Contact Energy Annual Report 2020

FY2020 Annual Report · Contact Energy

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Reliable.
Responsible.
Transforming.

2020 Integrated Report

Contact
INTEGRATED
REPORT
2020

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Welcome to our first integrated report. The purpose of this report
is to explain how Contact Energy creates value over time, or as we
say in our company vision, how we are building a better New Zealand.

Our leadership team has reviewed the report and our CEO Mike Fuge and the Board have confirmed it is a true
and accurate picture of how Contact Energy created value for our stakeholders in the 12 months to 30 June 2020.
We expect it to be of interest to employees, customers, investors, suppliers, business partners, local communities,
iwi, legislators, regulators, policymakers and all other stakeholders.

The report follows the principles-based approach of the Integrated Reporting Framework and reflects our ongoing
journey towards integrated thinking, focused on value creation.

This report is dated 10 August 2020 and is signed on behalf of the Board of Directors of Contact Energy:

Robert McDonald
Chair

Dame Therese Walsh
Chair, Audit & Risk Committee

Our Chair Robert McDonald and the Board of Directors will host shareholders at the Contact Energy AGM
on 11 November. The notice of meeting and agenda will be provided to shareholders in mid-October 2020.

More than 98 per cent of Contact Energy shareholders receive digital reports from us. We encourage shareholders
to move to digital, but we’ve also ensured the 2,000 printed reports use environmentally responsible paper and inks.

Contact
INTEGRATED
REPORT
2020

Contents

Jargon buster

Key activity this year

Chair’s report

CEO’s report

Who we are

Our board

Our leadership team

Our moral compass – Ngā Tikanga

Our operations

Creating value

Our strategy

Our supply chain

What matters most

Accessibility

Customer wellbeing and energy hardship

Customer experience

Reliability

Reliable renewable energy

Financial sustainability

Regulation

Employee wellbeing

Employee safety

Resilient supply chain

Environmental sustainability

Community wellbeing

Climate change

Better water quality

Biodiversity

Governance matters

Our board

Our Code of Conduct

Risk management and assurance

Remuneration report

Additional disclosures

Statutory disclosures

Sustainability disclosures

TCFD index

GRI index

Financial statements

Statements

Independent auditor’s report

Corporate directory

100

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Contact INTEGRATED REPORT 2020Jargon buster

ASX

Australian Securities Exchange.

Hydrology The scientific study of the movement, distribution, and management

Contact

The company called Contact Energy Limited. Unless otherwise stated,
all activities and indicators in this report are for Contact.

CEN

Contact’s stock ticker on NZX and ASX.

EBITDAF Earnings before interest, tax, depreciation, amortisation, fair value

adjustments and other significant items.

ERANZ

The Electricity Retailers Association represents companies that
sell electricity to NZ customers and businesses. ERANZ’s role is to
promote and enhance a sustainable and competitive retail electricity
market that delivers value to electricity customers.

ESG

FY18

FY19

FY20

FY21

FTE

GRI

The environmental, social and governance factors to evaluate
performance.

Electric vehicle.

The financial year ended 30 June 2018.

The financial year ended 30 June 2019.

The financial year ended 30 June 2020.

The financial year ended 30 June 2021.

A ‘full-time equivalent’ is a way to measure the workload of one person.

The Global Reporting Initiative is an international independent
standards organisation that helps businesses, governments and other
organisations understand and communicate their impacts on things
like climate change, human rights and corruption.

The Group This is Contact Energy Limited, Contact Energy Trustee Company
Limited (a subsidiary), Simply Energy Limited (a joint venture) and
Drylandcarbon One Limited Partnership (an associate).

of water. The ‘hydrologic cycle’ involves the continuous circulation of
water and underpins hydro-electric generation. Understanding the
cycling of water into, through, and out of catchments is a key element
of hydrology.

The Integrated Reporting Framework is a principles-based framework
for corporate reporting.

The Ministry of Business, Innovation and Employment.

Net profit after tax.

New Zealand’s Aluminium Smelter is the country’s only aluminium
smelter and is located on Tiwai Peninsula, across the harbour from
Bluff in Southland.

New Zealand Stock Exchange.

Prompt payment discounts.

Sustainable Development Goals are a collection of 17 global goals
designed to be a “blueprint to achieve a better and more sustainable
future for all”. The SDGs were set in 2015 by the United Nations
General Assembly and intended to be achieved by the year 2030.

Small and medium-sized enterprises are often defined as those with
fewer than 20 employees.

The Task Force for Climate-related Financial Disclosures provides
a framework for climate-related financial risk disclosures.

Total Recordable Injury Frequency Rate is a globally recognised
measure of injury rates that can be benchmarked.

MBIE

NPAT

NZAS

NZX

PPD

SDGs

SME

TCFD

TRIFR

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Contact INTEGRATED REPORT 2020
Key activity this financial year

July
2 houses in Taupō temporarily evacuated
after geothermal subsidence.

August
FY19 results announced with EBITDAF
from continuing operations of $505m,
up 12% from FY18, and net profit of
$345m.

September
Paid 23c per share FY19 final dividend
to investors, following on from interim
dividend of 16c paid in April 2019.

Confirmed new emissions reductions
targets after approval from Science
Based Targets initiative.

October
Held our first EnergyMate community
hui with ERANZ.

Won ‘Best Established Brand’ at the
Charge Energy Awards in Iceland.

23c
per share

November
New Chief People Officer Jan Bibby
started.

December
Announced investment of up to $5m
to fast-track Transpower’s Clutha-
Upper Waitaki Lines Project build.

January
Entered into a $50m, 4-year
sustainability-linked loan facility
with Westpac NZ.

18 summer interns joined us across
the country.

Launched the ‘Your Skills, Our Energy’
advertising campaign celebrating small
businesses.

February
New CEO
Mike Fuge started.

FY20 interim results
revealed EBITDAF
from continuing
operations of $221m,
down 21% from FY19,
and net profit of $59m.

17,000 new broadband customers
joined us in the past 12 months.

March
COVID-19 pandemic response under
way with electricity confirmed as an
essential service and 93% of our people
working from home.

NZ’s largest electrode boiler to be
installed at Open Country Dairy’s Awarua
site using Contact-supplied electricity.

April
Paid a 16c per share FY20 interim
dividend to investors.

Donated $400,000 of free power
to St John, Women’s Refuge and
the Salvation Army, and $40,000
to iwi and hapū COVID-19 response
initiatives in Taupō.

Fined $245,000 for misleading
customers in a 2017 AA Smartfuel
promotion.

16c
per share

May
Drylandcarbon partnership makes first
plantings at Matiawa, near Kaikōura.

June
Launched ‘Transforming Ways of
Working’ programme to our people.

11,600 customers transferred to Contact
after energyclubnz exits the market.

Electricity Authority preliminary ruling
found our actions in flood conditions of
late 2019 did not create an undesirable
trading situation.

New record of 3,333GWh set for
geothermal generation in a financial year.

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Contact INTEGRATED REPORT 2020

Chair’s report

Welcome to Contact’s FY20 integrated report. I’m pleased to be sharing my
perspectives and reflections on the year and looking ahead to the new challenges
and opportunities of FY21 and beyond.

After the resignation of Dennis Barnes as CEO in June 2019,
Mike Fuge arrived in February 2020 to begin a new chapter
of leadership for Contact. Over his nine years Dennis
worked passionately to make Contact a high-performing
organisation, with strong shareholder returns and significant
investment in renewable generation, flexible thermal
generation, enterprise-wide systems and an outstanding
safety culture. We thank Dennis for his commitment
to Contact.

We were excited to have Mike join us from Refining NZ.
He has a strong history in the energy sector in New Zealand
and overseas, including as CEO of Pacific Hydro in Australia
and as COO at Genesis Energy. He has a passion for
renewable energy and is relishing the challenge to deliver
on Contact’s vision to build a better New Zealand and play
a leading role in the decarbonisation of the energy sector
and wider economy.

The Board has been working with Mike and his leadership
team to agree on Contact’s strategic priorities. This will also
provide us with a chance to reflect on the future shape of
the company, the sector and the country in a world that has
COVID-19 and potentially does not have the Tiwai smelter.

It is fair to say Mike’s first 100 days at Contact were full
of surprises, as just weeks after his commencement, the

COVID-19 pandemic response began and his focus and
energy turned to crisis management and doing right by
Contact’s customers, staff and broader New Zealand.

It has been an extraordinary time. Contact fully supported
the actions of the NZ Government in restricting the spread
of COVID-19. A lot of work was done to ensure we were
actively reducing the risk of the virus spreading and making
sure our people across New Zealand were as safe as
possible.

The response from the 943 people across Contact in the
wake of the COVID-19 pandemic response was really
pleasing, as the team adapted and continued to deliver
for customers and New Zealand at a very challenging
time. The directors met regularly with the leadership
team through this period and we saw the company was
in good hands and overall Contact coped extremely
well in challenging, uncharted circumstances.

More change and challenges were to come soon after
the pandemic lockdown too, with the closure of the Tiwai
smelter announced following the conclusion of Rio Tinto’s
strategic review. Citing high energy costs and a challenging
outlook for the aluminium industry, NZAS gave notice to
terminate the power supply contract in August 2021.

FY20 has seen Contact continue to deliver solid financial results.
Despite initial concerns regarding the impact of COVID-19, the
second half of the year has been in line with expectations, after a
more challenging first six months.

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We have made no secret of our view that the best
interests of NZ Inc is served by NZAS remaining
operational in the medium-term: ideally for at least
the next five years. The inability for this to happen
will be bad news not only for Southland, but also for
global emissions and New Zealand’s renewable energy
aspirations. In our view a disorderly exit will impact
multiple stakeholders and all generation-retailers.

Contact has been and continues to work on mitigation
options for a post-Tiwai environment and we are well-
positioned to emerge in a stronger competitive position
over the longer term. We have already announced the
pausing of the world-class, shovel-ready geothermal
project at Tauhara: putting this on hold is the best and
only sensible option at the moment but we believe its time
will come as supply and demand stabilises in the future.

More broadly we are a resilient organisation and in good
shape. Our portfolio of long-life renewable generation
assets, flexible generation portfolio, strong balance sheet
and operational discipline provide confidence we are
well-placed even in a lower demand environment.

FY20 has seen Contact continue to deliver solid financial
results. Despite initial concerns regarding the impact of
COVID-19, the second half of the year has been in line with
expectations, after a more challenging first six months.

Contact INTEGRATED REPORT 2020

One observation I’d like to make is in relation to
predictions by some of high wholesale prices over the
longer term. We do not see this as a likely scenario or
a sustainable trend as long-term pricing is linked to the
long-run marginal cost of new renewable projects to
meet demand, plus the costs associated with firming
renewable intermittency.

Underpinning these results is Contact’s operational
efficiencies, the quality of our generation assets and
strength of the balance sheet. We have a flexible
portfolio of gas-fired and renewable generation assets
that contribute to the security of electricity supply
for Kiwis and a lower carbon future for the country.

It is particularly pleasing to deliver investors the same
39cps annual dividend this year as last year. However
as we look forward to a likely period of disruption in
the industry, we will need to reconsider the level of
future dividends as the status of Tiwai is cemented
and mitigations emerge. We will provide investors
with more clarity on this as soon as is appropriate.

This year we have produced a different style of report,
delivering an integrated report for the first time. This is
for a much broader group of stakeholders than investors
alone and is not merely a look back over the year, but
also forward-looking. We are transparent and we want
to help people have a better understanding of how we
do business and how we deliver value beyond financial
returns. This is the right thing to do and we understand
the increasing expectations on all companies from
investors, customers and communities to provide this
information.

We will continue to build on our ESG credentials and
Contact has a leading role to play in tackling climate

We will keep our focus on our role in building a better New Zealand,
and delivering value to our stakeholders alongside sustainable,
long-term growth.

change via tangible actions that drive good business
outcomes.

This includes supporting and growing New Zealand’s
low-carbon advantage. To do this we need policy
settings to support accelerated electrification of
process heat and transport and agriculture sectors
away from carbon-intensive fossil fuels like coal and
petroleum – but without unduly burdening the economy
and consumers.

We are already one of the first power companies in the
world to have carbon emissions targets verified by the
Science Based Targets initiative, we have an innovative
green borrowing programme, and this year we inked
one of the country’s first sustainability-linked loans.
With the recent appointment of James Kilty as deputy
CEO we have also reiterated our commitment to
accelerating the decarbonisation of the New Zealand
economy, and our intention to play a leading role in this
ongoing transition.

We’ve also walked the talk by making reductions in
our own carbon emissions. We can do more here and
the Tiwai smelter’s exit will over time expedite the
retirement of thermal generation assets in the industry
which will see emissions decline even further.

Geothermal generation has a huge part to play here too,
as it provides true baseload power to the grid. We’re very
proud of the Contact team that leads the world in the
development of this very low emission generation option.

Contact is proud to be an important, successful
contributor to New Zealand and a strong participant
in this country’s efficient, competitive energy market.
We operate in an environment that many countries
around the world are envious of, and regard as an
exemplar of best practice. It is imperfect, but compared
to the distortions and value destruction present in other
countries we believe it works very well most of the time.

Finally thank you to Mike, Dennis and the Contact team
for their hard work and dedication over FY20. As always
there is much to be done, but it is an exciting new chapter
for the company.

We will keep our focus on our role in building a better
New Zealand, and delivering value to our stakeholders
alongside sustainable, long-term growth.

Yours sincerely

With the recent appointment of James Kilty as deputy CEO
we have also reiterated our commitment to accelerating
the decarbonisation of the New Zealand economy, and our
intention to play a leading role in this ongoing transition.

Robert McDonald
Chair

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Contact INTEGRATED REPORT 2020
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CEO’s report

It is a privilege to share my thoughts in this integrated
annual report for the first time as CEO of Contact Energy.

This is a great company and I am very pleased to be here.
We have a fantastic, talented, resilient team and a very
supportive Board. I’d like to thank everyone for making
me feel so welcome and for their assistance over my
first few months in the role, including the outgoing CEO
Dennis Barnes. The time has flown by since my first day
in February 2020.

Elsewhere Contact’s leadership team continues to evolve
too. Late in 2019 we appointed Jan Bibby as our new
Chief People Officer, and in July 2020 Jacqui Nelson was
appointed as our Chief Generation Officer. James Kilty
moved into a new role as Deputy CEO and has the reins
on our decarbonisation and demand growth efforts.

Financial results
This year there have been some unique challenges to
navigate. This includes the impact of COVID-19 early in
my tenure, and more recently the announcement around
the Tiwai smelter’s exit. We also had an unusual hydrology
sequence where the Clutha River experienced periods of
extremely low inflows and a one in 20 year flood.

In the first half of FY20 we felt the impact of recent
under-investment in New Zealand’s ageing gas fields as
an unreliable supply of natural gas led to a sharp increase
in thermal input costs. However across the full year gas
costs landed marginally lower than FY19.

Despite these challenges and unusual circumstances
our high-quality, long-life, renewable generation assets
and lean, low-cost retail operations combined to deliver
another solid financial result for shareholders.

In FY20 Contact generated revenue of $2,073 million,
EBITDAF1 of $451 million, profit of $125 million and
operating free cash flow of $290 million. Investors will

receive a total annual dividend of 39 cents per share.
This is in line with the FY19 dividend.

COVID-19 response
There is no denying that New Zealand changed after
11:59pm on 25 March when we moved into lockdown
for COVID-19. Throughout the lockdown we stood up a
crisis management team and continued to operate as an
essential service and lifeline utility, with an unwavering
focus on looking after our customers, looking after
our people, and doing right by New Zealand. Through
necessity we mobilised all but a small number of our
people to work from home, including home-based
call centres – this was extraordinary and something
we never thought we could do.

We acknowledge all of the people who kept New Zealand
going as we were all confined to our bubbles – a massive
thank you from us all here at Contact. It was humbling
to see the dedication of everyone working hard for
New Zealand during a very challenging period.

We looked after our people across our sites and offices
in Te Rapa, Stratford, Levin, Taupo, Whirinaki, Dunedin,
Clyde, Roxburgh, Auckland and Wellington. We continued
to serve our customers but minimised any risk of spreading
COVID-19 through meticulous continuity and crisis
planning, and ramped up hygiene and physical distancing.

As the COVID-19 response got under way, we also
reassured our 943 Contact people across New Zealand
that if they needed to be home for anything pandemic-
related – including looking after elderly relatives or to
be with their kids – we would pay 100 per cent of their
salaries and not require them to take leave. It was the
right thing to do.

Strategic priorities
And now as New Zealand’s post-lockdown economic
recovery begins we have a significant role to play.
We want to play a role in leading New Zealand to a
low-carbon future by developing low carbon solutions
for customers, and advocating for regulatory settings
that will facilitate the transition of New Zealand’s energy
system away from fossil fuels.

We are helping our commercial and industrial customers
to transition from higher carbon fuels to low carbon
fuels, with new products and renewable substitutes.
We aim to displace 1PJ of industrial heat with electricity
by 2022 – roughly equivalent to the electricity used by
all the houses in Taupō in a year.

Recent successes include partnering with Open Country
Dairy to support the installation of New Zealand’s
largest electrode boiler (13MW) at their Awarua site,
and the expansion of our geothermal direct heat to
connect the Nature’s Flame wood pellet manufacturing
plant and displace coal usage outside of New Zealand.
We have also continued to grow our demand flexibility
platform – with more than 20 customers signed up
to automatically reduce power consumption from
equipment such as pumps, fans and compressors
during high usage periods.

