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  • Contact Energy (CEN) has entered a trading halt this morning as it plans NZ$400 million (AS$372 million) capital raise
  • The proceeds from the raise will be used to reduce net debt and provide financial flexibility to fund the Tauhara Project
  • Tauhara is a geothermal power station, which Contact is currently developing, with construction beginning shortly
  • The equity raise will include an underwritten placement and a retail offer, both deals offering shares at NZ$7 (around A$6.50) each
  • Under the halt, company shares will be paused until Wednesday, February 17, or until details about the placement are released
  • On the market, Contact last traded for $7.13 per share on February 12

Contact Energy (CEN) has entered a trading halt this morning as it plans NZ$400 million (A$372 million) capital raise.

The proceeds from the raise will be used to reduce net debt and provide financial flexibility to fund the Tauhara Project, a geothermal power station that Contact is building in Taupō, New Zealand.

"We’re absolutely delighted that market conditions now allow us to proceed with this important development for New Zealand – one which has been in the planning stages for over a decade," Chairman Rob McDonald said.

"We believe the Tauhara geothermal project is New Zealand’s best low-carbon renewable electricity opportunity. It will operate 24/7, is not reliant on the weather and is ideal for displacing baseload fossil fuel generation from the national grid which will significantly reduce New Zealand’s carbon emissions," it added.

Construction of Tauhara will begin shortly and is expected to be completed in the middle of 2023.

Rob says the equity raise will give Contact the flexibility to carry out a development pipeline beyond Tauhara, this includes the replacement and expansion of its geothermal powerstation at Wairakei.

"It will mean Contact can maintain optionality in respect of future
investment decisions, which will be able to be sized and timed to meet market demand," Rob said.

Equity Raise

The equity raise will include a NZ$325-million (A$302 million) underwritten placement and a non-underwritten offer (retail offer) to shareholders in New Zealand to raise up to NZ$75 million (nearly A$70 million).

The placement has been underwritten at a fixed price of NZ$7 per share (around A$6.50), which represents a 2.8 discount to Contact's closing price on February 12 of NZ$7.20 (A$6.70) per share.

Under the retail offer, existing shareholders will be able to purchase up to NZ$50,000 or A$46,500 of new Contact shares. These shares will be at the same price as the placement.

Financial performance

The New Zealand energy company also released its half year financial results for the 2021 financial year.

Contact has reported a statutory profit of NZ$78 million (A$72 million), up 32 per cent on the same period last year.

Operating free cash flow for the period also increased from NZ$120 million (A$111 million) to NZ$157 million (A$146 million), which is up 31 per cent year-on-year.

Contact CEO Mike Fuge said it's been a very heartening start to the year, in a complex environment.

"We’re pleased to have delivered a strong financial result despite challenging
headwinds in the form of ongoing uncertainty around gas availability, and the doubt swirling around the future of the Tiwai Point smelter until the extension announced a month ago," he said.

"We’re also proud to have played our part in helping secure the financial sustainability of the unique low-carbon smelter at Tiwai until at least the end of 2024," he added.

Under the halt, company shares will be paused until Wednesday, February 17, or when more details about the placement are released to the market, whichever comes first.

However, Contact says it expects to make an announcement on the placement by 1:00 pm tomorrow, February 16.

On the market, Contact last traded for $7.13 per share on February 12.

CEN by the numbers
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