5.9% as returns from Manawa and recent renewable investments began to flow through. The bridge on the right nets to a NZD 237 million increase in underlying EBITDAF, with two interconnected movements explaining most of the change. Renewable generation added NZD 225 million, reflecting Manawa's hydro, the first full year of Te Huka III, and improved inflows.
That additional generation supported more contracted sales while materially reducing our reliance on gas-fired generation. Pricing moved the other way, creating a NZD 53 million headwind. The average price across contracted sales reduced from NZD 157 to approximately NZD 140 per MWh , reflecting the move away from FY 2025 stress conditions and the greater proportion of generation sold through longer dated contracts. This illustrates the two sides of hydrological volatility. Sector earnings have rebounded as conditions move from very dry in FY 2025 to wet in FY 2026. The distinction for Contact is that our portfolio delivered through both. Lower gas, carbon, and acquired generation prices added a further NZD 40 million, reflecting the reduced costs of replacement energy in the year.
While other income improved by NZD 51 million, reflecting new income streams acquired with Manawa, and the absence of losses incurred on excess gas from Methanex sales in FY 2025. Fixed costs increased principally through the Manawa cost base and transaction integration expenditure, partly offset by the synergies and productivity benefits delivered during FY 2026. Turning to profit. Underlying profit increased 62% from NZD 261 million to NZD 423 million. Importantly, it also increased on a per share basis. Underlying profit per share rose 27% from NZD 0.327 per share to NZD 0.415 after allowing for the shares issued during the year. That per share outcome matters. The capital we raise must translate into stronger earnings and value for each share, and not simply to deliver a larger company.
Below EBITDAF, high depreciation and interest reflect the larger asset base and our approach to acquisition funding, while tax includes the benefits of the government's investment boost settings. One item worth explaining is the unrealized movement within the change in fair value of financial instruments. Around NZD 39 million of the year-over-year improvement relates to commercial contracts that are not eligible for hedge accounting. They relate to future periods, are non-cash in the current period, and do not reflect current period operating performance. That's why reported profit should be considered alongside EBITDAF and operating free cash flow per share, and most importantly, delivering improving return on invested capital. The segment view shows where the EBITDAF was generated. I'll keep this brief and return to the details in the slides that follow.
Wholesale EBITDAF increased by NZD 250 million- NZD 1.145 billion, reflecting the scale in renewable generation drivers already described. Retail EBITDAF improved from a loss of NZD 49 million to a loss of NZD 41 million. That's despite NZD 130 million increase in electricity and network input costs. Corporate and other allocated costs increased from NZD 73 million- NZD 93 million. That includes NZD 24 million of Manawa transaction and integration costs, compared with NZD 18 million in the prior period. The remaining increase reflecting the acquired Manawa cost base, inflation, and investment supporting the development of our new Contact31+ strategy. On to our wholesale business. FY 2026, the generation from renewable sources was 98%, up from 81% when Contact26 began in FY 2021. That shift has changed not only our emissions profile, but also our cost base and the resilience and quality of our earnings.
Manawa has added 2.4 TWh of hydro generation and contracted renewable PPAs. Combined with geothermal storage, flexible thermal capacity, and access to markets, that has created greater geographic and technology diversity, and gives us materially more ways to manage volume and price risk. The value lies in using all of those resources together. Let me bring that to life with a practical example from FY 2026. The year included planned outages at Tauhara and Te Huka III, unplanned disruption, and some assets taking longer to return than expected. We did not respond by replacing every one of those lost megawatt hours at any cost. When Te Mihi and Poihipi experienced an unplanned five-day outage and geothermal generation was approximately 20 GWh below our forecasts, increased hydro and thermal generation largely offset that shortfall.
That's exactly what resilience looks like in practice. It doesn't mean avoiding every disruption. It just means having those portfolio options to manage the financial and customer outcomes and consequences when that disruption invariably occurs. Thermal generation fell to 229 GWh , its lowest ever recorded level. High inflows contributed, but so did the expanded renewables portfolio. Thermal remains valuable in dry periods and during major outages, but is now just one option within a broader mix. The Contact and Manawa assets are already being managed commercially as one portfolio. The next source of value is integrating the support systems, data and decision processes. On wholesale contract revenue, the larger renewable portfolio also allowed us to increase contracted revenue by NZD 281 million- NZD 1.666 billion.
The largest movement was in strategic fixed price sales, where revenue increased from NZD 146 million- NZD 361 million and volumes increased by 2.2 TWh . That reflects the Mercury contract acquired with Manawa, a full year of Tauhara backed PPAs, higher INSUS volumes, and the commencement of the New Zealand Steel agreement. This is our channel management flywheel in action. Durable customer demand supports renewable investment, and our generation and customer commitments are managed together through our trading team. Long-term contracts are important. They provide earning certainty and help underpin new generation. The trade-off is that they can underperform merchant exposure in tight markets, but become particularly valuable when supply increases and near-term prices fall. The wholesale price conditions in FY 2026 demonstrated that value, and the allocation across each of these channels is deliberate.