1. EBITDAF, underlying profit, free cash flow and operating free cash flow are non-GAAP (generally accepted accounting practice) measures. Information regarding the usefulness, calculation and reconciliation of these measures is provided within note A2 to the financial statements.

Contact INTEGRATED REPORT 2020
As well as our focus on decarbonisation and demand
growth, we are also under way with several other areas
of strategic activity as we pursue our vision of building
a better New Zealand.

This includes:

• maintaining flexibility around our investment options
across multiple, renewable energy sources (with a
focus on geothermal);

• simplifying how Contact is set up to be more effective

and efficient, reviewing our core processes and
organisational structure, and building on the experiences
of the COVID-19 lockdown by transforming our ways
of working;

• being a leading energy retailer in New Zealand as we
accelerate digitisation, consider adjacent products
and services, and optimise our spending; and

• embedding our commitment to best practice

environmental, social and governance practices
across Contact.

Tiwai and Tauhara
We will also continue planning for a post-Tiwai environment.
We expressed our disappointment when Rio Tinto’s July
announcement emerged setting out the planned closure of
the smelter in August 2021. If the smelter is to leave, we are
very supportive of the runway to closure being extended
beyond the current 14-month period. You may hear this
described as a ‘just transition’ or ‘orderly exit’ to enable
Southland, New Zealand and the electricity industry to
prepare for a post-Tiwai world. We remain optimistic a deal
can be done and will leave no stone unturned on this front.

In the meantime it is prudent for us to accelerate our
mitigation plans to minimise the potential impact. We have
already paused the development of a new power station
on the Tauhara geothermal field near Taupō. The team
involved in the preparation of the site and $40m appraisal
campaign have done an outstanding job and confirmed
that Tauhara is a world-class renewable geothermal
project, with very low associated carbon emissions.

It is on hold for now but we believe it is a matter of
when – not if – Tauhara will play an important role
in New Zealand’s transition to a low-carbon future.

However we must get a clearer picture of demand before
we make any final decision to proceed with this $600 million
investment. We believe Tauhara remains New Zealand’s
cheapest and most attractive option for new, renewable,
baseload electricity generation and when its time comes,
it will deliver substantial economic benefits and jobs in
the central North Island when it proceeds.

We were surprised to be the subject of allegations of
creating an undesirable trading situation in December 2019
when the Clyde River was in a major flood, but pleased
that the Electricity Authority did not uphold the complaint
against us in their preliminary decision in June 2020. We
are engaging with the Authority in the consultation that
followed the preliminary decision’s release.

Customer focus
On the retail front we now have more than 500,000
connections across electricity, gas and broadband. In
June more than 10,000 energyclubnz customers joined
Contact as that retailer exited the market. We have
continued our transformation to becoming a digital-first
retailer, with more than 100,000 customers now using
our apps and website for self-service each month.

Our focus on improving customer experience has seen
our Contact app ratings improve significantly, and this
success has eased demand on our traditional service
channels, with call volumes reducing from 850,000 in
FY19 to 760,000 in FY20.

The release of the Electricity Pricing Review’s final
report and Government response in October 2019
commanded a lot of attention across the sector. We
believe the goal should be to seek enduring solutions
to some of the challenges identified in the report.

We continue to work closely with the Electricity
Authority, ERANZ, MBIE and the Government as
recommendations from the Review are consulted on
and implemented. These recommendations relate to
both the wholesale and retail markets in New Zealand.
In particular, we agreed to extend voluntary market
making to support market liquidity, ensure we are
supporting vulnerable and medically dependent
customers, continuing to phase out prompt payment
discounts, and we supported the cessation of win-backs.

We help our most vulnerable customers keep the power
on with initiatives such as PrePay, flexible billing options
and contributing to hardship funds and education
campaigns. And more broadly we continue to work hard
to help customers maintain access to energy and avoid
burdensome debt by giving them choice, certainty and
control over their energy needs.

When the Clutha River is in significant flood our focus
is always to operate the Clutha hydro system to ensure
the safety of communities downstream, the safety of
our people and assets, and to manage our resource
consent obligations.

The Authority is expected to release its findings into
a ‘higher standards of trading conduct’ complaint in
relation to the same flood event in the next few months.
We disagree with these allegations too and we do not
expect the complaint to be upheld against us.

Conclusion

We’re excited about the future for Contact.
We are a strong company with plenty of options
and opportunities in front of us. We have a
robust balance sheet, an excellent portfolio
of assets and a very capable team.

And as you will see over the ensuing pages of this report,
we are focused on delivering value and reporting on
the things that matter most to our stakeholders. We
appreciate your ongoing support and interest.

Kind regards

Mike Fuge
CEO

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Contact INTEGRATED REPORT 2020

Who we are

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Contact INTEGRATED REPORT 2020Who we areOur board

Whaimutu Dewes

Victoria Crone

David Smol

Dame Therese Walsh

Robert McDonald

Jon Macdonald

Elena Trout

INDEPENDENT
NON-EXECUTIVE DIRECTOR

INDEPENDENT
NON-EXECUTIVE CHAIR

INDEPENDENT
NON-EXECUTIVE DIRECTOR

Appointed Feb 2010

Appointed Nov 2015

Appointed Oct 2018

Appointed Sep 2018

Appointed Nov 2015

Appointed Nov 2018

Appointed Oct 2016

Member, Health, Safety
and Environment
Committee

Member, Audit and Risk
Committee

Member, Health, Safety
and Environment
Committee

Member, Tauhara
Committee

Chair, Audit and Risk
Committee

Member, People
Committee

Chair, People Committee

Member, Tauhara
Committee

Chair, Health, Safety and
Environment Committee

Chair, Tauhara
Committee

Our directors bring broad knowledge, deep understanding and strong experience to the boardroom table.
Their governance sets our strategic course and enables Contact to thrive, succeed, and navigate risk-taking.
They ask the hard questions until they are satisfied with decisions, help us seize the right opportunities, and
ensure we balance the interests of all of our stakeholders.

In the Governance section of this report we include a matrix setting out the Board’s expertise across a range of strategic skills.
You can also find full profiles of the directors on our website.

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Contact INTEGRATED REPORT 2020Who we areOur leadership team

Jan Bibby

Dorian Devers

James Kilty

Mike Fuge

Catherine Thompson

Jacqui Nelson

Vena Crawley

CHIEF PEOPLE OFFICER

CHIEF FINANCIAL OFFICER

Joined 2019

Joined 2018

DEPUTY CHIEF EXECUTIVE
OFFICER

Joined 2002

CHIEF EXECUTIVE OFFICER

Joined 2020

CHIEF CORPORATE
AFFAIRS OFFICER AND
GENERAL COUNSEL

Joined 2010

CHIEF GENERATION OFFICER

CHIEF CUSTOMER OFFICER

Joined 2004

Joined 2014

Joined leadership team
15 July 2020

Our leadership team implement the strategy approved by the Board. They also ensure the Board receives accurate and
timely information about Contact’s operations, performance, legal obligations, reputation, financial conditions and prospects.

They manage the day-to-day operations of the company, our people and our resources to ensure these function
effectively and efficiently. They demonstrate strong and clear leadership inside Contact and to our external stakeholders.

You can also find full profiles of our leadership team on our website.

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Contact INTEGRATED REPORT 2020Who we arePutting our energy where it matters
Our moral compass – Ngā Tikanga

Our Tikanga guides our actions, both as individuals and as Contact,
and is our set of principles, commitments and behaviours.

Principles

Commitments

Behaviours

Pointed focus sharpens us

Human kindness connects us

Curiosity propels us

Progressive defines us

We act professionally at all times.

We care about the health and safety of
our people and minimise health, safety
and environmental impacts on customers
and communities.

We put our energy into things that
matter by:

· adding value to resources under

our control

· being inclusive, encouraging diversity
and expression of ideas and opinions

· creating value for our stakeholders
· ensuring the sustainability of our

business

· looking after natural and shared

resources

· being a good neighbour in communities.
We’re authentic and make sound decisions
knowing they’ll be subject to scrutiny.

Creating value for our customers and
communities by developing smart
solutions that make life easier.

Creating a rewarding workplace for our
people by valuing everyone’s contribution,
encouraging personal development,
recognising good performance and
fostering equal opportunity.

Respecting the rights and interests
of communities by listening, and
understanding and managing the
environmental, economic and social
impacts of our activities.

Respecting the rights and interests
of our business partners so we work
collaboratively to create valued, rewarding
partnerships.

Delivering market-leading performance
for shareholders by identifying,
developing, operating and growing
value-creating businesses.

Staying a step ahead, anticipating the
things that are going to matter to our
business and New Zealand.

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Contact INTEGRATED REPORT 2020Who we areOur operations

Connections

934employees

63.3k

shareholders

850k

spent in communities

510k

total customer connections at 30 June 2020

0Tier 1 process safety incidents 8TWh

contracted electricity sales $2.6b

net assets

39c

per share dividend

83%

renewable generation

$70m

tax paid

Electricity
6.6k

5.6k

Electricity

414k

419k

Volume sold GWh

Natural gas

860

838

2019

2020

Connections
by energy type

Natural gas
67k

65k

Broadband
26k

12k

+36Net Promoter Score

96%

gender pay ratio

921k

tCO2e Scope 1 emissions

Residential
424k
418k

Connections
by account type

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Business
59k
58k

Other

2.9k

1.5k

Contact INTEGRATED REPORT 2020Who we are2020 generation by station and type

8.5TWh

generated

3,752

(GWh)

3,333

(GWh)

Roxburgh (320 MW)

1,657

Te Huka (28 MW)

Poihipi (55 MW)

Ohaaki (44 MW)

198

335

340

Wairākei (132 MW)

1,045

Clyde (432 MW)

2,095

Auckland

Te Rapa

Stratford

Levin

Te Mihi

Ohaaki

Whirinaki

Te Huka

Poihipi

Wairākei

Wellington

Offices and call centres

Geothermal power station

Hydroelectric power station

Storage lake

Thermal power station

Hawea

Clyde

Dunedin

Roxburgh

1,439

(GWh)

Te Mihi (166 MW)

1,415

Te Rapa and Whirinaki (199MW)

Stratford – Peakers (210 MW)

Stratford – CCGTs (377 MW)

277

291

871

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Hydro

Thermal

Contact INTEGRATED REPORT 2020Who we areCreating value

This section sets out our business model. We are creating and contributing
to a better New Zealand, by putting our energy where it matters.

It includes an overview of the resources and
relationships (or ‘capitals’) that are deployed in or
impact on our business, the influence of the external
environment, and a summary of our key business
activities.

The outputs – and ultimately the outcomes – that
emerge from these interactions are how we create
value for Contact, New Zealand, communities, our
staff and all of our other stakeholders over the short,
medium and long term.

External environment
The external environment we operate in impacts our
value creation. This includes economic conditions
such as the post-COVID-19 recession and recovery,
technological change and the rise of digital for
customers, political activity, regulatory policymaking
such as the Electricity Price Review, societal change as
the population ages and diversifies, and environmental
factors such as climate change.

For more detailed observations about the external
environment for Contact in FY20 and beyond, please
read the overviews from our Chair Robert McDonald,
our CEO Mike Fuge and the ‘Our strategy’ section.

“Healthy energy systems
are secure, equitable and
environmentally sustainable,
showing a carefully managed
balanced Trilemma between
the three dimensions.”
World Energy Council

“The energy trilemma sums up
our difficulty in finding secure
energy supplies and catering
to rising demand without
prices becoming unaffordable,
all while reducing greenhouse
gas emissions.” The Guardian

The trilemma
The World Energy Council’s energy trilemma is a
three-dimensional problem that involves balancing
the security of energy supply with environmental
sustainability and affordability.

It neatly provides a framework for articulating the areas
where Contact puts its energy to create sustainable
value for New Zealanders: we’re working hard to
improve accessibility, demonstrate reliability and look
after the environment.

The trilemma also demonstrates the competing
demands and trade-offs at play. Pushing harder on one
dimension of the trilemma may require concessions
from the others. For example, a requirement for all
energy production in New Zealand to be 100 per cent
renewable is likely to prove very expensive, but a more
balanced target of 95 per cent will still deliver excellent
environmental outcomes but avoid the prohibitive costs.

In the Contact context:

• accessibility is focused on customer wellbeing, energy
hardship and tailoring our products and services to
customer needs.

• reliability is focused on the resilience of our supply

chain, the impact of regulation, financial sustainability,
the reliable supply of energy, and the safety and
wellbeing of our people.

• environmental sustainability is focused on community
wellbeing, climate change, renewable energy, water
and biodiversity.

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Contact INTEGRATED REPORT 2020Who we are

We create value by:

deploying financial, natural,
relationship, asset and people capital;

factoring in external environment
influences;

undertaking business activities in
alignment with our Tikanga, vision &
strategy, overseen by good governance;

delivering outcomes that impact on
accessibility, reliability and environmental
sustainability.

Vision and strategy

Tikanga

Governance and leadership

Supply chain

Risk and opportunity

Assets

c e ssibility

ple
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P

R
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ility

r
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viro

E n

R e l a t i o

n ships

Build a better New Zealand by:

Reliable generation of electricity

Sustainable environmental impacts

Smart solutions for customers

Economic returns

Engaged staff

Safe working environment

Capitals – We depend on various forms of capital for our success and the stocks of these increase, decrease or change in the course of our business activity.

Natural
Using, looking after and
managing natural resources
and environmental assets are
fundamental parts of Contact’s
business. This includes water,
geothermal steam/fluid,
gas, air quality, land, carbon,
biodiversity, pest control and
ecosystem impacts.

People
The experience, expertise,
competence and passion of
our people from our Board and
management team through
to everyone in our offices and
sites. It captures our ways of
working, our safety culture and
our Tikanga. It includes internal
engagement, development,
risk management, continuous
improvement and innovation,
managing external relationships
and aligning to deliver strategy.

Relationship
Our social licence to operate
relies on a myriad of relationships
within and between our
communities, stakeholders
and networks. It includes
the reservoir of goodwill
and trust we earn (or burn)
with stakeholders including
tangata whenua, customers,
communities, shareholders,
local bodies, Government,
regulators, media, suppliers,
partners and our own people.

Financial
We have a pool of funds that
we deploy to produce and
deliver energy, serve our
customers and undertake all
of our other activities. This has
been generated via our business
activities, investors and debt
arrangements with banks.

Asset
Various physical and intellectual
assets are used in delivering
reliable, affordable and
environmentally sustainable
electricity to New Zealanders.
This includes 11 power plants,
three offices, vehicles and
transmission/distribution
connectivity. It also includes
our reputation, website and
application software, IT
systems, customer databases,
brands, licences and internal
‘know-how’ around activities
like safety, transformation
and geothermal engineering.

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Contact INTEGRATED REPORT 2020Who we areOur strategy

Encouraged by the Board, our new CEO Mike Fuge has driven refreshed
strategic priorities as we continue our commitment to delivering
stakeholder value.

We are pursuing our long-term vision to create and
contribute to a better New Zealand, and also navigating
the challenges and opportunities emerging over the
short term and medium term, including:

• the implications of the exit of the Tiwai smelter and
the many ways this significant change to electricity
demand could evolve;

As the environment we are operating in evolves, we
know we need to keep adapting. We can’t keep doing
what we’ve always done and expect to succeed.
To ensure we become stronger and more successful,
we have commenced work on four strategic areas:

• ongoing focus on decarbonisation as we lead by

example and help our customers decarbonise too;

• COVID-19’s impacts on major industrial users who

• growing demand and maintaining flexibility around

consume the electricity we generate;

• the effects of the COVID-19 aftermath on households

and SMEs;

• the impact of new climate change legislation, carbon
budgets sets by the Climate Change Commission and
the ‘sinking lid’ on NZ’s net greenhouse gas emissions
from 2021; and

• the ongoing focus on the electricity sector from

politicians and regulators.

The twin impacts of the smelter’s exit in August 2021 and
the potential post-COVID-19 recession will inevitably
affect our business directly and also indirectly via our
customers and stakeholders.

In the wake of the pandemic, we know there will be hugely
challenging times ahead for New Zealanders, community
organisations and businesses of all sizes, and New Zealand
as a country. But there will be many opportunities too.

And similarly, with the smelter news we have a renewed
focus on development and building demand growth.
We intend to play an important role in accelerating
the decarbonisation of the New Zealand economy.

investment options across multiple, renewable energy
sources (with a focus on geothermal);

• simplifying how Contact is set up to be more effective

and efficient, reviewing our core processes and
organisational structure, and building on the experiences
of the COVID-19 lockdown by transforming our ways
of working; and

• being a leading energy retailer in New Zealand as we
accelerate digitisation, consider adjacent products
and services, and optimise our spending.

We are also focused on embedding our commitment
to best practice environmental, social and governance
practices across Contact.

We are uniquely placed as a crucial renewable energy
generator and retailer, in a critical industry for the
future of New Zealand.

We are preparing to navigate challenges and seize
opportunities. It’s exciting to think about what this
could look like, and the role Contact can play in
helping New Zealand recover and succeed.

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We are preparing to navigate
challenges and seize
opportunities. It’s exciting
to think about what this
could look like, and the role
Contact can play in helping
New Zealand recover and
succeed.

