Contact Energy Profit Jumps, Eyes 250MW Data Center

Contact Energy, the New Zealand electricity generator and retailer, just posted a sharp jump in annual profit, and the contact energy profit story now carries a second headline: a possible large data center on the site of a retired gas plant. The company's shares (CEN) traded at 20.73, up 1.07% on the day, sitting closer to the bottom of a 52 week range of 20.09 to 22.70.

At a Glance

• Net profit of NZ$423 million for the year ended June 30, 2026, up 62% from an underlying NZ$261 million
• EBITDAF rose 31% to NZ$1.01 billion; operating free cash flow climbed 49% to NZ$648 million
• Revenue slipped 3% to NZ$3.21 billion despite the earnings gains
• Dividend yield stands at 4.34%, with the annual payout set to rise to 42 New Zealand cents per share
• Stock carries an RSI of 46.15, a neutral reading rather than overbought or oversold

Why Contact Energy's Profit Jumped

The Manawa Energy acquisition, completed in July 2025, brought in roughly 2.4 TWh of hydro generation and contracted renewable supply, and Contact says it has already locked in the full NZ$28 million in annual cost synergies it targeted from the deal. A full year of output from the Te Huka 3 geothermal plant added further scale. Renewable generation now makes up 98% of Contact's own output, up from 88% the year before, as thermal generation fell 79%. Across the wider New Zealand grid, 93% of electricity came from renewable sources during the financial year, helped by strong hydro inflows.

The comparison against the prior year excludes a one time NZ$98 million release tied to an onerous gas storage contract that had flattered FY2025 results, so the underlying growth picture is somewhat cleaner than a simple year over year reading would suggest.

The Stratford Data Center Plan

Contact has partnered with CDC Data Centres to explore a large data center at Stratford in the Taranaki region, the former home of its Taranaki Combined Cycle gas plant, retired in 2026. The companies plan to seek resource consent for a facility with 250 MW of IT and compute capacity, which translates to roughly 350 MW of total peak load once cooling and other ancillary needs are counted. Nothing is finalized. Development still hinges on permits, anchor tenants and financing falling into place.

The site already has grid infrastructure in place, plus 500 MW of consented grid scale battery storage. Contact and Lightsource bp are separately pursuing a 150 MWac solar project nearby, and Contact's existing 200 MW fast start gas peaking units at Stratford would keep running. The company wants the data center's power needs met through long term contracts backed by its 11 TWh pipeline of geothermal, wind and solar projects, with battery storage co located on site.

Quick Facts

• FY2027 EBITDAF is guided at about NZ$1.05 billion, assuming average hydro and wind conditions
• Contact estimates New Zealand data center sites could eventually draw 4 to 6 TWh of annual electricity demand
• The proposed Stratford facility would need roughly 350 MW of total peak load capacity
• Industrial electrification in dairy and metals is cited as an additional source of future demand

Contact Energy Valuation, Momentum and Yield

Contact trades with a market capitalization tied to its current share price of 20.73 and carries a P/E ratio and EPS profile that investors are weighing against the freshly reported profit jump. The RSI of 46.15 points to a stock that isn't stretched in either direction, neither overbought nor beaten down, which fits a share price that has spent recent sessions closer to the low end of its 52 week band of 20.09 to 22.70.

The bull case rests on the earnings momentum: profit up 62% on an underlying basis, free cash flow up 49%, and a dividend raise to 42 cents per share that lifts the yield further from its current 4.34%. Add in the Stratford data center concept, which could eventually anchor several terawatt hours of new demand tied to Contact's renewable pipeline, and there's a growth story layered on top of a income focused utility.

The bear case is more grounded in execution risk. Revenue actually fell 3% even as profit rose, meaning some of the improvement came from cost items and one time comparisons rather than pure top line growth. The data center project is early stage, unfunded, and dependent on securing an anchor tenant and consent approvals that could take years. A neutral RSI also suggests the market hasn't yet decided whether the good news is fully priced in.

What Happens Next for the Stratford Project

Contact's near term guidance points to NZ$1.05 billion in EBITDAF for FY2027, a target built on average hydro and wind assumptions rather than the unusually strong conditions that helped the latest results. Whether the Stratford data center moves from concept to construction will likely take longer to answer, since it still needs anchor tenants, financing and resource consent before Contact commits any capital, but the scale of the opportunity, potentially 4 to 6 TWh of new annual demand across its data center pipeline, keeps the project firmly on the company's agenda.