Each carries different price, shape, location, duration, and risk characteristics, and no channel is always superior. For example, in retail, that meant preserving the long-term value of a customer franchise rather than materially reducing volumes over the last six years, when input costs were higher and it was tempting to do so. In wholesale, it meant retaining a balance between long-term contracts and shorter-dated market-linked channels like C&I and CFDs, rather than concentrating the portfolio for one market outcome. That balance preserves options as the conditions change to deliver that purposeful alignment between customer demand, renewable investment and the risks that Contact chooses to retain. That contracted book provides the foundation of how we set up the business, and our trading business manages the residual position as the conditions change from those starting assumptions.
2026 began with fuel scarcity, planned outages and the risk of constrained gas delivery. By the second half of the year, high hydro inflows and wind generation had driven those spot and short-term dated prices materially lower. In-year, we continually reoptimize the portfolio rather than operating to a fixed annual plan. The clearest example in FY 2026 was our move fuel strategy. Through autumn and early winter, the team increased market purchases when electricity was inexpensive and retained our valuable hydro storage for periods when winter prices are expected to be higher. In June alone, that meant buying an additional 22 GWh when spot prices at Ōtāhuhu averaged NZD 41 per MWh .
Viewed asset by asset, buying electricity when water is available can appear counter-intuitive, but when viewed across the portfolio, it can be economically the right decision when the expected future value of the water exceeds the current purchase price. We had similar examples within our gas portfolio. Lower electricity prices and that limited thermal generation created a risk that Ahuroa gas storage could reach capacity. The team therefore sold the gas, including at a standalone loss for that gas, to preserve the flexibility across the wider portfolio rather than potentially face forced sales later. I guess those are the decisions that bring the Manawa thesis to life. We've got greater hydro and geographic diversity. That just doesn't reduce the risk, though. It gives us more ways to respond as conditions change. Now to the performance of our retail business.
Retail price increases, they're never comfortable decisions, and average electricity tariffs increased by around 12% as we sought to recover the NZD 130 million increase in electricity and network costs, while recognizing the pressure on household affordability and the importance of protecting customer trust. Even after that significant increase, pricing did not fully recover the additional input costs and electricity gross margin was approximately NZD 5 million lower. In deciding how far and how quickly to move, we modeled, we debated the expected effect on customers, churn, calls, and acquisition. Customer response was more resilient than expected, supporting our judgment that we'd struck a reasonable balance between cost recovery and customer trust. Network and metering costs are third party costs that must be recovered, energy recovery requires more judgments because customer demand is weighted towards winter and peak periods, while retail prices adjust less frequently than our wholesale market channels.
There'll always be channels and choices about the pace, timing, and extent of price changes. The most significant progress in the business came through multi-product growth. Total connections increased by around 50,000- 692,000, including 24,000 in telco and 26,000 across energy. Gas and telco margins increased by NZD 15 million and NZD 4 million respectively and were the main contributors to the improvement in retail EBITDAF. Retail operating expenses increased by only NZD 4 million, while OpEx per connection remained broadly stable at NZD 117. That demonstrates the value of a more diversified customer and margin base. Our next phase of retail growth is not simply adding more customers to our current operating model. It's simplifying the processes and products, modernizing our platform, and converting the customer growth into stronger margins through improved operating leverage rather than price.
Reported other operating costs increased from NZD 295 million- NZD 387 million, principally reflecting the acquired Manawa cost base and integration expenditure. Manawa added NZD 93 million of operating costs. Inflation and other headwinds added NZD 11 million, while a further NZD 4 million was associated with growth, including the full-year operating costs of Te Huka III and investment supporting retail connection growth. Against those increases, we delivered NZD 24 million of synergies and productivity benefits during FY 2026, NZD 22 million from Manawa, and NZD 2 million from continued improvements in retail cost to serve. As Mike mentioned, that full NZD 28 million Manawa run rate synergy target has now been secured. Delivering the transaction synergies was important, but it didn't impact or determine the integration sequence. The integration was deliberately sequenced around operational continuity first and foremost, control and clear accountability.
We transferred operating knowledge and established ownership before redesigning processes or going on to those duplicated costs. That allowed us to secure the full synergy target while maintaining stable operation of the combined portfolio. A word on discipline. We only recognize the synergy once the action is complete. Finance has independently validated the value, the saving is embedded in the receiving business unit's budget. The NZD 28 million is therefore a reduction in the future cost base, not simply a piece of information on the PowerPoint or an opportunity identified within the acquisition case. For FY 2027, we expect BAU OpEx of approximately NZD 360 million, broadly flat on FY 2026, despite around NZD 11 million of inflation and NZD 4 million of growth. Those pressures are offset by a further NZD 16 million of synergies and productivity.
Reported FY 2027 costs are expected to also include approximately NZD 7 million of remaining integration expenditure and NZD 12 million of time bound SaaS implementation expenditure, principally related to the potential future retail platform, which remains subject to final investment approval. Accounting standards require those SaaS implementation costs to be expensed with the equivalent investment removed from forward SIB capital guidance. Across FY 2026 delivery and the FY 2027 outlook, the cost bridge incorporates approximately NZD 40 million of in-year synergy and productivity benefits. The most important outcome is that the enlarged business is expected to absorb inflation and growth while holding BAU operating costs broadly flat. That represents a meaningful reset of our operating cost base and provides evidence that the wider productivity program is beginning to deliver. Earnings converted strongly into cash.