Contact INTEGRATED REPORT 2020Who we areOur supply chain

We generate
energy

We own and operate
11 power stations and produce 83%
of our electricity from our renewable
hydro and geothermal stations. Our
natural gas and diesel-fired power stations
operate to ensure the lights stay on for
New Zealanders when intermittent
renewable plants cannot operate

We innovate

We create smart solutions
that are good for people
(tiaki tangata) and the environment
(tiaki taiao) to help customers, partners,
suppliers and communities have a better
quality of life. We are an innovative, safe
and efficient generator, actively working
with our customers, partners and
suppliers to improve energy
efficiency, reduce emissions
and fight climate change

We sell and serve

As a retailer we sell products and
services to thousands of individuals
and businesses to meet their
energy and broadband needs

We trade

We sell the electricity we
generate on the wholesale market.
We purchase goods and services
from more than 2,000 suppliers.
We also trade a range of financial
products to manage our risk
and create value

83%

RENEWABLE
GENERATION

934

EMPLOYEES

2,000

SUPPLIERS

63.3k

SHAREHOLDERS

510k

CUSTOMER
CONNECTIONS

We provide more detail about our business activities and outputs in the Accessibility, Reliability and Sustainability sections of this report.

*All figures at 30 June 2020 or for FY20

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Contact INTEGRATED REPORT 2020Who we areWhat matters most

We use the Global Reporting Initiative (GRI) standards (core) and the International
Integrated Reporting Council (IIRC) Framework to report on material environmental,
social and governance activities, and aim to provide a balanced view of our performance.

We also report our climate change risks using the best practice guidance of the
Task Force for Climate-related Financial Disclosures (TCFD) framework.

What we did
We undertook an annual review to help determine the things our stakeholders
care about that we impact on. This assists our understanding of the most important
environmental, social and governance issues for our business, and the opportunities
for us to create value. This review involves an environmental scan, a review of internal
documents, and what our stakeholders have told us.

What we heard
The topics identified by each stakeholder group are set out below.

Customers
Affordability,
customer service,
helping communities,
environmental
protection, post-
COVID-19 kindness,
supporting NZ
economy, climate
change, inequality,
reducing costs,
mitigating emissions
trading costs,
business resilience,
decarbonisation and
electrification, energy
efficiency, cash flow
and financial security,
internet access.

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Tangata whenua
Whānau/hapū/iwi
wellbeing, connection
to and care of natural
resources, respect
for cultural sites and
cultural identity, jobs,
inequality, te reo
and tikanga, access
to resources, youth
development.

Communities
Being a good
neighbour, impact
on the natural
environment, climate
change, community
connection, jobs,
cost of living, cost of
energy, mental health,
post-COVID-19
recovery, inequality,
supporting local
economy.

Investors
Sustainable dividends,
financial performance,
managing risk (including
climate change risk),
taking care of our
customers, human
rights, supply and
demand, COVID-19
impact, environmental
stewardship,
regulatory change,
social licence, ESG
credentials.

Our people
Safety, wellbeing,
professional
development,
inclusion and diversity,
attraction and
retention, flexible
working and work/life
balance, leadership,
Tikanga and company
culture, connecting
with communities,
job security.

Suppliers/partners
Continuity and
certainty of work,
maintaining supply
chains, health and
safety, natural
environment, cash
flow, potential
Tauhara investment.

Government
Supporting vulnerable
consumers, post-
COVID-19 economic
recovery, accelerating
renewables and
electrification,
management of
natural resources,
fresh water,
relationships with
tangata whenua,
inequality, regional
development, social
licence, reliability
of supply.

Contact INTEGRATED REPORT 2020Who we are100

Accessibility

Reliability

Sustainability

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o
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k
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u
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n

Customer
wellbeing

Community
wellbeing

Customer
experience

Energy
hardship

Inequality

Resilient
supply chain

Water

Regulation

Climate
change

Renewable
energy

Partnerships

Leadership issue,
championship

People
development

Biodiversity

Financial
sustainability

Technology

Changing
expectations

Human rights/
rights

Employee safety
& wellbeing

Reliable
energy

Diversity

100

Significance of the impact or opportunity

Materiality matrix

Our materiality matrix maps ‘stakeholder
concern’ on the vertical axis, and ‘business
impact’ on the horizontal axis. All the
topics are important, but we report on
those that rank highest across both axes
and appear in the top-right corner.

Our key observations are:

• An increased focus on wellbeing by all stakeholders,
largely underpinned by the impact of the COVID-19
pandemic and the subsequent response;

• ‘Community wellbeing’ (encompassing the creation
of local jobs, the importance of connection and
relationships, and opportunities to support local
communities) and ‘customer wellbeing’ emerge
as the most important material topics;

• ‘Resilient supply chain’ is a new material topic,

reflecting an increased concern around our ability
to access the goods and services we need to run our
business, and do so locally where possible;

• ‘Regulation’ has increased in importance as we look
to opportunities to support the post-COVID-19
recovery.

This year we report on 13 topics grouped under the
three outcomes in our version of the energy trilemma:
accessibility, reliability and environmental sustainability.

United Nations Sustainable
Development Goals
We also mapped the 13 material topics against the
United Nations’ 17 Sustainable Development Goals,
and identified six goals where we believe Contact can
have the greatest positive impact.

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Contact INTEGRATED REPORT 2020Who we are

Contact
INTEGRATED
REPORT
2020

Accessibility

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Contact INTEGRATED REPORT 2020AccessibilityAccessibility

We play a vital role in the lives of hundreds
of thousands of individuals and businesses
in New Zealand who rely on the electricity,
gas, and broadband that we supply.
We help them warm their homes, power
their businesses, and connect with their
communities and the world.

We listen to what our customers want
and align our services and our people
capability and culture with this. We use
our human energy to make access fair,
easy and customer-centric.

The activities and ambitions in this section
contribute to affordable and clean energy
(SDG 7) and will be achieved through
partnerships (SDG 17).

Customer wellbeing and energy hardship

We’re committed to being accessible to all New Zealanders and businesses, with
a focus on how we can best support our customers, and we make every effort to
ensure no customers will be left without power.

We have a role in helping those most in need to keep
their lights on and their homes warm, and we agree with
the Electricity Retailers Association’s (ERANZ) position
set out in its Election Briefing in June 2020 that the
fundamental solution for energy hardship is addressing
poverty by improving housing, increasing incomes, and
fixing regulation:

“New Zealand has the 10th cheapest electricity
in the developed world, but low-quality
housing means we use a lot of it – which can
lead to high bills. Because of that, some
families struggle to keep their home warm
in winter. We want all families to live in warm,
dry homes with affordable energy costs. No
family should have to choose between putting
food on the table or turning their heater on.”

We’re acutely aware of the importance of supporting
vulnerable customers. If anyone needs help paying their
bill, we encourage them to get in touch so we can discuss
their options, including our range of plans and ways to
pay that may help manage energy use.

We know ‘one-size-fits-all’ isn’t the best way to serve our
customers or New Zealand. We help customers having
a tough time maintain their credit rating and we deploy

a wide range of tools to help people stay connected.
This includes early and proactive intervention, different
payment options, prepay services, health and welfare
checks for customers, EnergyMate energy assessment
referrals, and working with support agencies including
the FinCap budgeting service and Work and Income.

We’re also involved in ERANZ’s Vulnerable and Medically
Dependent Consumer Working Group, which brings
together people from across the electricity sector,
government departments, regulators, and community
organisations.

Our range of payment options make it easy for
customers to smooth out the cost of their bills, align bills
and due dates with pay days, or opt for PrePay for more
control. We also check whether customers are on the
right plan to meet their needs and whether switching
to a different plan or payment option might help.

More than 10,000 customers are now on weekly
or fortnightly payment plans, up from 1,200 a year
ago. This includes many of the energyclubnz customers
who transferred to Contact in June 2020. We’ve also had
more than 5,400 customers sign up for PrePay since it
was launched in September 2018. About 2,000 of these
customers would previously have been unable to access
energy from us because of their credit history.

PrePay operates like a prepaid mobile phone, so
customers control how much they pay and when. They

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Contact INTEGRATED REPORT 2020Accessibilitycan choose to build up credit to use over winter when
people tend to use more energy. They can also access
all the same products, prices, discounts and rewards
as other customers on ‘post-usage’ payment plans.
The PrePay option helps to retain access to energy by
enabling customers to repay debt at a rate and timeline
that suits their budget, with no charges or fees.

We understand there are complex issues at play when
it comes to customer debt, and we take a responsible
approach. We enable customers to manage their existing
debt to be repaid over a period that works for them and
without any debt-related fees or charges. This has helped
customers reduce their average debt and seen overall
debt decline by 45 per cent compared to FY19.

We only move to disconnection as an absolute last
resort, and for this small proportion of residential
customers their average balance in the final quarter of
FY20 was $500. We saw some customers accumulate
increased debt when we halted disconnections during
the COVID-19 lockdown.

We work hard to help customers who are disconnected
get reconnected. In the final quarter of FY20, 54 per cent
of customers were reconnected within 24 hours, up
from 46 per cent on last year.

EnergyMate helping
vulnerable families
We are proud of our work with ERANZ on the pilot
programme for EnergyMate, a free in-home energy
coaching service for consumers at risk of energy hardship,
struggling to pay their power bills or to keep their homes
warm. The programme is funded by electricity retailers
like us, as well as lines companies and Energy Efficiency
and Conservation Authority (EECA) – and delivered by
community organisations.

In 2019 ERANZ piloted EnergyMate in 150 homes in
Auckland, Wellington and Rotorua. The energy efficiency
advice given in-home to families was also trialled
successfully at community hui in Manukau and Petone.
We’re looking forward to the programme being extended
to 1,000 more families across New Zealand, alongside
more hui and more training for community organisations.

Dr Susanna Kelly’s evaluation (December
2019) found that whānau involved with the
EnergyMate pilot “identified appropriate
actions to improve their energy usage
and costs and were able to follow actions
through. The in-home nature of visits is likely
to be a key factor in this success.”

Feedback on what the participants took
away from the programme included:

“I recommend EnergyMate visits every home.”

“Now I know the things I do well and what I
can improve on to help reduce my spending.”

“Learning about pricing plans.”

”Knowing how to manage our power usage,
stick to our plan and budget.”

Responding to the
Electricity Price Review
The Government’s response to the final report of the
Electricity Price Review panel chaired by Miriam Dean
QC was released in October 2019. We have been
working with MBIE, the Electricity Authority and other
market participants as the proposed changes to the
electricity sector are implemented.

We supported the ban on win-back activity that
was announced in February and came into effect on
31 March 2020, and we have long advocated for removal
of the low fixed user charge that will be phased out over
the next few years.

We also stopped prompt payment discounts for new
residential customers in May 2019, aligned with the
recommendations in the Electricity Price Review.
There are now more than 120,000 Contact residential
customers on plans without prompt payment discounts.

Existing customers may still have these discounts as part
of legacy plans, but this will continue to decline over time.

Helping out during COVID-19
While almost all New Zealanders have physical access
to energy, there are still economic barriers to access for
some. COVID-19 provided a stark reminder of that in
2020, as everyone across New Zealand was forced into
lockdown bubbles.

We already have very competitive pricing and well-
established processes and plan options, which enabled
us to support customers having a tough financial time in
the maelstrom of the pandemic response.

Our support included adapting payment terms
and options, working with social service agencies,
suspending disconnections and debt collection referrals,
and automatically applying prompt payment discounts
or forgoing late payment fees.

We were also heavily involved in the ERANZ-led initiative
to fund 10,000 power credits worth $120 each, allocated by
community groups to households affected by COVID-19.

We acknowledged the efforts of organisations on the
front line looking after New Zealanders, by providing
Women’s Refuge, Salvation Army and St John with
more than $400,000 of free electricity across their sites
throughout New Zealand.

The COVID-19 response is going to be an ongoing
commitment of time, resources and kindness.

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Contact INTEGRATED REPORT 2020Accessibility

Customer experience

We work hard to create positive customer experiences so our customers will stay with
us and advocate for us, and we’re seeing good signs across many customer metrics.

Our customer ‘switch rate’ (which measures customers
leaving Contact) was 16.4 per cent, down 2.1 per cent
on FY19 and 2.7 per cent below the market average.
And our Net Promoter Score (a measure of how many
customers would recommend Contact) has been
increasing steadily to +36 at 1 July 2020.

Net Promoter Score1

-3

FY16

FY17

FY18

FY19

FY20

1. We use the relational Net Promoter Score.

We use brand tracking and customer panels to listen to
our customers and these help us decide where to put our
human energy and resources. For example, customers
have told us they want personalised, seamless, digital
experiences. They want bundled products and services
to remove hassle and reduce their energy costs. They
want to pay competitive, fair prices and if something
goes awry they expect to be able to get it fixed swiftly.

We have continued our shift to becoming a digital-
first retailer. Thirty per cent of our customers now use
our apps and website for self-service, with more than
100,000 active monthly users. During the past year
our focus on improving customer experience has seen
our Contact app ratings improve from 1.9 to 4.5 (on a
scale where 5 is the best) for the Apple App Store and
from 1.8 to 4.3 on Google Play, the highest ratings of
any energy retailer in New Zealand. This success eases
demand on our traditional service channels, with call
volumes down from 950,000 in FY18 to 850,000 in FY19
and 760,000 in FY20.

Different needs, different plans
We offer a broad range of products and services to
meet different customers’ needs. We also proactively
help customers move to plans that are a better option
for their current circumstances to help them save money
or gain other benefits.

Some of our popular new plans and services include:

• Bundle with broadband: customers can keep things

simple and get discounts by getting one bill for
broadband and their electricity and/or gas. In
May 2020 we relaunched this offer with an even
better customer experience and compelling pricing for
ADSL, VDSL and fibre. More than 14,000 customers
have added broadband this year and we now have
more than 25,000 customers on our broadband plans,
meaning Contact is New Zealand’s fastest-growing
broadband provider.

• Basic: a simple, hassle-free plan, with no fixed term,

break fees or rewards. We now have over 40 per cent
of our residential customers on PPD-free plans.
• Simplicity bundle: launched in June 2020, this plan

for electricity and gas customers means they pay only
one set of line charges – there is no separate daily
gas charge.

• Rewards: we joined the AA SmartFuel (AASF) scheme

in 2017 so our customers can sign up to plans that
give them fuel discounts. We have 40,614 customers
receiving regular rewards and have given away
$15,632,532 in rewards since launching with AASF.
• Bach: gives customers the flexibility to only pay for
what they use at the bach with no daily charges, no
fixed term and no break fees.

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Contact INTEGRATED REPORT 2020AccessibilityReliability

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Contact INTEGRATED REPORT 2020ReliabilityReliability

Contact works hard to be a safe, efficient and
reliable energy provider that delivers value to
our customers and makes their lives better,
while also delivering good financial returns.

We’ve weathered volatile wholesale markets,
increased uncertainty resulting from a global
pandemic, and a competitive retail sector.

We’re committed to continuing both Contact’s
and New Zealand’s transition to renewable
energy, to finding innovative ways to meet our
customers’ needs, and to ensuring we have the
right people, with the right skills and experience
to achieve this.

Our work to be reliable contributes to
growing sustainable industry, innovation
and infrastructure (SDG 9), responsible
consumption and production (SDG 12)
and will require partnerships to deliver
it (SDG 17).

Reliable renewable energy

We are a reliable, responsible, safe and efficient generator. We are also innovative
and pushing for accelerated decarbonisation of New Zealand’s energy sector –
through our own efforts and investments, and also by working with customers,
partners and suppliers.

In FY20, 83 per cent of the energy we generated came
from renewable geothermal and hydro sources, and
the remainder from thermal generation. Our thermal
capacity supports increased use of renewables by
providing necessary back-up when there’s not enough
wind, rain or sun.

Predicting future energy demand is complex. With the
announcement of the closure of the Tiwai smelter in
August 2021, which uses approximately 13 per cent
of New Zealand’s electricity supply, there will be a drop
in electricity demand in the near term. There will also
be an over-supply of energy in the South Island, and a
need to upgrade transmission in order to move energy
northwards to where demand is located.

This over-supply of energy could also be used by large
commercial and industrial customers in the South Island
who are currently using fossil fuels (e.g. coal-fired boilers for
process heat). At a national level, demand is expected to
increase long-term as a result of widespread electrification.

A low carbon future for
New Zealand
We want to play a role in leading New Zealand to a low-
carbon future. Our strategy is made up of three parts –
leading by example, leading our market and leading
business.

We lead by example by making our operations more
efficient, minimising any adverse impacts on communities
and the environment, and walking the talk – if we expect
our customers to decarbonise, we must take the journey
ourselves.

We are leading our market by closing higher-carbon
generation assets and developing new, low-carbon
ones. Since 2008 we’ve closed thermal power stations
in Ōtāhuhu and New Plymouth and we’ve developed
New Zealand’s only underground gas storage facility at
Ahuroa (sold in 2018), geothermal generation at Te Mihi
and Te Huka, and a gas-fired peaking plant at Stratford.
We also acquired a thermal peaking plant at Whirinaki.

We’re preparing for the market of the future and
maximising low-carbon energy by building a demand
flexibility platform (piloted in FY19 and launched in
FY20), developing low-carbon solutions for customers,
and advocating for regulatory settings that will facilitate
the transition of New Zealand’s energy system away
from fossil fuels.

We’re also well-progressed with our understanding of the
geothermal resources at Tauhara (see Investigating options
to develop geothermal resources), and we are monitoring
other renewable generation options for the future.

