Contact Energy Accelerates Renewable Expansion with NZ$525 Million Capital Raising

About Contact Energy Limited

Contact Energy Limited (ASX: CEN) is one of New Zealand’s largest electricity generators and retailers, with a diversified portfolio spanning geothermal, hydro and thermal generation assets. The company plays a central role in New Zealand’s transition toward a lower-carbon electricity system, underpinned by its strategic Contact31+ roadmap focused on renewable expansion, grid flexibility and sustainable long-term returns.

For the year ahead, Contact is positioning itself to capture rising electricity demand driven by electrification, population growth and decarbonisation initiatives. In that context, the company has undertaken a NZ$525 million equity raising to accelerate investment across a series of renewable and storage projects designed to strengthen generation capacity and long-term earnings resilience.

Capital Raising Structure and Rationale

Contact successfully completed a fully underwritten NZ$450 million institutional placement, followed by the launch of a NZ$75 million Retail Offer available to eligible shareholders in New Zealand and Australia. The Retail Offer allows shareholders to apply for up to NZ$100,000 (or A$41,000 for Australian investors), ensuring broader participation in the company’s growth plans.

The Retail Offer price is set at the lower of NZ$8.75 per share, being the institutional placement price, or a 2.5% discount to the volume-weighted average share price over the five trading days prior to closing. This pricing mechanism is consistent with market practice and aims to balance fairness with execution certainty.

Management has indicated that the raising strengthens Contact’s balance sheet and provides capital flexibility as the company moves key projects toward final investment decisions.

Accelerating Renewable Development

Proceeds from the equity raising will support a pipeline of renewable and system-flexibility projects central to the Contact31+ strategy.

A major focus is Tauhara 2, a geothermal development where the company intends to advance drilling activities prior to a final investment decision. The project has potential capacity of between 60MW and 70MW, subject to further exploration results, expanding Contact’s already significant geothermal footprint.

Additional funds will be allocated to Glenbrook Battery 2.0, which aims to enhance grid flexibility and support renewable intermittency management. Contact will also invest in the Glorit solar development, broadening its exposure to large-scale solar generation in New Zealand.

These projects respond directly to expectations of three to five terawatt hours of incremental grid demand growth over the next five years, driven by electrification of transport and industry.

Financial Position and Dividend Policy

Contact has reaffirmed its disciplined capital allocation framework and dividend policy. The board continues to target dividend distributions equivalent to 80 to 100 per cent of average operating free cash flow over the previous four financial years.

For FY26, management has indicated a dividend target of 40 cents per share, subject to board approval and prevailing market conditions. Importantly, shares issued under the placement and Retail Offer will not be entitled to the upcoming interim dividend, given the timing of record dates.

While the equity raising introduces modest dilution, estimated at approximately 5.7% for shareholders who do not participate, management has framed the transaction as balance sheet strengthening rather than defensive capital management. The capital injection provides funding headroom without materially increasing leverage risk during a period of significant infrastructure rollout.

Strategic Positioning

Contact’s strategic focus remains firmly on renewable leadership, system reliability and long-term value creation.

New Zealand’s energy market is experiencing structural change as ageing thermal assets retire and renewable penetration deepens. In this environment, geothermal capacity offers dependable baseload renewable energy, while battery systems provide critical grid stability.

By combining geothermal expansion with solar generation and battery deployment, Contact is building a diversified renewable portfolio capable of supporting rising national electricity demand while contributing to decarbonisation targets.

Institutional investor support for the placement reflects ongoing confidence in this strategy, particularly as global capital increasingly favours scalable renewable platforms with stable regulatory frameworks.

Outlook

Looking ahead, Contact enters the next phase of its growth cycle with strengthened funding capacity and a clearly articulated renewable pipeline. The company’s focus over the next 12 to 24 months will centre on project execution, disciplined cost management and maintaining earnings stability during the build-out period.

Electricity demand growth, decarbonisation policy settings and system reliability needs are expected to underpin ongoing investment across the sector. Contact’s scale, geothermal expertise and integrated retail platform position it to capture incremental market share while delivering reliable returns to shareholders.

Management continues to emphasise execution discipline, noting that capital deployment will remain contingent on investment hurdle rates and long-term earnings accretion.