Operating free cash flow increased 49% from NZD 434 million- NZD 648 million, and the cash conversion improved from 55%- 64% of EBITDAF. That is the cash generated after SIB CapEx and is available to support dividends, improve balance sheet strength, and drive disciplined growth. Higher EBITDAF was the principal driver, while working capital improved by NZD 55 million, largely as a result of lower fuel and carbon inventories, more than offsetting the higher cash, tax, interest and standard business capital expenditure. Standard business capital expenditure was NZD 145 million, below guidance of NZD 170 million-NZD 185 million. Within that, BAU expenditure was NZD 82 million, also below the NZD 115 million-NZD 125 million guidance range.
The balance relates to identifiable time bound programs, including the final year of the accelerated asset program launched in 2021, the Wairākei extension, Manawa hydro enhancements, and the first payment on the spare Tauhara rotor and the integration activity. That distinction is really important. The underlying expenditure that's required to maintain reliable operations remain well controlled. While the higher total reflects those deliberate programs to extend asset lives, complete prior commitments, and integrate the expanded portfolio. Some of the FY 2026 underspend reflects timing, with delayed activity moving into FY 2027. Operating free cash flow increased by 18%, from NZD 0.544- NZD 0.64, despite the issued shares during the year. Together with the equity raise, DRP retention, and appropriate use of debt, that cash funded the Manawa acquisition, NZD 375 million of growth capital, and the NZD 387 million of declared dividends.
That's consistent with the capital allocation hierarchy that we set out at our Investor Day in November. One, maintain the assets. Two, preserve investment grade strength. Three, support reliable dividends. Four, commit growth capital only when the return is justified. The February equity raise and the consolidation of acquisition financing leaves us with a strong and more flexible balance sheet. Net debt was NZD 2.2 billion at 30 June, and S&P adjusted net debt to EBITDAF reduced from 2.3 x to 2.1 x That's a strong outcome following the Manawa acquisition and continued renewable investment. It reflects the equity raise, the stronger earnings, and improved cash generation, and the equity credit treatment of our capital bonds. The balance sheet is also simpler and more diversified.
The EUR 500 million EMTN termed out the acquisition funding and extended our maturity profile while we repaid the more administratively complex U.S. private placement facilities. Average tenor is now 7.2 years, and the weighted average gross interest rate reduced from 5.8%- 5.2%, matching our efforts in the low interest rate periods earlier this decade. This gives us the capacity to complete the Contact31 program, plus the additional growth where customer demand and project economics support it while continuing to support reliable dividend growth and remain resilient through changing market conditions. Capacity to invest does not lower our return thresholds. For projects not yet committed, the depth of our pipeline over 11 terawatt hours gives us the choice over timing, sequencing, and funding.
It allows us to prioritize the projects that best meet our customer return and risk requirements rather than creating an obligation to commit to every project. That combination of cash generation and balance sheet capacity supports the dividend, and the Board has declared a final dividend of NZD 0.24 per share, taking the FY 2026 total to NZD 0.40 per share. That's a 3% increase on FY 2025 and delivers the guidance provided at the beginning of the year. The dividend represents 65% of FY 2026 operating free cash flow and is well supported by the cash generated during the year.
Against the formal policy measure, the dividend represents 114% of average free cash flow over the preceding four years, and that reflects a temporary timing mismatch following Manawa, as the enlarged share base is included immediately in the dividend, while Manawa's FY 2026 cash contribution only begins to enter the rolling average from FY 2027. The Board has therefore applied the discretion previously communicated for the initial post-acquisition years. Contact expects the FY 2027 dividend to increase to NZD 0.42 per share, a further 5% increase at the top end of the range previously indicated. That reflects confidence in the forecast operating free cash flow, the secured Manawa synergies, and balance sheet capacity. As always, each dividend remains subject to board approval and business and market conditions at the time it is declared. We also retain the 2% DRP discount as part of the Contact31 funding framework.
For FY 2027, we expect normalized EBITDA of approximately NZD 1.045 billion based on mean hydro and wind conditions. That outlook is stronger than the headline comparison suggests. It includes NZD 19 million of remaining integration and platform investment. Before those items, the expected underlying operating result is approximately NZD 1.064 billion. The outlook also absorbs a substantial planned reduction in geothermal output during the Wairakei extension and Te Mihi 2 transition. The Wairakei generation output is expected to be reduced by approximately 428 GWh, partially offset by Te Mihi 2 commissioning later in the year. The outlook also includes a planned 10-day Tauhara outage. The principal sources that give us confidence in earnings visibility are the full year contribution from the combined portfolio, those secured Manawa synergies, and our contracted revenue position.
Approximately 97% of FY 2027 repricing is confirmed, materially limiting the near-term effect of ASX futures on FY 2027 earnings guidance. Retail net price is expected to reduce by approximately 2%, from NZD 174- NZD 171 per MWh. That reflects moderating wholesale energy input costs and deliberate pricing simplification and retention choices ahead of a potential future retail platform investment decision. Importantly, the FY 2027 outlook doesn't rely on further increases in retail net price. We expect that energy component of customer pricing to reduce year on year, with customers beginning to benefit from increased renewable supply and moderating wholesale input costs. That benefit that's under our control will be partly offset in total customer bills by continuing increases in regulated network charges. The acquired Manawa and Mercury arrangements provide a net FY 2027 repricing benefit of approximately NZD 56 million.