We help our commercial and industrial customers to
transition from higher-carbon fuels to low-carbon fuels,
with new products and renewable substitutes. We aim

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Contact INTEGRATED REPORT 2020Reliabilityto displace 1PJ of industrial heat with electricity by 2022
– roughly equivalent to the electricity used by all the
houses in Taupō in a year.

We’re helping customers to reduce emissions by
electrifying industrial heat, electrifying transport,
offering long-term electricity supply agreements,
connecting customers to renewable geothermal ‘direct
heat’ and rewarding customers for being flexible with
their energy use through our ‘demand flex’ service.

Driving electrification
opportunities
We have partnered with Open Country Dairy to support
the installation of New Zealand’s largest electrode boiler
(13MW) at their Awarua site, and have collaborated
with industrial customers to explore industrial heat-
pumping solutions for hot water provision.

We have an ongoing partnership with Optifleet, with
funding support from EECA, to help our commercial
customers review and transition their fleets to electric
vehicles (EVs). Optifleet also has an online tool that will
make sourcing EVs easier for customers, as it makes
the total cost of ownership transparent and helps them
choose the right option.

On the infrastructure side, we’ve recently entered
into a partnership with Thundergrid. It provides a full
EV infrastructure service that includes everything
from design advice to ongoing user support. Through
Thundergrid we can offer our commercial customers
a simple way to provide vehicle charging to their
customers, staff, and visitors.

These partnerships make life easier for customers by
taking the guesswork and effort out of making the
switch to EVs – so they can focus on their core business.

Alongside this, we’ve been working with Optifleet to
audit our own fleet, develop vehicle replacement plans,
and review how we’re using our vehicles. Contact’s
passenger and light vehicle fleet is now 53 per cent electric
vehicles or plug-in hybrids. We have set a target of having
a 100 per cent electric passenger fleet before 2023.

100 per cent of our vehicle fleet (including all commercial
vehicles) will be zero emissions before 2030.

Our geothermal connection
We supply geothermal direct heat to Taupō businesses
around our geothermal power stations, including the
Prawn Park, Tenon, Wairakei Terraces, Ohaaki Heat and
Wairakei Resort.

This year we connected Nature’s Flame to our
geothermal operations providing heat for drying the
wood fibres used to make biomass pellets. This has
enabled them to increase their production and export
their biomass pellets to Japan and Korea to displace
coal usage outside of New Zealand. This increase in
production has also resulted in a partnership with
Fonterra to convert the boiler at the Te Awamutu dairy
plant from coal to biomass and reduce annual carbon
emissions by 84,000 tCO2e.

The Nature’s Flame wood pellet manufacturing
plant in Taupō makes a mountain of sustainable
wood pellets every year from sawmill waste.
When they needed a new energy source to
dry the wood fibres for their pellets, we signed
an agreement to build a geothermal energy
supply system to provide them with low-
emission, high-efficiency process heat.

“We are thrilled by the outcome of this deal
with Contact. With our new energy supply
system getting to operational status, we are
able to increase to 100 per cent of capacity,
creating new jobs in the Taupō region.”

John Goodwin, Operations Manager, Nature’s Flame

Growing our demand
flexibility platform
We have continued to grow our demand flexibility
platform – and we now have over 20 customers signed
up providing a total portfolio of 7MW.

Our demand flexibility platform enables our commercial
and industrial customers to automatically reduce power
consumption from equipment such as pumps, fans and
compressors during high-usage periods and reduce
fossil fuel generation as a result.

When supply is tight, the platform can provide a more
sustainable option than ramping up thermal electricity
generation to balance the grid. Our customers are
paid to reduce grid emissions by being flexible with the
electricity they consume so it is a win-win.

Since launching our demand flexibility service last year,
we’ve been getting some great feedback from our
commercial and industrial customers. They’re telling us
how much they value opportunities that make it easy for
them to contribute to reducing New Zealand’s emissions
by being flexible with their operations.

We’re now seeking further partnerships with industrial
consumers across the lower North Island, so if you’re
interested in finding out more and joining us on our
journey to reduce emissions, please do get in touch.

Farmland Foods is one customer who said
that signing up to the service was a ‘no-
brainer’. Like all businesses, they’re looking for
commercially viable ways to do the right thing.

Managing Director, Eddie Davis told us that
participating in demand flexibility ticks all
the boxes and is a way for them to stay at
the forefront of their industry. Like many
companies, they’re on the lookout for innovative
technology that helps them to reduce costs
and reduce their impact on the environment.
For Eddie, another bonus is being paid for
participating, making it a win-win.

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Contact INTEGRATED REPORT 2020Reliability

Investigating options to develop
geothermal resources
Geothermal energy is important in the transition to a
low-carbon economy because it provides low-emission
baseload generation, unlike weather-dependent
renewable sources like wind, solar or hydro. We have
had options to further develop a power station at
Tauhara, near Taupō, since 2010, when we obtained
resource consents for development on the field.

Investigating the potential to further develop Tauhara
aligns with our decarbonisation strategy and with
New Zealand’s climate goals. To put things in perspective,
producing the same amount of electricity from coal-
fired generation emits 18 times more carbon than
is expected from the Tauhara project, and gas-fired
generation from a thermal peaker emits eight times more.

In June 2020 we announced positive results from the
four wells drilled in a $40 million appraisal campaign,
confirming that Tauhara is a world-class renewable
geothermal project. We also selected Sumitomo
Corporation as the preferred construction partner for
a new power station development at Tauhara and an
early works contract has been signed. Sumitomo is an
engineering, procurement and construction contractor,
headquartered in Japan, and has successfully delivered
geothermal projects in New Zealand and several other
countries.

In July, Rio Tinto announced it intended to close the
Tiwai smelter in August 2021 and this has forced us
to press pause on the Tauhara project for now. It is
‘shovel ready’ and remains New Zealand’s cheapest and
most attractive option for new, renewable, baseload
electricity generation, but pausing this $600 million
investment is the prudent option as we factor in the
impact of COVID-19 and the potential exit of the
smelter to get a clearer picture of demand.

As we work through the geothermal options from here,
we will continue to work closely with the local community
in Taupō, who will share the benefits of any new (and
existing) developments. We are sensitive to impacts
on land, waterways and biodiversity; modern adaptive
management techniques help ensure these are identified
early so negative impacts can be reduced and mitigated.

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Contact INTEGRATED REPORT 2020ReliabilityFinancial sustainability

Our investors rely on us to continue delivering sustainable financial returns.
We continue to have strong cash flow generation and operational performance,
and solid and improving ESG credentials.

We expanded the Green Borrowing Programme in
January 2020 with the establishment of a $50 million
sustainability-linked loan facility, the first such loan
issued by Westpac NZ and one of the first of its kind
in New Zealand.

The arrangement means we receive a discounted
interest rate on the loan if we meet ambitious targets
linked to our environmental, social and governance
(ESG) rating determined by the independent ratings
agency RobecoSAM. (Conversely, we will pay higher
interest costs if we don’t meet the rating targets.) This
includes assessment of our climate strategy, electricity
generation mix, corporate governance and stakeholder
engagement.

We have an open share register with high liquidity
and no cornerstone shareholders.

Importantly, we see a clear pathway to long-term value
creation for shareholders as we pursue decarbonisation
opportunities, leverage our high-quality generation
portfolio, and retain flexibility around investing in
renewable generation opportunities (including the
world-class resource at Tauhara) when the time is right.

Green leader
Access to affordable, long-term capital is one of
the essential enablers for the globe to deliver on
commitments under the Paris Agreement. Ultimately
carbon doesn’t care about borders and a domestic focus
on domestic targets ahead of global targets will result in
carbon leakage.

We were the first company to establish a Green
Borrowing Programme in New Zealand in 2019. It
demonstrates our responsible and committed approach
to decarbonisation and promoting sustainable energy
sources. There are more details on our Green Borrowing
Programme in the Sustainablity disclosures section.

By obtaining green certification for our funding
portfolio, we are showing the way for companies to take
tangible steps to support a sustainable economy in an
efficient, innovative and transparent way.

In August 2019 the pioneering programme won the
‘Innovation in Energy’ award at the Deloitte Energy
Excellence Awards, and was a finalist for the ‘Low
Carbon Future’ award.

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Contact INTEGRATED REPORT 2020ReliabilityFinancial performance in FY20
We delivered a solid financial result in FY20,
underpinned by our operational efficiency, high quality
and flexible portfolio of gas-fired and renewable
generation assets, and the continued strength of our
balance sheet. The second half of the year was in line
with expectations despite the impact of COVID-19,
following on from a more challenging first six months.

Profit from continuing operations was down 26 per cent
to $125 million. This was $220 million lower than FY19,
but last year included a $170 million gain on the sale of
the Rockgas business and Ahuroa gas storage facility.

EBITDAF1 from continuing operations was down
$54 million (11 per cent) on last year to $451 million in
FY20. This was due to a combination of lower renewable
generation, lower wholesale prices and the impact of
rising costs of thermal generation and restricted gas
supply. Income from electricity market making was also
down $10 million on the prior year following volatile
swings in the wholesale market during the large inter-
island transmission outage early in 2020. These market
headwinds were offset by lower fixed costs (+$13 million).

The increasing cost of gas and carbon is accelerating
the case for the substitution of our Taranaki Combined
Cycle thermal plant at Stratford with new renewables.
As a result the useful life of the plant has been reduced,
increasing our depreciation by $15 million year-on-year.

Contact’s operating free cash flow1 for FY20 was
$290 million, down 15 per cent on FY19. This was due
to a combination of lower operating earnings, partially
offset by lower stay-in-business capital expenditure
and interest costs.

Cash tax of $70 million was paid, up $23 million on FY19
and reflecting the increased tax payable on the strong
profit realised in the last financial year.

In August 2020 the Board approved a final ordinary
dividend of 23 cents per share (imputed by up to
15 cents per share for qualifying shareholders) and
this will be paid to investors on 15 September 2020.

An interim ordinary dividend of 16 cents per share
was paid in April 2020, meaning the annual dividend
declared for FY20 is 39 cents per share.

Despite strong operational performance and underlying
efficiency improvements, EBITDAF in the Customer
business was down $17 million year-on-year to $50 million,
as rising costs for electricity, gas and carbon were not
recovered as average electricity tariffs were flat year-
on-year.

EBITDAF in the Wholesale business reduced by $38 million
to $425 million year-on-year, as production from hydro
generation was restricted by transmission constraints and
dipped by 11 per cent (479GWh) despite strong hydro
inflows. Thermal generation costs increased by 1 per cent
after a $6 million increase in gas storage facility costs.

New Zealand’s shift from reliance on fossil fuels to
renewable electricity has impacted Contact’s near-term
profitability as thermal costs rise, but over the longer
term we are well-positioned to connect renewable
energy to our customers.

We are focused on improving operational efficiency and
leveraging our lean operating model. We are a strong
company with plenty of options and opportunities in
front of us. We have a robust balance sheet, an excellent
portfolio of assets and a very capable team. We are
excited about the future.

Dividends (cps) – Declared

FY16

FY17

FY18

FY19

FY20

Interim dividend

Final dividend

The last five years in review

For the year ended 30 June

Unit

Revenue

Expenses

EBITDAF

Profit/(loss)

Underlying profit

Underlying profit per share

Operating free cash flow

Operating free cash flow per share

Dividends declared

Total assets

Total liabilities

Total equity

Gearing ratio

cps

2016

2,163

1,640

523

(66)

157

21.7

352

48.5

5,652

2,829

2,823

20171

2,079

1,578

501

151

142

19.9

305

42.6

5,455

2,677

2,778

20182

2,275

1,794

481

132

130

18.1

301

42.0

5,311

2,584

2,727

20192

2,519

2,001

518

345

176

24.6

341

47.5

4,954

2,172

2,782

2020

2,073

1,622

451

125

129

18.0

290

40.4

4,896

2,275

2,621

1. EBITDAF, underlying profit and operating free cash flow are non-GAAP

1. Restated figures reflecting the adoption of NZ IFRS 15 Revenue from Contracts with Customers and NZ IFRS 16 Leases.

(generally accepted accounting practice) measures. Information
regarding the usefulness, calculation and reconciliation of these measures
is provided within note A2 and note A3 of the financial statements.

2. Figures reflect the combined result and position for continuing and discontinued operations and certain amounts have been reclassified to conform

to the current year’s presentation.

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Contact INTEGRATED REPORT 2020ReliabilityRegulation

Society is demanding action on climate change, with clear progress expected.
The New Zealand regulatory framework is being adapted to deliver on this societal imperative.

New Zealand’s regulatory environment
provides the framework within which
our business operates, and requires high
standards of health, safety, labour and
environmental compliance.

We proactively monitor legislative and policy changes
to ensure we meet our obligations and manage risks and
opportunities. We also work hard to maintain broad
relationships across the political divide, pull our weight
with industry and business organisations, and ensure our
voice is heard by regulators on behalf of our customers
and investors.

Our approach is straightforward, open-minded and
evidence-based, in line with our Tikanga. We aim to
build sustained and trusted relationships with external
stakeholders who shape and influence the environment
in which we operate.

There are several themes, all aligned with the energy
trilemma, that we see potentially affecting our business
and the environment in which we operate, including:

• Focus on energy hardship e.g. the Electricity Price Review

and introduction of associated recommendations,
energy efficiency initiatives such as ERANZ’s EnergyMate
programme and Hardship Fund, engaging consumers
who are unengaged with the energy sector;

• Renewable energy e.g. the Emissions Trading Scheme,

increased momentum around electric vehicles,
incentivising investment in renewable developments
and electrification of industry away from fossil fuels;

• Sectors in transition e.g. future and longevity of

demand from major industrial users, electrification
of agriculture and other industrial processes, and the
long process of reworking transmission pricing;

• Improving environmental outcomes e.g. new climate
change legislation, ongoing reviews of the Resource
Management Act, National Policy Statement for

Potential electricity demand impact

Potential renewable
generation impact

Potential wider electricity
sector impact

Net zero
NZ carbon
emissions
by 2050

Transport
policies

Climate
Change
Commission

Tiwai
announces
exit in 2021

Zero
Carbon Act

COVID-19
economic
stimulus

Coal phase-
out for
electricity
generation
by 20301

Ban on
offshore
oil and gas
exploration

Freshwater
reform

Electricity
Pricing
Review2

Emissions
Trading
Scheme

Transmission
Pricing
Methodology

1. A commitment made by the Government when New Zealand joined the Powering Past Coal Alliance.

Announced

In progress

2. Review complete, findings announced and into implementation.

Freshwater Management and the National Policy
Statement for Indigenous Biodiversity.

The other major area of focus is the impact and
aftermath of the COVID-19 pandemic and response.
We have been in the fortunate and critical position of
being an essential service and lifeline utility, and had a
strong focus on operating reliably through the lockdown
period and reducing the financial impact for vulnerable
customers.

We are also committed to supporting the economic
recovery of New Zealand, ensuring stakeholders are
aware of our desire to reduce carbon, create jobs and
look to invest in renewable generation where economic
conditions allow. This has also extended to exploring
green hydrogen opportunities, as well as our Tauhara
geothermal project.

‘Undesirable trading situation’ claim
In December 2019, the Electricity Authority advised us
of a claim against both Contact and Meridian Energy
alleging we had created an undesirable trading situation

(UTS) and breached the ‘good conduct’ provisions of
the industry code. The allegations related to the cost of
electricity in the wholesale market at a time when flood
conditions saw considerable volumes of water being
spilt by generators in the lower South Island.

In June 2020 the Electricity Authority released its
preliminary decision that an undesirable trading situation
may have existed in the wholesale electricity market
from 3–18 December 2019, but stated that market offer
behaviour at Contact’s South Island stations “did not cause
outcomes that were significant enough to constitute a UTS.”

At the time there was more water than we could use for
generation, given the Clutha River was in significant flood.
Our focus in extreme flood events is always to operate
the Clutha system to ensure the safety of communities
downstream, our people and assets, and to manage our
resource consent obligations. We have always disagreed
with the allegations and we were surprised at the claim
when it emerged in December. We will continue to
engage with the Electricity Authority as consultation
continues following the preliminary decision.

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Contact INTEGRATED REPORT 2020ReliabilityEmployee wellbeing

We have a team of 934 dedicated, passionate and innovative people at Contact.
We support our people to do their best work, and we pay competitive salaries and
provide a wide range of additional benefits.

We see most learning happens through experience, so
we look for on-the-job opportunities, secondments
and projects for our people. This includes opportunities
outside Contact, such as working with our partners.
Growing our people also includes formal training,
coaching and mentoring, and leadership training.
We invest in growing leadership for women through
Global Women programmes.

Our regular Ask Your Team (AYT) engagement
surveys measure how our leaders are doing, and
include questions on leadership, culture, performance
development and internal communication – these were
particularly useful in the COVID-19 response. AYT also
provides us with our manager effectiveness score and
the average score this year was 81 per cent, putting us in
the upper quartile.

We invest in a healthy workforce to ensure our people
are highly engaged and able to perform at their
best. Insights gathered in our Wellbeing360 Survey
undertaken in FY19 helped us understand our people’s
needs. The survey measured mental, physical, work
and social wellbeing, and provided each person with
personalised results and ideas for improving their
wellbeing.

This survey also gave us insights about how our people
feel about our Employee Assistance Programme (EAP);
RedMed, our discounted medical insurance benefit
with Southern Cross; and ContactFlex, which allows
our people to work flexibly. Acting on these insights we
encouraged and allowed more of our people to access
this benefit. We also continue to proactively increase
flexible ways of working for our people, even more so
since the COVID-19 lockdown.

