Contact Energy's First-Half Benefits From Strong Wholesale Electricity Prices

Narrow-moat Contact Energy’s first-half fiscal 2021 result was marginally above our expectations. Strong wholesale electricity prices due to dry weather and gas supply constraints underpinned year-on-year EBITDA growth of 11%. Wholesale EBITDA increased 12% on higher volumes and wholesale pricing. Generation volumes were flat, with lower geothermal output because of scheduled plant maintenance offset by higher hydro and thermal generation. The latter saw generation costs rise, though transmission costs fell following the grid's regulatory reset. In contrast to the good wholesale performance, retail EBITDA was flat as tariff increases and lower incentives offset higher wholesale electricity and gas costs.