Together with the secured NZD 28 million of cost synergies, that provides approximately NZD 84 million of uplift over FY 2025 before generation normalization and demonstrates the acquisition economics we outlined. The outlook also includes renewable generation from Kōwhai Park and a full year contribution from Glenbrook Battery One. To conclude, FY 2026 delivered that step change we promised through Manawa and our renewable investment program, and we converted that delivery into stronger cash flow per share, improving returns, and increased dividends. FY 2027 is supported by largely confirmed pricing, Mercury repricing, and the secured synergies within our expanded portfolio. Together, those outcomes provide the financial platform for the next phase of Contact31. I'll now hand back to Mike.
Thank you, Matt. Look, building on the success of Contact26, November last year, we launched the Contact31 strategy, which many of you were present for, to lead New Zealand's renewable energy future. The basics of this are we will extend our advantage as New Zealand's geothermal leader. We will scale on high-quality existing fields, exploring new options and continuing to improve on our cost leadership position. We will lead on new flexibility in this country through batteries, hydro, and gas flex, and smart portfolio optimization, which Matt expanded on. We will deliver lowest cost, diversified wind and rapidly deployed solar, all backed by long-term industrial partnerships. We will lead the energy transition at home, empowering our customers to shift their energy use to the times of lower cost and demand.
All of this will be enabled by empowering our people, maintaining trusted relationships with our key stakeholders, establishing an edge in data and AI, and maintaining discipline and growing productivity as we grow in bulk. We never lose sight of the fact that it is our ongoing focus on operational excellence and underlying performance that allows us the privilege to keep growing. I do want to make it very clear that the Contact31 strategy is anchored on building renewables backed by long-term partnerships. This is not a build it and they will come strategy. We've talked about the 3 TWh of new demand sources that are known and committed across dairy, metals, data centers, and residential. Just today, we saw New Zealand Steel's electric arc furnace come online in reality, and we have the contract to convert the Whareroa dairy factory.
This is clear demonstration of this commitment to grow demand and supply at the same time. Beyond these committed projects, we can see up to an additional 8 TWh of live potential across the same three sectors. The potential restart of Potline 4 at Tiwai is a great example. Some of these are large projects and are potentially binary in their outcome, i.e., they're going to happen or they won't. However, even partial conversion of this potential would act as a step change for the demand picture, unlocking renewable development pipelines across the board. This is particularly true with large data center projects. Leaning into these opportunities, Contact is able to draw on its experience as a developer and operator of renewable energy sites around the country. We have long-term community and stakeholder relationships. We have the experience in planning, consenting, and environmental management.
We have that track record of bringing innovative solutions to our customers to help them manage and contract their energy needs into the future. All of this, we will continue to bring to the table to work alongside our existing and potential new customers to unlock future electricity demand opportunities and, more broadly, the economic growth of Aotearoa. We are well prepared to take hold of this opportunity. We have over 4 TWh of priority development options across New Zealand that we plan to build to meet customer needs as they materialize. We have a diversity of options here across the technologies and geographic locations, with many either fully or partially consented, putting us in a unique competitive position. We are prepared to accelerate high-quality options from our wider 11 TWh pipeline as the market continues to evolve. Turning briefly to Southland Wind.
This is a really good example of how we're working closely with our customers to build renewable energy online hand-in-hand with that new demand. We were granted consent in April this year and immediately kicked off an RFI process to look for a strategic wind partner. We're now engaging with a shortlist of very credible parties and are close to bringing our partnership plans to life. We intend to bring to wind what we have already successfully done in solar. Not only can a partner bring additional expertise, but an off-balance sheet structure will help to share risk and reduce costs. On the customer side, we have signed a non-binding letter of intent with Rio Tinto for a PPA to support the restart of the idle Potline 4 at Tiwai Point. Potline 4 has been idle since 2020.
Its restart would require 50 MW of additional electricity or around 400 GWh per annum and would deliver increased production and export earnings for the nation. Having a credible baseload partner such as Rio Tinto is critical for bringing new renewable generation online. The letter of intent helps underpin our Southland Wind Farm and shows how industry and renewable energy can work hand-in-hand to deliver long-term benefits for Aotearoa. You'll have seen our announcement today that Contact has partnered with CDC to explore data center development at Stratford. This will give new life to the site of our decommissioned baseload gas plant, TCC. It represents a significant step forward in Contact's strategy to lead New Zealand's renewable energy future. Our approach is based on the principles of additionality and support for broader electricity system resilience.
Contact has more than 11 TWh of uncommitted renewable generation projects across its development pipeline. Long-term contracted demand, like the proposed Stratford Data Center, will underpin our ability to bring more of those projects forward. Six years ago, I would've said the Stratford site was likely heading for total closure, aligned with the impact of the decline in the downstream gas market. Now, we're making plans to leverage the unique combination of the site's resources, unlock the development of more renewable energy, and support growth in the Taranaki region with investment across multiple technologies. We have been at Stratford for over 50 years. These opportunities across multiple state-of-the-art technologies could well secure it for the next century. Stratford has existing high-capacity fiber connections, transmission capacity, onsite firming, and a wonderfully skilled workforce. It has all the ingredients for success.