We’ve implemented our ‘GoodYarn’ programme to build
a community in Contact with the knowledge and skills
to identify mental health issues and support colleagues
in a caring and respectful way. We’ve now rolled out
GoodYarn workshops across all our locations. During
lockdown we worked with GoodYarn to develop and
deliver workshops remotely through Microsoft Teams
to keep up momentum. We are also delivering a series
of workshops supporting people to build personal
resilience as we redesign how we work.

Our ‘Building Better Workdays’ programme was a finalist
at the Deloitte Energy Excellence awards in August.

Supporting employee activities
We support and encourage a huge number of
community and team activities across our sites and
offices. Examples this year included Steptember
(a fundraiser and awareness campaign for cerebral
palsy), Pink Ribbon Breast Cancer Foundation events,
Movember, Māori Language Week, the Emissions
Reduction Challenge, Waka Ama racing, Bring Your Kids
to Work Day and Mental Health Awareness Week.

We also took part in the important Shakeout earthquake
preparedness drill in October and encouraged staff to
attend the global climate change marches in September.

Progress on inclusion and diversity
Our efforts here are underpinned by our Inclusion and
Diversity Policy. This leads to broader ideas, better
decision-making and ultimately more value for our
stakeholders.

We’re proud to be certified with the Rainbow Tick, a
continual quality improvement programme designed
to help organisations provide a safe and welcoming

workplace for all employees. We believe in an inclusive
and diverse workplace where differences in gender
identity and sexual orientation are valued. We were
assessed based on international best practice across
areas including employee engagement, external
engagement and organisational development. We
achieved our Rainbow Tick status in December 2018
and were re-accredited in July 2020.

We’re also a member of Champions for Change, a group
of New Zealand CEOs and directors on a mission to
accelerate inclusive and diverse leadership. Members of
this initiative share best practice activity, and benchmark
inclusion and diversity statistics and policies. Overall, as
at 30 June 2020, the Contact team is 47 per cent female
(the same as 2019). We have seen improvements in
gender diversity across some levels in Contact and we
continue to focus on executive positions, management
roles, and plant operational roles where we’re not yet
meeting the gender balance measure of 40–60 per cent
female. Progress is slow but steady.

We have actively removed bias from our talent acquisition
process by removing names from candidate CVs where
agreed with hiring managers, and making sure we have a
Talent Acquisition or People team presence during the
process. Our new talent acquisition model is now fully
embedded and has resulted in operational efficiency, a
better candidate journey, and reduced costs.

We foster inclusion and diversity by supporting
Connexis ITO’s Girls with Hi-Vis programme by hosting
events at our Stratford and Wairākei power stations.
Girls with Hi-Vis aims to attract more women into the
trades by giving them the opportunity to see options in
the energy sector first-hand. In FY21 we are expanding
the programme to include both Clyde and Te Rapa.

We are a global partner for WING (Women in Geothermal),
a not-for-profit international organisation promoting
education, professional development and advancement of
women in the geothermal industry. We support scholarship
programmes, networking opportunities and development

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Contact INTEGRATED REPORT 2020Reliabilityopportunities for WING participants. We also supported
the WINGman Special Taskforce – a key initiative of WING
to enable men in geothermal to support and empower their
female colleagues – by holding a series of sessions facilitated
by Upflow to engage men in the conversation around
gender equality.

We provide interns with projects aligned to their studies
and interests. For example, our Māori interns help
us with te reo lessons, marae protocol, and Te Tiriti o
Waitangi understanding. We love seeing them report
back to the hapū and iwi of Tuwharetoa and Ngāti Tahu
on what they’ve achieved during their internships.

We also recently partnered with Diversity Works to
help guide our thinking on how we keep building a more
inclusive and diverse culture. This included a diagnostic
of our current state, assessing what is working well and
where we need to improve. We have plenty of scope
to develop a more formal, strategic and well-informed
approach to diversity and inclusion management.

We were proud to have our efforts recognised in
Equileap’s 2019 Global Gender Equality Ranking,
ranking the top 100 global organisations for diversity and
inclusion alongside three other New Zealand companies:
Air New Zealand, Fonterra and Z Energy. We were 73rd.

This year for International Women in
Engineering Day we showcased the journeys
of 10 of our amazing women engineers. The
international theme was “Shape the World”,
so we asked Kelsey, Lelish, Ellie, Katie, Paula,
Katherine, Nataly, Christine, Lynley and Rachelle
some questions about what got them into their
field in the first place. We used both internal
channels and social media to tell their story.
www.contact.co.nz/thewire

Bumper intake of interns
In late 2019 we welcomed our biggest intern intake
ever with 18 paid interns joining us to get involved with
projects, provide a fresh perspective and get hands-on,
practical experience. Our interns join us from Summer
of Tech, Tupu Tek and Summer of Biz.

We also run a dedicated Māori internship programme,
established in 2015. This has helped foster trust between
ourselves and our iwi partners, grow our cultural capability,
and advance our goal to be inclusive and diverse.

Gender

53%
Male

47%
Female

Age diversity

1%
Undisclosed

47%
30–50

20%
Under 30

8%
Māori

7%
Asian

2%
Pasifika

1%
AMELA2

Ethnicity1

32%
Over 50

29%
Undisclosed

29%
Other

37%
European

1. Total % adds up to more than 100%. This is because

individuals can choose to identify multiple ethnicities.

2. African, Middle Eastern & Latin American.

More data available in the Sustainability disclosures section.

Responding during COVID-19
As essential workers during the COVID-19 lockdown,
our team continued to operate in what we called “the new
business as usual”. For 93 per cent of our people it meant
a rapid shift to working from home, and all the pressures
and juggling that comes with such a move. A big thank
you to the team for their resilience and commitment.

During lockdown we checked in with our people through
two Hearing from You surveys to understand how they
were coping with working differently, with more than
9,000 verbatim comments emerging across the two
surveys. People said they felt connected and supported
by their leaders and teammates, and that leaders had
their people’s wellbeing in mind, and genuinely cared
about them and their families.

For most of our people, working from home went
well and we intend to keep this flexibility in place. We
started thinking about future ways of working early in
2020 and COVID-19 accelerated this. The feedback
from our Hearing from You surveys was clear: let’s not go
back to our pre-COVID-19 ways of working. So, we’ve
used the insights from the last couple of months to
help us understand how we might work going forward
and our Transforming Ways of Working programme will
focus on this early in FY21.

As part of our COVID-19 response we continued to
look after all our people across our sites and offices in
Hamilton, Stratford, Levin, Taupō, Whirinaki, Dunedin,
Clyde, Roxburgh, Auckland and Wellington. This meant
we could continue to serve our customers and minimise
the risk of spreading COVID-19 through meticulous
continuity and crisis planning, hygiene practices and
physical distancing. Protecting our people and the wider
community is a top priority.

As the COVID-19 response got underway, we also
reassured our team of just over 900 people working
across New Zealand that if they needed to be home
for anything pandemic-related – including looking after
elderly relatives or to be with their kids – we would pay
100 per cent of their salaries and not require them to
take annual or sick leave. We also contributed a $120
(net) payment to all our people to help with increased
power and internet use and to show our appreciation
for their commitment and resilience.

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Contact INTEGRATED REPORT 2020ReliabilityProcess safety

Tier 1

Tier 2

Tier 3

FY20

FY19

FY18

FY17

FY16

Tier 1 – a significant loss of containment of hazardous material or energy.

Tier 2 – a lesser loss of primary containment or a significant degradation

of barriers.

Tier 3 – learning events where issues have been identified in our process

safety barriers or controls.

Note: This table represents the number of process safety incidents across
our operations. The figures exclude any incidents occurring in the Ahuroa
Gas Storage facility or Rockgas LPG facilities.

Employee safety

Our people, plant, communities and the environment are our most important
assets, so we have a robust, world-class, Health Safety and Environmental
Management System (HSEMS) to ensure we have the plans and processes
in place to keep them safe.

Measuring our HSE performance
We track our safety performance with three key
measures. Our HSE index, our Total Recordable Injury
Frequency Rate (TRIFR) and Total Incidence Severity
Rate (TISR). Our HSE Index is derived from questions in
our engagement survey. Our people score us on things
like how well we’re empowering and involving them
in process improvement and performance reliability,
how safe they feel to speak up and be honest, how
well and consistently we support them when things are
challenging or go wrong, and how effective our supplier
and contractor relationships are.

Total Recordable Injury Frequency Rate (TRIFR) is a
global measure that can be benchmarked and monitors
injury rates. However, it is a lagging indicator that
looks back rather than taking the potential for risk
into account. As our TRIFR reduces, it becomes less
relevant in understanding how our systems and culture
are working effectively, so while we continue to monitor
and report TRIFR we no longer set targets based on this
measure. We also measure Total Incident Severity Rate
(TISR), a leading indicator measure that gives us a much
better idea of exposure to risk by assessing the potential
severity of both HSE and process safety incidents.

Our year-to-date TRIFR for controlled activity (work
done under our HSE management system, e.g. at our
sites or by our people) was 2.1. This included five minor
injuries (minor knocks and strains). Our TRIFR measure is
calculated based on hours worked (2.40m in FY20) and
number of injuries.

Our TRIFR for monitored activity (work done by our
service delivery partners under their own HSE systems)
was 5.4 representing one minor injury. This is Contact’s
lowest-ever TRIFR result.

TISR assesses all HSE and process safety events and
considers both actual and potential consequences so
that we get a view of how well our defences are working
for our critical risks. TISR was 2,279 within controlled
activity in FY20 (a significant improvement on 3,900
in FY19).

Controlled TRIFR1

FY17

FY18

FY19

FY20

2.4

3.3

1.3

2.1

1. We have removed Rockgas from our data for comparative purposes.

Monitored TRIFR

FY17

FY18

FY19

FY20

10.3

6.6

5.4

18.8

More data available in the Sustainability disclosures section.

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Contact INTEGRATED REPORT 2020ReliabilityResilient supply chain

Maintaining and developing a sustainable and resilient supply chain is increasingly
important, especially as COVID-19 has placed greater restrictions on access to
international markets and resources, and increased pressure on the sustainability
of local businesses and suppliers. We must maintain access to the resources we need
to run our business, while also driving more sustainable outcomes with our supply
chain partners.

Contact purchases a wide variety of goods and services.
Our biggest purchases are electricity to sell on to
our customers and transmission charges relating to
transporting that electricity to our customers. We
also use a range of national and international suppliers
to help us maintain our power stations and electricity
supply, support our connection to customers, and
support the running of our offices and overall business.
We have around 2,000 suppliers and approximately
5 per cent are offshore.

In the last 12 months we have developed our approach
to sustainable procurement. Prior to the COVID-19
lockdown we had worked to ensure resilient, sustainable
supply chains for broadband modems. This allowed
Contact to pivot between international and domestic
suppliers and ensure we could continue to provide
modems and support our customers during the impacts
of COVID-19.

We will be looking to embed our sustainable
procurement approach into the business in the coming
year. We have developed resources to help our people
make more sustainable and balanced decisions in
purchasing, assist with identifying key suppliers to
partner with to improve environmental and social
reporting and impacts, and increase understanding
of our supply chain and its dependencies.

Data on supply chain impacts in Sustainability
disclosures section.

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Contact INTEGRATED REPORT 2020ReliabilityEnvironmental
sustainability

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Contact INTEGRATED REPORT 2020Environmental sustainabilityEnvironmental
sustainability

Our business, our people, our customers
and our communities rely on New Zealand’s
natural resources, and it’s crucial we look
after them. Environmental sustainability
ensures our natural and shared resources
are available to future generations, and is
essential to the continued operation of
our power stations and to meeting the
expectations of our stakeholders.

We are constantly evaluating our relationship
with, and impact on, the environment, and
we report on our environmental performance
to the Board Health, Safety and Environment
Committee. This reporting includes our
material issues: climate change, water,
biodiversity, resource consent compliance
and tangata whenua relationships.

Our environmental sustainability work
contributes to affordable and clean
energy (SDG 7), climate action (SDG 13),
life below water (SDG 14) and will be
achieved through partnerships (SDG 17).

Community wellbeing

We live, work and operate in communities across the country, and we know our
actions impact on the people and environment around us. Our philosophy is to
‘be the neighbour you’d want to have’.

To us, this means respecting the rights of others,
ensuring the safe and best practice operation of
our sites, and making a positive contribution to the
communities we call home. It is all part of being a
responsible New Zealand company.

We foster open, respectful, reciprocal relationships
using our Tikanga to guide us. We work hard to
understand the needs and aspirations of our local
communities, and to ensure they understand how
our business works – and how we tick as people too.
We have community engagement plans across
100 per cent of our generation sites.

We engage with stakeholders in our local communities
year-round and we have an annual stakeholder
council hui with representatives from across the five
sustainability pillars, to help identify and prioritise our
material themes. We use these findings, along with
national and global trends and research, to inform
our local community plans.

Each of our key regional sponsorships is supported by
a business case, identifying key deliverables for our
stakeholders. We meet regularly throughout the year
with our partners, who report back to us on how they
are tracking. During the COVID-19 lockdown, when

some of our partnerships had to push “pause” because
of restrictions, we assured them that we would continue
to support them so that they were in a positive place
post lockdown.

Here at Contact we do want to hear from our neighbours,
both when times are good and not so good. To this end
we have an 0800 number for communities around our
geothermal and hydro operations, where people can
call 24/7 if they need us. We also have a formal complaint
process for Environmental and Community Events
embedded in our risk reporting system.

Stakeholder Registers have been developed for our
Taupō, Clyde and Stratford operations. These registers
include key contact information across a wide range
of stakeholders. Community, whānau, hapū and iwi
engagement is embedded in our systems and processes
for major operational activities that impact directly
on our neighbours (such as noise and visual impacts).

We also have some mitigation and relationship
agreements as part of our consents, which guide
our approach to working with important community
stakeholder groups, including tangata whenua.

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Contact INTEGRATED REPORT 2020Environmental sustainabilityPreparing for Tauhara
We have had a significant presence in the Taupō
community since geothermal energy operations began
at Wairākei more than 60 years ago. At our Wairākei
sites, we employ around 165 people, most of whom live
in the Taupō community.

We know local iwi, hapū and the wider community have
a special interest in any developments at Wairākei and
nearby Tauhara. If the construction and commissioning
of a new geothermal power station was to proceed, it
would bring significant investment and economic impact
for the region.

Over the last year our team has worked on engaging the
community around the Tauhara project, which has now
been paused. We have also started preparing for the
important resource consent process for our broader
geothermal operations on the Wairākei geothermal
field, which are up for renewal in 2026.

Supporting community-led
initiatives
Alongside our special community relationships in Taupō,
we value our place in communities that we operate in
across New Zealand. In FY20 we contributed more than
$850,000 to community initiatives, including $400,000
of free power for St John, Women’s Refuge and the
Salvation Army during the response to COVID-19. We
also donated $40,000 towards iwi and hapū COVID-19
response initiatives in Taupō.

Our community support activities include:

Learning through nature
Kids Greening Taupō empowers students to be actively
involved with projects to increase biodiversity and solve
environmental problems. It instils a sense of connection
between children and the natural environment to help
to build the next generation of sustainability champions.
We provide support to the Take Action Fund, which
enables students to get out there planting.

“Without Contact Energy’s financial support,
Kids Greening Taupō would not have been
able to have the same level of involvement in
the community. We could not have held the
same number of events, completed as many
restoration projects, supported as many
schools, assisted as many teachers, or worked
with so many students. We are incredibly
grateful – it has made a huge difference
to the educational and environmental
outcomes that we have been able to achieve.”

Rachel Thompson, KGT Education coordinator

“We would be lost without the SwimWell
programme. Our parents love it. Without
these lessons during school time many
wouldn’t have the opportunity to take part.
A significant number of our parents do not
have the spare dollars and means to pay
for lessons – we often find that older family
members ask about lessons and guidance
when their children are learning too.”

Liz France, Teacher, Taupō Primary

Blossoming in Alexandra
Since 2004, Contact has been a major sponsor of the
colourful Alexandra Blossom Festival, which takes place
close to our Clyde Dam. This year more than 8,000
people turned out to join the festivities and enjoyed
fairground rides at the Contact Party in the Park. It’s a
real family affair and to keep it this way Contact gives
free entry to all primary school kids as well as a free
carnival ride and helium balloon.

Kiwi in Stratford
Through the Stratford Site Sponsorship Fund, we have
a partnership with the Taranaki Kiwi Trust (TKT) to
support one of the birds in Te Papakura O Taranaki.
Their kiwi programme measures the birds’ survival,
dispersal, breeding attempts and impact of predators.
TKT has released 107 kiwi onto Mount Taranaki, and
they continue to monitor some of them to measure
survival and productivity using radio transmitters.

Swimming lessons
Our long-standing sponsorship of SwimWell Taupō gives
every school-aged child in the district access to free
swimming and water safety lessons, helping children
to develop the skills and confidence they need to stay
safe while having fun in the water. Each year our support
enables more than 25,000 swimming and water safety
lessons to be delivered to 3,500 local children, aged
5–12 years. We also sponsored the Central Taranaki
Safe Community Trust’s swimming lessons for families
in the Stratford region who might not normally be able
to participate. Around 80 young children attended the
programme this summer – now in its third year.