We have 500 MW of consented battery development and a large-scale solar hybrid battery development currently in the consenting process, and we have an existing footprint with adjacent land under option. We have chosen to partner with CDC, one of Australasia's largest data center developers and operators. They bring incredible expertise in data center development, construction operations, and customer connectivity and capability. They also bring their proprietary closed-loop cooling system that enables exceptionally low ongoing water consumption. They have strong ties already to this country, both through their operations and through local ownership by Infratil. I do want to be clear that no decision has been made to construct the facility, and no material capital commitment has been made. The project remains in early stage and is subject to customer commitments, consenting, project-level financing arrangements, and final investment decisions.
Looking at the year ahead, where you will see Contact already making strides, big strides, on its Contact31 strategy. We will deliver on the initial milestones laid out when we released the strategy last November, and we will continue to work with customers to advance our active data center and electrification opportunities, accelerating the strategy and bringing forward more renewable generation for this country. I have huge aspirations for this country and the part that the renewable energy economy can and must play in creating jobs for our children and grandchildren, in building regional communities, powering manufacturing, attracting new industry and technologies, and growing the country's export earnings and therefore its wealth. We have a clear strategy, a strong balance sheet, and proven execution capability to see us lead New Zealand's renewable energy future. With that, I am delighted to take questions.
Thank you, Mike. Thanks, Matt. We'll now open for questions. If you wish to ask a question, please raise your virtual hand. We will then invite individuals to come off mute one at a time. With that, we'll go to our first question from Vignesh Nair at UBS. Vignesh, you can take yourself off mute.
Good morning, Mike. Can you hear me?
Yes, I can. Yes.
Awesome. Thank you for the very thorough presentation. First, a couple of questions, I suppose, on the data center deal, and I understand it's early days, but keen for a pretty high-level read from you guys at this stage. Just probably to begin with, do you have a view on what it could cost to build out a DC of this scale in New Zealand? If you look at CDC's assets in Australia, the average cost is around about NZD 15 million a megawatt. I think a few industry people have mentioned that New Zealand has a slight premium against that given the seismic considerations. Wondering what style of cost we can expect from an asset of this size?
Matt, maybe you want to.
Yeah, those international benchmarks sound about right. Because this is a regional facility in New Zealand, we haven't built data centers before. You could expect a slight premium on that cost. Going the other way, New Zealand has got other features, including cooling costs and renewable energy costs, which are lower than international jurisdictions, and that's what makes it such an appealing proposition.
Okay. Extending that a little bit further, if you do take the Australian benchmark at 250 MW, you kind of get to a potential CapEx of close to NZD 4.5 billion-NZD 5 billion worth of overall spend. I know you sort of mentioned in footnote four on page two of the release that you might be contributing equity towards it in an off-balance sheet sort of project finance structure. Just keen to know if there's a potential upper limit in terms of the equity investment that you guys are willing to contribute to the project?
Yes, Vignesh. The upper limit would be 50/50 from our perspective because we would require this to be financed at the project level. We have a range of scenarios which we've tested with our credit rating agencies to see whether we could support an investment up to that scale on our balance sheet. Clearly, any decision around any equity investments would be highly dependent on the economics of the project, the certainty around the CapEx, the customer credit quality, which is incredibly important not only from a data center payment perspective, but also to give us the confidence to invest in more renewable growth. We've run to ground many different scenarios, and we're confident that as we step through the details and the risk allocation, that we're well-placed.
Okay. Just finally on the data center piece, any color on, I suppose, timing? That's kind of obviously been absent from the release. Is it fair to assume it's this decade?
This decade is not a bad assumption. Obviously, there's a lot of mahi still to come. We have to get a resource consent. We have to get a customer. We have to complete the concept and detail design. There's a bit of hard mahi to go, so that's not a bad assumption.
That's very clear. I suppose just on a couple of other things, I think, that battery from Glenbrook 1 sort of began operations earlier this year. Just any specific learnings to comment on there? Understandably probably a less than ideal wholesale price environment from an arbitrage perspective sort of what are your-
I think-
What are your observations?
Oh, we're learning every day and adjusting the models every day. You saw the value of that battery last week, where the combination of batteries in the market got the market through a record high demand with almost 1,000 MW of conventional generation out of the market with TCC, E3P, and Huntly unit former not in the market. So one, it's valuable. We're learning every day about how to integrate the operation of the battery with our existing peaking plant in particular. We're delighted with the operation of the battery and particularly these last two weeks.
Okay. Last one before I pass it on. I think Matt mentioned 420 GWh worth of lost load from Wairakei. I think you've got 320 GWh net on slide 43 there. What's the timing of that turnaround? Does that begin in 1H or is it entirely 2H skewed?
2H.
Yeah, predominantly 2H activity there, Vignesh. Obviously dependent on a number of different moving pieces, including the, you know, Te Mihi 2 project, the Wairakei extension project, as well as market conditions at the time. Yeah, we're optimizing all those three sort of topics. As you would've seen, we're already highly contracted, the key swing for this year will be hydrology and the management of those outages.
Okay. Very clear. I'll pass it on to my peers.
Okay.
Thanks, Vignesh. We'll now move to Andrew Harvey-Green from Forsyth Barr. Andrew, please come off mute and go ahead.
Morning, everyone. Thanks for that. Yeah, a couple of questions from me. First of all, just following on the CDC side of things, is this, at this stage, very much a project-specific relationship, or you're looking at potentially a longer-term relationship here?
The answer is all of the above. Obviously, the clear and incisive focus is on getting that initial project off the ground. If that leads to a longer-term relationship, that's a wonderful outcome, but let's keep the focus on the game in front of us.
Okay. All good. Okay. Next question I just had was, I guess thinking about the impacts of the lower ASX futures prices, that's probably the sort of the biggest talking point in some ways over the last six months. First of all, are you able to sort of talk to a little bit what sort of impact we might expect for FY 2028, FY 2029? Noting there isn't a huge impact in FY 2027, as things reprice, we would expect a bit of a headwind. Are you able to give us a bit of color on that?
Obviously, the sort of impacts of ASX pricing on FY 2028 and FY 2029 are highly dependent on how those ASX prices hold up or not over the next few years. Obviously, when you think about the 12 TWh of generation that we contract, we only have around 4 TWh that is linked to ASX or those short-term channels, including C&I, sort of roll off on those is probably a third a year. It's probably not as impactful as you can imagine, I guess talks to that strategy that we've had around terming out our book.
Okay. Thanks, Matt. Then thinking about the FY 2031 goals that you had in the November strategy day, that was NZD 1.2 billion-NZD 1.3 billion, with a run rate NZD 100 million higher than that at the end of that. You still feel comfortable with those particular targets given the drop we've seen?
Absolutely.
Yeah. Absolutely. Just to echo Mike, I guess, our targets were always based on a reversion to 120-130 real from the ASX, and the ASX is broadly tracking in line with that. The key sort of swing factor on us achieving those targets, Andrew, is really on the demand side. If we continue to be as successful as we have been on initiating new demand into the market, then we're very confident on those targets. If we can get this Stratford data center site up and running, I think that would be enhancement on that FY 2031 set of targets.
Yeah. That makes sense. Just lastly from me, just around the gas situation and looking at your gas book, noting you still have reasonable volumes coming from Pohokura, how confident are you of those volumes actually being delivered over the next five years or so?
I think we've all learned our lesson. We've built resilience into our gas supply book. We are reasonably confident that both the volumes from Pohokura and the contracted gas volumes that we acquired from Greymouth have good, robust operating performance to back them. Yeah, we're reasonably confident in that.
Of the 10 PJs approximately, only 30% or so is from Pohokura, which is the variable pay as delivered. Greymouth is a flat contract.
Yep. Great. That's all from me. Thank you.
Thanks, Andrew.
Thanks, Andrew. We'll move now to Grant Swanepoel from Jarden. Grant, please go ahead.
Thank you. I am unmuted, I assume?
Yep.
Thanks. First question just on hydro. You guys did just over 5,000 GWh in FY 2026. You had set yourself a target of 5,750 GWh. Everybody else beat their average, while you guys didn't. Is that something to do with the way you dispatched Manawa? How do we have confidence that you're going to do the 5,850 GWh normalized into FY 2027?
Yeah. Great question, Grant. I'll give you the two-second summary. On the Contact assets, obviously, our assets are further down to the bottom of the South Island, so when we had those mega inflows over spring and summer, prices were zero dollar anyway. We couldn't have actually got any more generation out. Meridian sort of stepped into the fold there. There was quite a significant amount of spill through that period. I think from memory, Ōtāhuhu prices for January were NZD 2, so it wasn't really something that sort of impacted performance but did impact the volume numbers. On Manawa, there was less generated at Manawa throughout this year. Two factors there. Firstly, wholesale prices have been very low coming into winter, so we're coming into FY 2027 with higher storage lakes.
The second point, as Mike mentioned, a couple of the larger Manawa assets had extended outages over this period. That's most notably Coleridge and Highbank. Once we can get those assets back into service, you'll see an improved Hydro output. This year hasn't been impactful because of the fuel situation, but clearly getting up to those capacity factors is incredibly important, even more so as those big geothermal outages come into view.
Thanks, Matt. Next question just on pricing through your channels, following on from Andrew's question. Your CFD book is more shorter term, and you've got almost 20%-25% of your channel through the shorter term CFD. Are you comfortable with that sort of position going into 2028, 2029, particularly with the forward curve and the potential overbuild relative to lack of demand in the short term?
Yeah, it's there or thereabouts. As I said, I think 25%-35% of the total book more leveraged to those shorter term channels. Remember, analysts were asking us why we went to 110% leverage to those short-term channels when prices were high. Also just a key point to note in our CFD channels is a large proportion of that is the Mercury CFD sold as part of the Trustpower retail acquisition, which reprices over a two-year period and is more heavily weighted to winter pricing when those prices are still-
Robust.
very robust. It's the summer pricing, as we've mentioned previously, where the sort of key impacts and changes and challenges are.
That's helpful, Matt. Thanks. Then on data centers, your 50/50 maximum exposure to equity in that business just surprises me. Your decision to potentially go into data center equity ownership, is that driven by CDC wanting you to have skin in the game, or is that your Board saying, "Actually, I want to be in data centers"?