Eureka! Scholarship
Congratulations to Renzo Ubaldo from St Patrick’s
College in Wellington for winning the Contact Energy
Gold Scholarship at this year’s Sir Paul Callaghan
Eureka! Awards. This programme challenges secondary
school students and tertiary undergraduates to
deliver a 12-minute presentation about how science
or technology will benefit New Zealand’s economic,
environmental and social wealth and wellbeing. This
scholarship rewards the student who presented the
most innovative and creative solutions to help reduce
carbon emissions in New Zealand’s energy sector.

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Contact INTEGRATED REPORT 2020Environmental sustainability

Golf in Taupō
Over the past 19 years, the Contact Wairākei Charity
Golf Tournament has raised more than $397,000 for
community projects in the Taupō area. In 2019 more
than 100 golfers participated, supporting the Taupō
Community Patrol (TCP). Based at the local police
station and manned by volunteers, TCP helps police
by being the extra eyes and ears to keep the local
community safe, patrolling residential, business and
commercial areas. The proceeds were used to purchase
an EV community patrol car, the first of its kind in
this country.

Action in education
At the Taranaki Regional Council Environmental
Awards, three schools took out the Contact-sponsored
‘Environmental Action in Education Award’. The awards
recognised outstanding examples of environmental
stewardship and sustainable development of our natural
resources in the Taranaki region. Congratulations to
Moturoa School for empowering students to take
action to build a sustainable community; Omata
School for inspiring students to be guardians of their
local environment; and Ngamatapouri School for
using innovative technology to understand the local
environment and inform their community.

Mrs Heron’s Cottage
On the banks of Lake Roxburgh, we helped with the
restoration of a humble cottage dating from the 1860s.
Mrs Heron’s Cottage is virtually the only remaining
evidence of a once thriving gold-mining community in
the Roxburgh Gorge. Contact funded the work through
an agreement we have with Heritage New Zealand to
work together to manage archaeological sites along the
banks of the Clutha River.

Engaging with tangata whenua
Tangata whenua have a special relationship with the
natural resources that we rely on to generate electricity.
We interact with various iwi and hapū around our
operational sites, and have a number of mitigation and
relationship agreements to guide our engagement.

In Taupō, we have continued to work constructively
and transparently with Tauhara hapū, to understand
hapū interests in relation to our development plans for
Tauhara. Our commercial partnership with local Māori
Lands Trust Tauhara Moana has been constructive in
relation to geothermal access rights. We are also about
to begin engagement with Wairākei hapū and local iwi
on the reconsenting of our operations on the Wāirakei
geothermal field which are up for renewal in 2026.

In response to the Karapiti slip event in February 2019,
we have commissioned a Cultural Impact Assessment
for Ngāti Tūwharetoa iwi and hapū about the impacts
of the event on the Waipuwerawera and Waikato Rivers.

We also have formal agreements and relationships with
Ngāti Tahu around our Ohaaki power station, and Ngāi
Tahu around our hydro operations on the Clutha River.
There are a number of formal and informal committees
and groups through which we discuss mitigation-related
matters, and have three mitigation Charitable Trusts
established with each of Tauhara hapū, Wairākei
hapū and Ngāi Tahu to distribute funding towards
programmes that offset the cultural impacts of our
operations.

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Contact INTEGRATED REPORT 2020Environmental sustainabilityClimate change

Momentum to limit the extent and impacts of global warming continues to grow in
New Zealand. This includes the projected physical impacts of climate change and
the transitional risks such as regulatory change and shifting consumer behaviour.

As an energy company, climate change is a material issue
for our business. While more than 80 per cent of our
electricity comes from low-carbon renewable resources,
we contribute to climate change through the burning
of fossil fuels in our thermal power stations, our vehicles
and through other indirect sources (such as energy
use and travel). We are a mandatory participant in the
New Zealand Emissions Trading Scheme, which means
we purchase and surrender units to cover the emissions
created through our generation operations.

In 2019 Contact commissioned the National Institute
for Weather and Atmospheric Research (NIWA) to
model the potential climate-change impacts around
our power stations and operational sites based on two
scenarios developed by the Intergovernmental Panel on
Climate Change (IPCC). This information was used by
our teams to help identify the physical and transitional
risks and opportunities that climate change presents to
our business. We found that climate change exacerbates
existing risks in some areas, while also posing new risks.

The key risks and opportunities identified over the
short, medium, and long term are outlined in the
Climate-related risks section of this report.

We believe that as a business, we can help fight climate
change through both reducing our own emissions, and
supporting decarbonisation of energy in New Zealand
(see Reliable renewable energy section). This benefits
our communities, and also creates opportunity to grow
demand for renewable energy, which as a generator and
retailer we are well positioned to meet.

Reducing our carbon emissions
Contact is a member of the Climate Leaders Coalition,
and is committed to playing a role in the decarbonisation
in New Zealand. In 2019 we set verified science-based
emissions reduction targets in line with a goal of limiting
global warming to well below 2˚C.

Our targets are:

Emissions from electricity generation (tCO2e)

2,500,000

2,000,000

1,500,000

• to reduce our Scope 11 and 22 emissions by 34 per cent

1,000,000

by 2026 on a 2018 base-year

• to reduce our Scope 33 emissions by 30 per cent by

2026 on a 2018 base-year.

Achieving these targets will require us to displace
thermal generation with low-carbon renewable
generation. This will take time and investment. Our
Tauhara project, paused after the Tiwai smelter news
in July 2020, will play an important role in helping us
to meet these long-term targets.

In FY20 our Scope 1 and 2 emissions were 7 per cent
lower than the previous year, and 22 per cent down on
our 2018 base-year. This was largely driven by lower
thermal generation as a result of increased hydro
inflows. Our Scope 3 emissions reduced year on year by
39 per cent as a result of the sale of Rockgas, reduced
travel as a result of the COVID-19 lockdown, and
concerted efforts to drive emissions reductions from
energy use at our sites, and other programmes.

There is a slight reduction in emissions per MWh for
the period as a result of using less thermal generation.
Further detail on our emissions is in the Sustainability
disclosures section.

500,000

2
1
Y
F

3
1
Y
F

4
1
Y
F

5
1
Y
F

6
1
Y
F

7
1
Y
F

8
1
Y
F

9
1
Y
F

0
2
Y
F

Total greenhouse gas emissions by Scope (tCO2e)

74.3%
Scope 1

25.6 %
Scope 3

0.1%
Scope 2

1. Scope 1 – produced directly through our operations.

2. Scope 2 – emissions from purchased electricity.

3. Scope 3 – emissions in our wider supply chain.

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Contact INTEGRATED REPORT 2020Environmental sustainabilityLeading by example
Contact was the first New Zealand company to sign up as
a supporter of the Taskforce for Climate-related Financial
Disclosures. We have used their guidelines to guide our
climate-related reporting and have included a TCFD Index
in this report to identify where material is reported.

Contact was also the first company to establish a Green
Borrowing Programme in New Zealand. This year
we have expanded this with the establishment of
a $50 million sustainability-linked loan facility, one
of the first of its kind in New Zealand. We’re listed
on the Nasdaq sustainable bond index – the first
New Zealand company to do this. We were also
pleased to be recognised as one of the companies
working hard to be a sustainability leader in the 2020
edition of Colmar Brunton’s Better Futures report.

We are also developing an initiative to support
commercial and industrial customers in identifying
opportunities and implementing measures to reduce
emissions. Our launch of this initiative was interrupted
by COVID-19, and we now plan to launch the
programme later in 2020.

We’ve made some decisions that have helped to reduce
risk and maximise the opportunity presented to us by
climate change in the short term. We have invested
into Drylandcarbon to help manage our carbon costs,
we have developed our sustainable opportunities team to
help drive decarbonisation of energy in New Zealand, and
we have made progress on preparing new renewable
geothermal generation options to help meet demand
for renewable energy (see Reliable renewable energy
section) in line with New Zealand’s climate change and
renewable energy targets. In the short term, we see that
these steps position us well.

In the medium and long term, there is greater uncertainty
about the future risks to the business. However, our
scenario analysis suggests that mobilising to help
decarbonise New Zealand, and limiting global warming
to well below 2˚C, yields better financial outcomes
for Contact than a situation where temperatures
increase above 2˚C. While there are many unknowns,
we believe that our current strategy positions us well
to drive change, while maximising opportunity for our
stakeholders now and in the long term. We have more
detail on our climate-related risks in our Sustainability
disclosures section.

Financial implications
of climate change
In 2020, we undertook scenario analysis to further
understand the financial implications of climate-related
risk on our business. We formulated 12 potential
scenarios using a business as usual, 2˚C future, and
4˚C future to help us understand the impacts of
climate change on revenue, assets, expenditure, capital
financing and lending. We mapped this over the short,
medium, and long-term looking at inputs such as the
impact of the closure of Tiwai smelter, changes to solar
uptake, increasing carbon costs, changes to demand,
generation asset mix and more.

This analysis tells us that under all market scenarios
the average, relative EBITDAF will not be materially
different as a result of climate change in the short-
term. Operating earnings are assumed to increase in
line with assumptions on increasing demand as a result
of electrification post 2023.

Drylandcarbon
planting underway
In March 2019 we invested in the Drylandcarbon
partnership to create a geographically diversified forest
portfolio to sequester carbon on marginal land, along
with Air New Zealand, Genesis Energy and Z Energy.
It aims to produce a stable supply of forestry-generated
New Zealand Unit (NZU) carbon credits to support
fulfilling our annual requirements under the New Zealand
Emissions Trading Scheme over the long term. Through
the partnership, we are committed to positive sustainable
outcomes for the environment, the farming economy and
rural communities where Drylandcarbon will operate.
Its afforestation plans are closely aligned to a number
of key Government objectives and will deliver a range of
environmental and sustainable development benefits to
our regions. In June 2020 Drylandcarbon planted its first
seedlings at Matiawa Station on the Kaikōura coast to
officially get its carbon offset programme underway.

2020
2019

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Contact INTEGRATED REPORT 2020Environmental sustainabilityBetter water quality

We know water is a precious tāonga – a resource for everyone to enjoy and look after.
It is also a high priority for our focus on sustainability.

The value we generate for our stakeholders relies
on an ongoing supply of good quality water, and we
understand our responsibility to minimise the impact of
our activities on the health and wellbeing of freshwater
ecosystems. We are part of the solution to better water
quality in New Zealand.

Back in 2015 we worked through a collaborative process
with our stakeholders, and listened to what people value
about water. We developed Our Commitment to Water,
which frames up our long-term plan to help maintain
this precious resource for future generations.

Our commitment
• We believe water is for all New Zealanders to share and

that no one owns water.

• Certainty and longevity of access to water for

sustainable economic development is a cornerstone of
our country’s success.

• Contact will work to enhance and improve the quality

and mauri of water.

• Contact’s continued access to water is a privilege

and comes with responsibilities that define our use,
management and stewardship. This approach should
enable the continued sustainable uses and values
of water from a cultural, recreational and economic
perspective.

• Contact will maximise the efficiency of our water use,
and we must constantly review those needs to find
further efficiencies to return water to the system for
other users.

• We share these responsibilities with others and we must

have open, collaborative relationships that work to ensure
every one of us plays our part in improving our waterways.

• We recognise the principles of the Treaty of Waitangi
and the relationship that tangata whenua have with
water as kaitiaki.

Our water use
At Contact, we use and impact on water in a number
of ways:

• Our hydro stations use water directly for electricity
generation. This water is not consumed as it runs
through the dams, but this process impacts the
ability of sediment and freshwater species to move
upstream or downstream.

• We use water and geothermal fluid, which we either
run through turbines or deliver to other companies
that need heat (such as Nature’s Flame, Tenon and
Ohaaki Kiln). Most of the geothermal fluid we use is
reinjected into the reservoir, but some of it is cooled
and discharged into streams and rivers.

• Cooling water is used at all of our electricity and
gas operations to keep things running safely and
efficiently. This is reused or returned to the stream
or river it was taken from (and some evaporates).
• Our offices use water just like any other business –
dishes, bathrooms, teas and coffees. Most of these
water systems are connected to local council supply
and treatment.

We prepare overviews of our potential waterway impacts
for each of our operational sites. From there we identify
where we can make improvements in our stewardship
by reducing or improving our impact. We measure our
water usage dynamically and also produce a holistic water
dashboard each year which measures our performance
on a range of water-related impacts from ecological
integrity to water security, water quality and more.

This financial year we used 17,163,076 megalitres
(ML) of water. After passing through our hydro and
geothermal power stations, 99 per cent of this water
was returned to rivers or to geothermal reservoirs
(non-consumptive), with the remainder discharged in
line with our resource consents. Overall, water usage
for processing, cooling and consumption in our thermal
power stations was 1,289 megalitres.

We have had no significant water-related incidents this
year. However, we are working through the restorative
justice process relating to the Karapiti slip that occurred
in February 2019, which involves addressing the harm
the incident caused for stakeholders including hapū
and iwi. We have reviewed the incident to ensure that
we learnt from our mistakes, and have implemented
remedial actions. We are deeply sorry that the incident
occurred, and would like to thank everyone who has
been working with us on the review and remediation
process.

Non-consumptive water usage (ML)1
for year ended 30 June 2020

Source/water use

Clutha Mata-Au River water2

Geothermal reservoir

Geothermal cooling water2

Total

(ML)1

16,624,902

75,992

330,047

17,030,941

Total water usage for year ended 30 June 20203

Source/water use

Geothermal reservoir

River and surface water2

Water from third parties2

Council2

Discharge from all sources

Total

1. ML = megalitres.

2. Fresh water.

Withdrawal
(ML)1

Discharge
(ML)1

114,805

1,536

283

116,658

15,476

3. Management of the use and impact on water is largely done through

our resource consent compliance activities.

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Contact INTEGRATED REPORT 2020Environmental sustainability
Impact of freshwater reforms
In September 2019, the Government released an
action plan for healthy waterways, including a range
of proposed changes to improve freshwater quality,
such as developing a new National Policy Statement for
Freshwater Management, setting higher standards for
swimming, stormwater and wastewater management,
and reducing the impact of land management practices
on waterways.

The changes are far-reaching, particularly in relation to
required reductions in contamination from farming and
urban catchments, but the impact on our operations is
relatively low as we have good processes and policies in
place, underpinned by our water commitment.

Biodiversity

Biodiversity encapsulates the variety of living things on earth; plants, animals, fungi and
micro-organisms, and the ecosystems they are a part of. Our operations impact on the
habitats of certain species, and as such, we have a responsibility to mitigate these impacts,
and contribute to outcomes that improve the ecosystems around our operations.

Across our sites in 2020 we caught 2,009 pests, planted
30,806 trees, transferred 489 eels downstream in the
Clutha catchment (including 54 migrant eels), and
transferred 7.5kg of elvers upstream of the Roxburgh
Dam. Contact has also planted more than 125,000
native trees over the last three years. To ensure their
survival, this year we hand-released (weeded and cleared
by hand) around some of the existing native plants.

As a responsible company we also understand that
proactively contributing to biodiversity supports
our social licence to operate, helps us earn trusted
relationships within local communities, and builds
credibility when we have a view or opinion to contribute.

The diversity of our generation operations means
a range of different impacts in different regions. At
our geothermal operations in the Taupō region, we
impact on species that rely on warm ground, such as
thermotolerant vegetation. In addition, our discharges
to freshwater can negatively affect water quality. At
our hydro operations on the Clutha River, our greatest
impacts are on fish passage. At our thermal stations,
our impacts on biodiversity are minimal, however, we
actively contribute to the needs and aspirations of our
community. For example, in Taranaki, where the region
has set a goal to be the first predator-free region in
New Zealand, we are contributing to achieving that goal
by running trapping programmes around our site, and
supporting local environmental initiatives.

We have established plans to mitigate our biodiversity
impacts for all our operational sites and we report on
progress on those plans to the Board Health, Safety
and Environment Committee. Initiatives we undertake
include species management programmes, community
engagement, and partnership projects.

This year, in collaboration with Waikato Regional
Council, we have continued to remove wilding pines
from geothermally significant land across Taupō, taking
the total area to approximately 38 hectares. We have
also planted 4.9 hectares of non-productive farmland
into indigenous species to boost indigenous flora and
fauna across the pastoral areas we operate.

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Contact INTEGRATED REPORT 2020Environmental sustainabilityGovernance
matters

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Contact INTEGRATED REPORT 2020Governance mattersGovernance
matters

Our board

Good corporate governance
protects the interests of all
stakeholders and enhances short-
term and long-term value. We
regularly review our corporate
governance systems and always
look for opportunities to improve.

At 30 June, we comply with the
recommendations of the NZX
Corporate Governance Code in
all material respects. You can see
our full reporting in our Corporate
Governance Statement on our
website.

The Board’s role and responsibilities
The Board is responsible for Contact’s governance,
direction, management and performance.

Specific responsibilities include:
• Setting and approving Contact’s strategic direction
• Monitoring financial performance
• Appointing the CEO and monitoring CEO and

senior management performance

• Ensuing appropriate systems to manage risk
• Reviewing and approving compliance systems
• Overseeing our commitment to our Tikanga, sustainable
development, the community and environment, and
the health and safety of our people.

Board composition
The Board consists of seven directors, all of whom are
independent (i.e. none of the factors described in the
NZX Corporate Governance Code that may impact a
director’s independence apply to any Contact director).