It's the value that's inherent in that Stratford site with you have a very high capacity connection available, you actually have a 400 MVA transformer available. You have land available, you have the electrical infrastructure available, in order that that package delivers value to our shareholders, that's where we landed. It's a very unique site, it also has wonderful fiber connectivity. It's about getting the value out of that site.
In effect, what you're saying, you want a discounted entry into a big data center.
There would be no payment, Grant. This would be a sort of organic growth into the data center site. It's the Stratford site and the speed to market that is unique to Contact and CDC to deliver those projects within the time frames that customers are currently searching for. It's an undersupplied market in the data centers, this is a unique opportunity for Contact, because power and speed to market is the most crucial thing that we're hearing.
Sorry, I need to get to the bottom of this. As a Contact investor, I don't have to worry too much that you're going to be taking on too much data center risk-
Absolutely.
We can actually get that exposure elsewhere if we wanted to.
Yep. No, absolutely.
Correct, Grant. That's why sort of all partnership and investment options on the table. We'd want to understand the relative economics, what the customer is going to deliver to the project from a credit perspective, how long they're going to be around for, and we want to sort of be molding into that decision.
Thank you. My final question, excellent news on the Potline 4 that you guys have more or less got the front running on that. What worries me, you got 1.2 TWh in the wind project and only 400 GWh in this sort of load side. How can we be sure that you will stick to your word that you'll make sure you've got backing before you go and build a big wind farm like that?
I mean, look, it's not just the smelter. The smelter is part of that equation. It's obviously the data center story as well. It's also the other sources of demand growth and the further conversion of dairy. As we said throughout the presentation, the key to unlocking those renewable development options is the demand side effort that we put in. We will stick to our word.
Fantastic. Thanks so much for answering those questions.
Thank you.
Thank you, Grant. We're going to move to Joshua Dale from Craigs Investment Partners. Josh, please come off mute and go ahead.
Good morning. Can you hear me okay?
Yep.
Brilliant. Thank you. I'm looking at your EBITDAF target for FY 2031 from your capital markets day. NZD 1.2 billion-NZD 1.3 billion. The Manawa block in there had a NZD 96 million total contribution. Assumed ASX pricing of NZD 160 per MWh, which is probably not the case now that futures have fallen 30%. It seemed to be the block that was the odd one out, and that the pricing assumption on it was more aggressive than the other blocks building up to that FY 2031 target. Would that not suggest some pressure on those FY 2031 targets?
Look, Matt can answer that. No.
Yeah, no. What we're showing is that the FY 2027 movement on FY 2026 is up by NZD 84 million. That reflects the fact that ASX pricing is higher than our long run average for that portion of the contract that has been locked in, with Mercury for next year. The reason the 92 reflects the long run estimation of wholesale prices, that's NZD 115 million-NZD 125 million. The reason why we are getting more next year is because the hydro generation volumes are normalizing from about 1.5 TWh that we delivered in FY 2026 up to more like 1.9 TWh, which is the benefits of having all of those enhancement projects back online and hydrology improvements.
In the near term, yes, we're over-earning on that contract versus long run estimates because of where the wholesale prices have been, and that Mercury contract has been progressively repricing for the last 2.5 years. Our targets all reflect a reversion to a balanced market.
Right. Okay. Perhaps I'll dig into that offline. As a second question, on slide 22 in your FY 2027 EBITDAF guidance buildup, you have NZD 12 million of SaaS implementation costs in there. How do you know what that will be if you haven't selected a software vendor yet? Are you actually quite progressed on that front?
We're reasonably progressed on that front. The future retail platform, getting that to the right customer platform is critically important, and the teams of the retail and technology teams have made some good progress on that.
The quantum and the timing, you're right, is clearly dependent on whether we go to final investment decision or not. We just thought it appropriate to put our best estimate of where we're at within the process today so that the models can assume that that'll be coming through OpEx as opposed to standard business CapEx. Muddy the waters on our productivity program, which is delivering good value.
Yep, makes sense. I appreciate you're looking to sign this off over the next 12 months. Are you thinking sooner rather than later, or perhaps later in the year, or any indication of that?
It'll be sometime during calendar 2027. The timing's yet to be determined.
Yeah. Obviously, there's not only the work to really get an understanding of the implementation timelines, the risks associated with it, and the benefits that we're going to achieve, but we need to keep our eye on the regulatory environment and carefully manage any investment expenditure which could not deliver for Contact shareholders through potential other political machinations.
Got it. Thank you. Final one, the data center at Taranaki. I was interested to read there might be a demand response type component to that. Are you able to give me any indication as to what that might look like in-
Not at this stage. Obviously, data center load, depending on the load, has a certain amount of variability, and I think it's important that you are able to manage that variability through might be batteries, might be various other syncons and the like. When that variability is not being used for the data center, you're then able to deploy that back in the market, and that's the extent of the thinking around that.
Okay. Makes sense. Thanks very much, guys.
Thank you.
Thanks, Josh. We'll move to one more set of questions. Stephen Hudson from Macquarie, over to you. If you come off mute and go ahead.
Okay. Yeah. Right, Stephen, got you.
Hey, just a couple from me. Just on the retail tariffs, I know it's a sensitive issue, as you explained, the NZD 171 per MWh that you've penciled in for FY 2027 vs the roughly NZD 125 long-dated futures in the North Island, can you give us a bit of a feel for, t hat's a 37% differential. Can you give us a bit of a feel for what the shape and location uplift-
Yep.
on a time-weighted price is? Based on what you can see of your portfolio, just so we can square some of the earlier questions around downside risks?
Yeah, great question, Stephen. When we're thinking of NZD 120 per MWh at Ōtāhuhu , when you think about the fact that 2/3 of customer electricity is in winter prices are clearly higher than summer prices. Customer use more electricity in the peak periods, morning and evening. Customers are not all thank goodness living in Auckland, that sort of adds a NZD 10-NZD 15 per MWh, premium over your NZD 120. Remember, you also need to recover your operating costs associated with the retail channel, NZD 78 million over our volume is about NZD 27 MWh . When you add in the margins needed to support things like our future retail platform of around 5%, which is pretty small when you consider the risks taken within that business, you're sort of broadly up at the NZD 155-NZD 165 per MWh mark.
We're not expecting large changes in that retail channel. You would've known for the last six years, we've been very moderate around how we've recovered those energy prices, that's just a function of the way that we manage retail as a long-term channel. It doesn't go up as fast and, any big shifts like we've seen over the last six months sort of are not as impacted.
Thanks, Matt. That's useful. Hey, just a quick question on LNG, maybe for Mike or for you-
Yep.
Shelley, just what you're seeing as the probability that that will be part of our dry year energy swing source? Without loading the question too much, what are the 30 PJs of industrial demand going to do if it doesn't transpire?
I think that's why the thing with LNG is that I think there are other ways to manage dry year risk, primarily, but it's important those gas users who are finding it difficult to convert off gas, that we continue to look after them because they do make a significant contribution to the broader economy. The answer on LNG is yes, as a country, we need to give it serious consideration, but we also need to convert those gas users who can convert to electricity as quickly as possible. We possibly need to increase the coal stockpile at Huntly. We need to look at potentially increasing the diesel strategic reserve of the country, and we need to look at increased hydro operating ranges. As part of that mix, with the continued decline of upstream gas supply, LNG has to be given also serious consideration.
Mike, the probability that it does actually get off the ground this year?
That's dependent. Look, like any investment decision, it's dependent on what the assessed cost is. It should be developed as a robust and economic project. If we can make sure that it is right-sized and right-specced, it's probably got a reasonably good chance of getting off the ground. If it's gold-plated, it's the wrong thing for the nation.
Okay. Just a question on the CDC announcement. Well, maybe a couple of questions. Firstly, it looks as if it's a 350 MW built project that you're-
Yep,
buying up.
That's right.
Not 250?
Yep.
Can I just clarify that?
Yeah. It's 250 output, 350 input.
Yep. Were you hinting that actually it could be larger than that given your infrastructure- your existing infrastructure there?
No. We're s aying that's what we're focused on today. There is capacity potentially for more, but no, our focus is on that one data center and getting that off the ground.
Sorry, what's the envelope given your grid connection?
Well, the grid connection is 400 MW, 400 MVA, which is the existing transformer there for TCC. I think the maximum capacity at the site is 600 MW or in that order-
Okay.
before grid upgrades are required.
Yep. Okay. That's exciting. Is there a sort of presumably there is actually a U.S. hyperscaler or an Anthropic that's actually put some megawatt of demand in front of you and CDC.
Oh, look.
This is not.
We can't obviously.
This is not prospective.
We can't discuss any of those conversations. It's fair to say that, we were on an international tour recently, promoting New Zealand as a data center destination, and we were right up there with the Nordic countries in terms of the attractiveness of New Zealand. We have the renewable energy, we have the cooler climate, we have a strong pro-investment market, and we have the digital connectivity. Like Norway and the rest of Scandinavia and Iceland, we are right there at the top of the pecking order in terms of attractiveness for a data center, a renewable energy powered data center.
Well, I guess you're also not within a 2,500 km missile range of Tehran as well, which has been the other sort of big driver of demand?
Outside the range of any known Shahed drones as well.
Yeah. Just in terms of what leverage meant, your kind of assumption you're running under your scenarios is sort of a seven times stabilized, debt to EBITDA number kind of something that we could use, do you think realistically?
That's probably sort of a little on the high side, Stephen. Our existing sort of business, as you know, attracts a sort of 3 x net debt to EBITDA ceiling for our BB B investment grade. That will continue to be our target. You do get a different dispensation for data center revenues because of the relative stability, the long-term nature of those contracts. That's more sort of like 5 x net debt to EBITDA. The sort of relative proportion of earnings from any potential data center would be sort of included within that calculation to give us a more favorable net debt to EBITDA metric within our existing measures. Obviously all that to be worked through, and we know that we can do it. It's now about securing sort of all the risk questions, which are clearly gonna be important as we work our way through the project.
Yeah. Okay. That's useful. Sorry, last one. You talked about an upper limit of 50/50. It's obviously a bit of a silly question, but presumably you would then entertain something like a 10% or 25% stake as well. To put your foot on the-
Yeah. We'll firm that up over the coming months, but yes.
Yep. Okay. Thanks everyone.
Thank you.
Thank you.
Thank you, Stephen. That's us for questions, so we'll close the meeting. Thank you to everybody for joining online.
Thank you.