Following an independent review of the Board by the
Propero consultancy in late 2019, the Board refreshed
Contact’s director skills matrix, which sets out the
skills necessary for Contact’s success and assesses
each director against this. It’s not expected that every
director will be an expert in every area, but all skills
should be represented in the Board as a whole.

The matrix shows a good spread of expertise and
secondary skills among current directors. In addition to
the skills in the matrix, all seven Contact directors have
strong governance expertise.

Board performance
We recognise the value of professional development
and the need for directors to remain current in industry
and corporate governance matters. Contact assists
directors with their professional development in a
number of ways, including an induction programme
for new directors, briefings to upskill the Board on new
developments, deep-dive workshops on key issues and
Board study tours.

During this year Board activities included:

• Appointing Mike Fuge as the new CEO of Contact

Energy

• Meeting weekly online during the COVID-19 lockdown
period to enable quick decisions to be made and keep
across the fast-developing risks

• Forming a new Board committee to reflect the

strategic importance of the possible Tauhara project
• Board site tour of Tauhara as part of October board

meeting to get an understanding of the site and project
and to help provide context for decision-making.

A fund is available for director development
opportunities, and the Chair may approve allocations
from the fund for opportunities that benefit both
Contact and an individual director.

We regularly review the performance of the Board to
ensure the Board as a whole and individual directors are
performing to a high standard. An independent review
was carried out by Propero late in 2019. The results
were reported in confidence to the Board in early 2020.
The Board is now working through the actions and
improvements identified.

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Contact INTEGRATED REPORT 2020Governance matters

Strategic Focus

Director Expertise

Governance Capabilities

Primary

Secondary

Next generation
customer
experience

Energy sector
including generation
and renewable
energy (geothermal,
hydro and thermal)

Physical
infrastructure

Capital markets
– investment
community
knowledge and
connections

Portfolio efficiency

Government and
regulation

Iwi connection/
relationships

Executive
experience

Financial expertise

IT/technology

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Deep customer insight and advocacy. Understands generation changes and the
impact on customer drivers. Retail transformation expertise including customer-
centric experience design, data analytics, digital marketing, sales, and agile
retail. Skills to support and challenge progress towards improving the customer
experience and reducing cost to serve.

Broad leadership experience across the energy sector including a generation
portfolio and regulation/ government engagement. Core understanding of
generation and key drivers in moving towards a high-quality renewable energy
business model. Operational risk management including health and safety.
Skills to support and challenge in strategic risk management, growth strategy
and sustainability, including anticipation of market needs.

Experience successfully leading sector adjacent companies (e.g. physical
infrastructure, engineering and construction), large-scale projects, investment
and management. Skills to support and challenge in project investment, build
and industrial maintenance.

Significant investment community experience. This spans finance,
communications, marketing and securities law to enable the most effective
two-way understanding of, and communication between, the company and
the financial community – ultimately contributing to fair valuation and ability to
gain buy-in for future strategic shifts (e.g. divestment, expansion, international
mergers and acquisitions).

Expertise in cost base reduction and increasing flexibility of an asset portfolio
in a sustainable manner. Proven track record in cost out, improving reliability
and resource utilisation while maintaining safety in an adjacent sector. Ideally
experience in optimising and automating processes and lowering cost in resource
environments.

Ability to engage effectively with key government stakeholders. Brings an
understanding of legal, policy, and regulatory environments that Contact
operates in.

Iwi connection in order to predict sentiments and utilise relationships to
influence outcomes for the organisation.

Former executive with excellent track record of strategic growth and
prioritisation including investing in people and talent (expanding resources,
effective management capability and team), evolving culture, measuring
progress, identifying priorities and determining actions and accountability
for implementation.

Accounting and finance, experience in a scale regulated entity including
transformation and cost optimisation. Meets criteria to chair audit committee.
Brings expertise in wholesale commodity markets.

Contemporary digital ecosystem experience-platforms and systems
development to support lean operations, automation, security management
and innovation. Skills to support and challenge in digital capital investment plan,
systems-enabled operational efficiencies and customer service improvements.

Board committees
The Board has four committees to perform work and
provide specialist advice in areas of focus.

The Audit and Risk Committee (ARC) helps the Board
fulfil its responsibilities relating to Contact’s external
financial reporting, internal control environment,
business assurance and external audit function, and
risk management.

The Health, Safety and Environment (HSE) Committee
supports the Board and works with management to set
the vision and commitment to HSE. The committee
agrees how HSE objectives will be met, determines the
framework for monitoring performance and oversees
the means for ensuring legal obligations are met. This
committee oversees climate-related matters.

The People Committee supports and advises the
Board in fulfilling its responsibilities across all aspects
of Contact’s people and capability strategies,
policies, practices and risks. This committee also has
responsibility for Board composition, performance
and remuneration, and CEO appointment, performance
and remuneration.

The new Tauhara Committee was established in
December 2019 reflecting the strategic importance
of the potential Tauhara power station project to
Contact and the industry.

The current members of the committees are:

Committee

Members

Audit and Risk Committee

Dame Therese Walsh (Chair)
Victoria Crone
Whaimutu Dewes

Health, Safety and
Environment Committee

People Committee

Tauhara Committee

Elena Trout (Chair)
David Smol
Whaimutu Dewes

Jon Macdonald (Chair)
Robert McDonald
Dame Therese Walsh

Elena Trout (Chair)
David Smol
Jon Macdonald

Contact INTEGRATED REPORT 2020Governance mattersThe committee charters are on our website and more
detailed information about the roles and responsibilities
of each committee is available in our Corporate
Governance Statement, also on our website.

Attendance at Board and committee meetings
The membership of Board committees changed during
the year. On 1 April 2020 Elena Trout became Chair of
the HSE Committee and Jon Macdonald became Chair
of the People Committee. The Tauhara Committee was
established on 1 December 2019.

The table records director attendance at Board meetings
and Board committee meetings of which the relevant
director was a member. In addition, a number of
directors attended meetings of committees that
they were not a member of as an observer.

Directors

Robert McDonald2

Victoria Crone

Whaimutu Dewes

Jon Macdonald

David Smol

Elena Trout

Dame Therese Walsh

Board

Audit
and Risk
Committee

HSE
Committee

People
Committee

Tauhara
Committee1

1. The Tauhara Committee was established in December 2019.

2. The Chair of the Board attended every board committee meeting held during the year.

Our Code of Conduct

We expect all of our people to act honestly, with integrity, in Contact’s best interests
and in accordance with the law, all the time. This expectation is enshrined in our
Code of Conduct, which underpins our corporate policy framework. We set new
corporate policies to address key risks and set expected standards of behaviour
for our people.

We have new policies for: anti-bribery and corruption;
discrimination, bullying and harassment prevention;
human rights; and updated our confidentiality and
privacy policy. Information about how our key policies
operate is in our Corporate Governance Statement and
the policies are on our website.

We have a whistleblower hotline, operated by an
external independent reporting service, to help ensure
we’re aware of any breaches of the Code of Conduct,
our policies or any other illegal or unethical activity.

Anyone at Contact who is concerned about any incident
or behaviour can use the hotline to report that matter,
anonymously if they choose. Any disclosures made
through the whistleblower hotline are reported to
the CEO and, where appropriate, the Chair. We have
a Protected Disclosure (Whistleblowing) Policy, which
offers protections for employees who disclose serious
wrongdoing in accordance with the process in the policy.

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Contact INTEGRATED REPORT 2020Governance mattersRisk management and assurance

Assurance
Our business assurance team fulfils our internal audit
function and provides objective assurance of the
effectiveness of our internal control framework. The
in-house team is supported by external expertise where
required.

Auditors
We recognise that the role of our external auditor
is critical for the integrity of our financial reporting.
Our external auditor is KPMG. The Audit and Risk
Committee ensures that the audit partner is changed
at least every five years.

The team brings a disciplined approach to evaluating
and improving the effectiveness of risk management,
internal controls and governance processes. We use
a risk-based assurance approach driven from our risk
management system. The business assurance team
also assists external audits by making findings from the
internal assurance process available for the external
auditor to consider when providing their opinion on
the financial statements. The team has unrestricted
access to all other departments, records and systems
of Contact, and to the external auditor and other third
parties as it deems necessary.

Our External Audit Independence Policy sets out the
framework we use to ensure the independence of our
external auditors is maintained and that their ability
to carry out their statutory audit role is not impaired.
Under this policy, the external auditor may not do
any work for Contact that compromises, or is seen
to compromise, the independence and objectivity of
the external audit process. In addition, KPMG confirms
their continuing independent status to the Board every
six months.

The ARC Chair approved KPMG to perform additional
engagements this year including assuring our green
borrowings programme, greenhouse gas emissions and
Global Reporting Index (GRI) indicators. They provided
scrutineering services at the AGM in November 2019
and supervisor reporting.

Representatives from KPMG attend Contact’s annual
shareholder meeting, where they are available to answer
shareholders’ questions relating to the audit.

Risk management
Our Board has established a robust risk management
framework, which is aligned to the International
Standard ISO 31000, Risk Management – Principles and
Guidelines. Our framework ensures we have appropriate
systems in place to identify material risks. We make sure
we understand the potential impact of identified risks
and that, where applicable, the Board sets appropriate
tolerance limits.

Our framework ensures we assign responsibilities to
individuals to manage identified risks and we monitor
any material changes to Contact’s risk profile.

Oversight of Strategy and Risk
The risk management framework enables the Board
to set an appropriate risk strategy and ensure that
risk is managed through the organisation.

Approving
strategic
direction,
monitoring of
performance

Board

Governance
structures, policies
and objectives,
identification of
significant risk

Strategic
Direction

Risk Capacity
& Tolerance

Monitor the environment,
respond to stakeholder
material issues, anticipate
long-term threats and
opportunity

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Contact INTEGRATED REPORT 2020Governance mattersRemuneration report

Dear fellow shareholders,

I am pleased to present Contact’s
Remuneration report for FY20 on behalf
of the Board’s People Committee.

FY20 Financial results and remuneration
Contact has delivered a solid financial result for
shareholders this year. Operating costs and capital
expenditure have been managed prudently, and there
have been some challenging operating conditions to
contend with, including COVID-19 and the rising costs
of thermal generation.

Given this performance, we consider executive
remuneration to be appropriate. Our discretionary
short-term incentive pool reflects the above company
performance in FY20 and any payments under these
arrangements will be made in September 2020.

A detailed overview of current employee remuneration
is set out in the Employee remuneration section.

CEO transition
In February 2020, we farewelled Dennis Barnes and
welcomed Mike Fuge. We have been thoughtful
and diligent in our remuneration approach for both
our outgoing and incoming CEOs. The details of our
arrangements for each of them is provided in the
following pages.

COVID-19
As a response to the current economic uncertainty,
there was no company-wide salary review, and the
majority of Contact people will not receive any
increased remuneration for the upcoming year. A more
targeted approach was adopted, in conjunction with
people leaders, to identify any necessary changes on
a case-by-case basis.

The Board also made a 20 per cent reduction in their
directors’ fees for six months from 1 April 2020 and
agreed to no increase in our fees for the 12 months
to 30 June 2021.

As part of the pandemic response, Contact enabled
working from home for the vast majority of people,
and provided a financial contribution to recognise any
potential additional working from home costs. There
was frequent and transparent communication and
regular check-ins to see how staff were feeling as they
adjusted to their new way of working.

The organisation is now taking the learnings from
the ‘work from home’ experience and has begun a
transforming ways of working programme to allow
people to have a personalised work/life blend.

Diversity & inclusion
The Diversity Works Diagnostic completed in January
2020 provided insights for the development of the
inaugural ‘Inclusion and diversity’ strategy for Contact.
Underpinned by the Inclusion and Diversity Policy,
this strategy defines the areas of focus. The Board
sets diversity objectives each year and reviews progress.

We were proud to have our efforts recognised in
Equileap’s 2019 Global Gender Equality Ranking
identifying the top 100 global organisations for diversity
and inclusion. Contact has also been certified with
the Rainbow Tick since December 2018, a continual
quality improvement programme designed to help
organisations provide a safe and welcoming workplace for
all employees. We have been reaccredited in July 2020.

We have seen improvements in gender diversity
across some levels in Contact and we continue to
focus on executive positions (where we now have 3
of 7 positions held by women), management roles, and
plant operational roles. At 30 June 2020, the Contact
team is 47 per cent female, the same as in June 2019.

The pay equity analysis looks at whether females and
males within the same role grade are paid equitably.
We ended FY20 with pay equity of 96 per cent, and
we expect to attain a pay equity of 97 per cent in FY21.
We recognise there is a need to address this, and aim
to reduce this gap over time.

Review of remuneration framework
This framework is designed to ensure the remuneration
paid by Contact is transparent, fair and reasonable.
We’re committed to paying appropriate market rates
for all our roles, and making sure our people are being
rewarded for their performance and experience.

The framework is currently being reviewed to ensure it
continues to meet these objectives and enables Contact
to attract, reward and retain high-performing people.
We expect to report fully on the outcomes of that
review, and any resultant changes to our remuneration
approach, in our next integrated report.

Jon Macdonald
Chair, People Committee

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Contact INTEGRATED REPORT 2020Governance matters

Directors’ remuneration
The total directors’ fee pool is $1,500,000 per annum.
It has not been increased since it was approved by
shareholders in 2008. Actual fees paid to directors are
determined by the Board on the recommendation of
the People Committee.

Between FY19 and FY20, fees for the Chair of the Board
increased 3.6 per cent and base director fees increased
by 2.2 per cent. Committee fees increased by between
2 and 4 per cent.

On 19 April 2020, the Board approved a 20 per cent
reduction in all directors’ fees for the period 1 April
to 30 September 2020.

Directors’ fees exclude GST, where appropriate.
In addition, Board members are reimbursed for
costs directly associated with carrying out their
duties, such as travel costs.

Details of the total remuneration received by each
Contact director for FY20 are as follows:

FY20

Board of Directors

Audit and Risk Committee

Health, Safety and Environment Committee

People Committee

Tauhara Committee

* No additional fees are paid to the Board Chair for committee roles.

Chair
per annum

$285,000*

$46,000

$26,000

$20,000

Member
per annum

$138,000

$23,000

$13,000

$10,000

Board fees

Audit and Risk
Committee

Health,
Safety and
Environment
Committee

People
Committee

Tauhara
Committee

Total
remuneration

$270,750

$131,100

$1,057,350

$21,850

$43,700

$87,400

$22,100

$12,350

$14,950

$49,400

$14,950

$12,350

$27,300

$270,750

$152,950

$175,050

$151,383

$148,783

$156,717

$187,150

$5,333

$10,667

$21,333

$1,242,78

Directors*

Robert McDonald

Victoria Crone

Whaimutu Dewes

Jon Macdonald

David Smol

Elena Trout

Dame Therese Walsh

Total

* Notes:

Amounts paid during the period 1 April to 30 June 2020 reflect a 20% reduction.
Elena Trout replaced Whaimutu Dewes as Chair of the Health, Safety and Environment Committee on 1 April 2020.
Jon Macdonald replaced Robert McDonald as Chair of the People Committee on 1 April 2020.
The Tauhara Committee was established on 1 December 2019.

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Contact INTEGRATED REPORT 2020Governance mattersChief Executive Officer and
Executive Team remuneration
The CEO and Executive Team remuneration is reviewed
by our Board each year. The Board works closely with
and is advised by Contact’s People Committee.

The remuneration reflects the complexity of the roles
and the wide-ranging skills needed to do them well. We
also consider market remuneration data benchmarks,
look at the achievement of performance goals and
factor in creating long-term sustainable shareholder value.

The total remuneration is made up of a fixed
remuneration component, which includes cash
salary and other employment benefits, and pay-for-
performance remuneration containing short-term
incentives (cash and equity awarded through deferred
share rights) and long-term incentives (equity awarded
through performance share rights).

The following table details the nature and amount
of remuneration paid to both Dennis Barnes and
Mike Fuge for their time as CEO during the year.

CEO remuneration for the periods ended 30 June 2019 and 30 June 2020

Position

Fixed remuneration

Pay-for-performance remuneration

Total
remuneration

Salary paid $

Benefits $

Subtotal $

Cash STI $ Equity STI $ Equity LTI $

Subtotal $

Dennis Barnes (1 July 2019 – 28 February 2020)

FY20

FY19

737,247

976,539

52,7121

789,959

46,485

1,023,024

205,6072

764,7923

–

205,607

764,792

995,566

1,787,816

Mike Fuge (24 February 2020 – 30 June 2020)

FY20

375,962

11,279

387,241

81,1504

60,3755

140,8756

282,400

669,641

1. Benefits include 3% KiwiSaver contribution, calculated on remuneration amounts including cash STI, and health insurance.

2. Partial STI for FY20 period – as recorded on page 51 this was 32% of the maximum available prorated for the period employed in FY20.

3. STI for FY19 period, paid in FY20.

4. STI for FY20 period, paid in FY21.

5. Equity, based on fair value allocation, performance hurdles tested 2022.

6. Equity, based on fair value allocation, performance hurdles tested 2023.

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Contact INTEGRATED REPORT 2020Governance mattersPay-for-performance remuneration breakdown for the year ended 30 June 2020
All discretionary payments were calculated and paid based on period employed in FY20.

Scheme

Description

Dennis Barnes (1 July 2019 – 28 February 2020)

Cash STI

Cash STI is a discretionary scheme based on achievement of KPIs.

Maximum potential set at 100% of base salary.

Mike Fuge (24 February 2020 – 30 June 2020)

Cash STI

Cash STI is a discretionary scheme based on achievement of KPIs.

Maximum potential set at 50% of base salary.

Performance measure

60% based on Corporate shared KPIs:
• 60% operating free cash flow
• 30% earnings per share
• 10% HSE Index
40% based on individual KPIs being conduct & culture, costs,
delivery of strategy and executive transition.

60% based on Corporate shared KPIs:
• 60% operating free cash flow
• 30% earnings per share
• 10% HSE Index
40% based on individual KPIs being achievement of agreed
100-day plan.

Equity STI (awarded as
deferred share rights)

Equity STI allows the participant to acquire shares at a $0 exercise
price subject to the time-bound exercise hurdle being achieved.

The participant’s performance rating influences the Equity STI
awarded by the Board.

Maximum potential set at 30% of base salary for CEO.

The exercise hurdle to receive these is to remain employed by
Contact 2 years from the grant date.

Equity LTI

(awarded as performance
share rights)

Equity LTI allows the participant to acquire shares at a $0 exercise
price subject to the exercise hurdle being achieved.

Set at 35% of base salary for CEO.

The exercise hurdle to receive these is Contact’s relative total
shareholder return (TSR) ranking within an energy industry peer
group of other New Zealand NZX50 listed utilities companies.
Tested once, at year 3.

Percentage of maximum
potential awarded

32%

(paid March 2020)

40%

(paid September 2020)

50%

$60,375 based of fair value
allocation

(To be granted 1 October 2020
and tested October 2022)

n/a

$140,875 based of fair value
allocation

(To be granted
1 October 2020 and tested
October 2023)

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Contact INTEGRATED REPORT 2020Governance mattersCEO remuneration
The scenario chart below demonstrates the elements of Mike Fuge’s CEO remuneration design.

Base salary & benefits

Cash STI

Equity STI

Equity LTI

Maximum potential remuneration

On-plan remuneration

Fixed remuneration

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

Five year CEO remuneration summary

Financial
year

Total
remuneration
paid1

Percentage Cash
STI awarded
against maximum

Percentage vested
Equity STI against
maximum

Span of Equity
STI performance
period

Percentage vested
Equity LTI against
maximum

Span of Equity
LTI performance
period

Dennis Barnes (1 July 2019 – 28 February 2020)

FY20

$995,566

FY19

FY18

FY17

FY16

$1,787,816

$3,031,608

$2,081,641

$1,875,9513

32%

78%

55%

50%

45%

100%

2017–2019
2018–2019

2015 Options/
PSR 89.54% 2016
Options/PSR 50%

2015–2020
2016–2020

100%

2016–2018

2013 Options 100%2
2014 Options 100%

2013–2018
2014–2019

100%

100%2

2015–2017

n/a

2014–2016

100%2

n/a

2010–2013
2011–2014
2012–2015
2013–2016
2014–2017

Mike Fuge (24 February 2020 – 30 June 2020)

FY20

$669,641

40%

n/a

Five-year summary TSR1 performance graph

40%

30%

20%

10%

-10%

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30 June 2016

30 June 2017

30 June 2018

30 June 2019

30 June 2020

6.63%
5.35%

-8.26%

1. Total remuneration paid includes salary, benefits, Cash STI, and value

of STI and LTI Equity (paid in shares).

2. 100% of STI and LTI Equity vested as a result of Origin selling its

shareholding in Contact triggering vesting of equity due to the change
of control.

3. Dennis Barnes was seconded to the role of CEO by his employer Origin
Energy Limited from April 2011 until August 2015. During the term of
the secondment, remuneration paid to him by Contact was processed
by Contact reimbursing Origin Energy for his costs. The figures provided
confirm his base salary level and cash STI for the periods.

Company

NZX50

Peer group2

1. TSR calculated using the volume-weighted average price for the

3 months prior to year end.

2. Peer group is a simple average of Meridian, Genesis, Mercury, Vector

and Trustpower, with Trustpower only in the group from FY18.

Contact INTEGRATED REPORT 2020Governance mattersEmployee remuneration
We’re committed to paying appropriate market rates
for all our roles, and ensuring our people are rewarded
for their performance and experience.

There are three parts to employee remuneration – fixed
remuneration, pay-for-performance remuneration, and
other benefits. These combine to attract, reward and
retain high-performing employees.

Fixed remuneration
Fixed remuneration is based on the role responsibilities,
individual performance and experience, and current
market remuneration data. Contact targets fixed
remuneration at the median of the market range.

Pay-for-performance remuneration
Pay-for-performance remuneration recognises and
rewards high-performing employees and comprises
short-term incentives (cash and deferred share rights)
and long-term incentives (performance share rights).

Short-term incentives (STI)
STIs are designed to recognise and reward high
performance with cash incentives for our eligible
people, and deferred share rights through Contact’s
equity scheme for some higher-level roles and key
talent. STIs have a maximum potential level set
reflecting the person’s position grade, and are based
on performance measured against key performance
indicators (KPIs), which generally consist of company,
business unit and individual objectives. The Board
reserves the right to adjust STI awards if company
targets are not met.

Long-term incentives (LTI)
Contact provides awards of performance share rights
through Contact’s equity scheme to our senior people
and key talent. This aims to encourage and reward
longer-term decision-making and align participants’
interests with Contact’s shareholders. These are subject
to performance hurdles.

Equity scheme
At 30 June 2020 there were 87 participants in Contact’s
equity scheme. For further details on the equity scheme
and the number of performance share rights and
deferred share rights granted, exercised, lapsed and on
issue at the end of the reporting period, see note E10
of the financial statement section.

Other Benefits
We know that rewards mean more than just money, so
we offer our people a range of other benefits too. Some
of these have eligibility criteria and include: discounts
for home energy and broadband; employer-subsidised
health insurance; an employee share ownership plan
called ‘Contact Share’ (see note E10 of the financial
statement section for more detail); and additional
benefits and offers from retailers and services providers.

Employees who earn over $100k
The table shows the number of our people (including
any who have left Contact) who received remuneration
and other benefits during FY20 of at least $100,000 for
the year ended 30 June 2020.

The value of remuneration benefits analysed includes:

• fixed remuneration including allowance/overtime

payments

• employer superannuation contributions
• short-term cash incentives relating to FY19

performance but paid in FY20

• the value of equity-based incentives at fair value allocation

received during FY20

• the value of Contact Share received during FY20
• redundancy and other payments made on termination

of employment.

The figures do not include amounts paid after
30 June 2020 that relate to the year ended 30 June 2020.
The remuneration (and any other benefits) of the two
CEOs, Dennis Barnes and Mike Fuge, are disclosed in
the CEO remuneration section.

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Table of employees who earn over $100k

Remuneration band

Number of employees

$100,001–$110,000

$110,001–$120,000

$120,001–$130,000

$130,001–$140,000

$140,001–$150,000

$150,001–$160,000

$160,001–$170,000

$170,001–$180,000

$180,001–$190,000

$190,001–$200,000

$200,001–$210,000

$210,001–$220,000

$220,001–$230,000

$230,001–$240,000

$240,001–$250,000

$250,001–$260,000

$270,001–$280,000

$280,001–$290,000

$290,001–$300,000

$300,001–$310,000

$310,001–$320,000

$320,001–$330,000

$330,001–$340,000

$340,001–$350,000

$350,001–$360,000

$360,001–$370,000

$390,001–$400,000

$410,001–$420,000

$420,001–$430,000

$450,001–$460,000

$490,001–$500,000

$500,001–$510,000

$520,001–$530,000

$630,001–$640,000

$640,001–$650,000

$700,001–$710,000

$870,001–$880,000

$880,001–$890,000

*Includes 17 former employees.

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Contact INTEGRATED REPORT 2020Governance mattersAdditional remuneration
disclosures
• Pay equity is monitored and reported on, comparing
pay by gender in roles at the same grade levels (i.e.
roles requiring a similar level of skills, knowledge, and
accountabilities). At 30 June 2020 our pay equity was
at 96 per cent. We make adjustments to individual
salaries where appropriate to address pay equity while
applying our grade structure.

• Contact does not implement any clawback practices
on employee remuneration other than in situations
permitted by New Zealand legislation (e.g. for
correction of overpayments).

• Contact has remediated underpayments to our

current and ex-employees following a review of how
we applied the regulations in the Holidays Act 2003.
• Contact does not have a share ownership requirement

for the CEO or Executive Team.

• The notice period for Mike Fuge in his role as CEO

is six months.

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Contact INTEGRATED REPORT 2020Governance mattersAdditional
disclosures

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Contact INTEGRATED REPORT 2020Additional disclosuresAdditional disclosures

Statutory disclosures
Disclosures of Interests by Directors
The following are particulars of general disclosures of interest by directors holding
office as at 30 June 2020, pursuant to section 140(2) of the Companies Act 1993.
Each such director will be regarded as interested in all transactions between
Contact and the disclosed entity.

Robert McDonald

Fletcher Building Limited

AIA Limited

Chartered Accountants Australia & New Zealand

University of Auckland Business School Advisory Board

McDonald Family Trust

Victoria Crone

Callaghan Innovation

Statistics New Zealand Governance Advisory Board

Figure.NZ

Whaimutu Dewes

Law Society Review Steering Committee

Sealord Group Limited

Kura Limited

Pupuri Taonga Limited

Aotearoa Fisheries Limited

Ngati Porou Forests Limited

Ngati Porou Whanui Forests Limited

Ngati Porou Fisheries Limited

Ngati Porou Seafoods Limited

Real Fresh Limited

Director

Chair

Trustee

Chief Executive Officer

Chair

Co-Chair

Chair

Director

Chair

Director

Whainiho Developments Limited

Managing Director/Shareholder

Jon Macdonald

Sharesies Limited

Titan Parent New Zealand Limited
(parent company of Trade Me Limited)

Mitre 10 (New Zealand) Limited

NZX Limited

NZ Technology Training Trust

David Smol

Director

Trustee

Department of Internal Affairs’ External Advisory Committee

Chair

Ministry of Social Development’s Risk and Audit Committee Member

Capital & Coast District Health Board

Hutt Valley District Health Board

New Zealand Transport Agency

Victoria Link Limited

GeoNet Advisory Panel

Rimu Road Consulting Limited

Elena Trout

Callaghan Innovation

Ngapuhi Asset Holding Company Limited

Ngapuhi Books and Stationery Limited

Ngapuhi Food & Beverage Limited

Ngapuhi Service Station Limited

Joint NZ Defence Force and Ministry of Defence
Capability Governance Board (CGB)

Energy Efficiency and Conservation Authority (EECA)

Harrison Grierson Holdings Limited

Marsden Maritime Holdings Limited

Motiti Investments Limited

Low Emission Vehicles Fund (a fund from EECA budget)

Interim Establishment Board for the Construction and
Infrastructure Workforce Development Council

Chair

Board member

Chair

Director

External Member

Chair

Director

Chair

Ara Ake Limited 1

Director 1. Effective 3 July 2020

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Contact INTEGRATED REPORT 2020Additional disclosuresDame Therese Walsh

Air New Zealand

ASB Bank

Antarctica NZ

Victoria University of Wellington

On Being Bold

Wellington Homeless Women’s Trust

Climate Change Commission Nominations Panel

Therese Walsh Consulting Limited

Chair

Director

Pro-Chancellor

Director

Ambassador

Member

Director

Information used by directors
No director issued a notice requesting to use information received in his or her
capacity as a director that would not otherwise be available to the director.

Indemnity and insurance
In accordance with section 162 of the Companies Act 1993 and the constitution
of the company, Contact has continued to indemnify and insure its directors
and officers, including directors of subsidiaries, against potential liability or
costs incurred in any proceeding, except to the extent prohibited by law.

Directors’ security participation
Directors are required to hold a minimum of 20,000 shares within three years
of appointment.

Securities of the company in which each director has a relevant interest at
30 June 2020

Director

Robert McDonald

Victoria Crone

Whaimutu Dewes

Jon Macdonald

David Smol

Elena Trout

Dame Therese Walsh

Bonds

35,000

Ordinary shares

30,000

20,050

20,011

20,000

15,100

20,000

15,000

Securities dealings of directors
During the year, the directors disclosed in respect of section 148(2) of the
Companies Act 1993 that they acquired or disposed of a relevant interest
in securities as follows:

Director

Victoria Crone

Date of
acquisition

03/10/19

David Smol

15/06/20

Dame Therese Walsh

20/09/19

Nature of
transaction

Consideration
per share

Number of
shares acquired

On-market
purchase

$8.48

2,500

$6.28

10,000

$8.33

5,000

Shareholder statistics

Twenty largest shareholders at 30 June 2020

HSBC Nominees (New Zealand) Limited

Citibank Nominees (NZ) Limited

Accident Compensation Corporation

JP Morgan Chase Bank

National Nominees New Zealand Limited

FNZ Custodians Limited

Cogent Nominees Limited

New Zealand Superannuation Fund Nominees Limited

BNP Paribas Nominees NZ Limited

Tea Custodians Limited

Forsyth Barr Custodians Limited

JB Were (NZ) Nominees Limited

Custodial Services Limited

Premier Nominees Limited

New Zealand Depository Nominee

New Zealand Permanent Trustees Limited

JP Morgan Nominees Australia Pty Limited

Private Nominees Limited

Total for top 20

Number of
ordinary shares

% of ordinary
shares

74,790,081

62,417,768

53,810,743

39,762,163

39,285,568

30,312,056

20,136,814

18,872,954

16,499,152

16,322,257

16,280,742

15,717,241

12,753,124

11,599,612

10,644,606

8,864,888

8,729,811

8,705,458

8,416,958

7,281,805

10.41

8.69

7.49

5.54

5.47

4.22

2.80

2.63

2.30

2.27

2.19

1.78

1.62

1.48

1.23

1.22

1.21

1.17

1.01

481,203,801

67.00

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Contact INTEGRATED REPORT 2020Additional disclosuresDistribution of ordinary shares and shareholders at 30 June 2020

Bondholder statistics

Size of holding

1–1,000

1,000–5,000

5,001–10,000

10,001–50,000

50,001–100,000

100,001 and over

Total

Number of
shareholders

% of
shareholders

28,820

28,776

3,328

2,105

148

45.55

45.48

5.26

3.33

0.23

0.15

Number of
ordinary
shares

18,668,890

52,709,467

23,586,451

40,472,573

10,408,941

572,285,562

63,275

100.00

718,131,884

% of ordinary
shares

2.60

7.34

3.28

5.64

1.45

79.69

100.00

Substantial product holders
According to notices given under the Financial Markets Conduct Act 2013,
the following persons were substantial product holders of the company as at
30 June 2020:

Substantial product holder

The Vanguard Group, Inc.

Number of ordinary shares in
which relevant interest is held Date of notice

35,953,294

12 March 2020

Accident Compensation Corporation (ACC)

36,285,224

1 April 2020

BlackRock Inc. and related bodies corporate

38,710,357

21 April 2020

The total number of voting securities of Contact at 30 June 2020 was 718,131,884
fully paid ordinary shares.

Twenty largest CEN030 bondholders at 30 June 2020

FNZ Custodians Limited

Forsyth Barr Custodians Limited

Cogent Nominees Limited

Citibank Nominees (NZ) Limited

Investment Custodial Services Limited

NZ Permanent Trustees Ltd Group Investment Fund No 20

Custodial Services Limited

Southern Cross Medical Care Society

Custodial Services Limited

Forsyth Barr Custodians Limited

Custodial Services Limited

FNZ Custodians Limited

Lynette Therese Erceg & Darryl Edward Gregory & Catherine
Agnes Quinn

Tea Custodians Limited

University Of Otago Foundation Trust

JB Were (NZ) Nominees Limited

Custodial Services Limited

Private Nominees Limited

HSBC Nominees (New Zealand) Limited

Number of
CEN030
bonds

16,352,000

15,184,000

12,436,000

11,849,000

11,814,000

7,439,000

5,051,000

3,495,500

3,400,000

3,261,500

2,783,000

2,748,000

2,716,000

2,500,000

2,164,000

1,985,000

1,948,000

1,914,000

1,802,000

1,000,000

% of CEN030
bonds

10.90

10.12

8.29

7.90

7.88

4.96

3.37

2.33

2.27

2.17

1.86

1.83

1.81

1.67

1.44

1.32

1.30

1.28

1.20

0.67

Total for top 20

111,842,000

74.57

Distribution of CEN030 bonds and bondholders at 30 June 2020

Size of holding

1,001–5,000

5,001–10,000

10,001–50,000

50,001–100,000

100,001 and over

Total

Number of
bondholders

% of
bondholders

Number of
bonds

% of bonds

132

397

734

7.63

17.98

54.09

9.67

280,000

1,244,500

11,436,500

5,769,000

10.63

131,270,000

100.00

150,000,000

0.19

0.83

7.62

3.85

87.51

100.00

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Contact INTEGRATED REPORT 2020Additional disclosuresTwenty largest CEN040 bondholders at 30 June 2020

Twenty largest CEN050 bondholders at 30 June 2020

Citibank Nominees (NZ) Ltd

FNZ Custodians Limited

Cogent Nominees Limited

HSBC Nominees (New Zealand) Limited

Investment Custodial Services Limited

Custodial Services Limited

Private Nominees Limited

Custodial Services Limited

Forsyth Barr Custodians Limited

JB Were (NZ) Nominees Limited

BNP Paribas Nominees NZ Limited

Forsyth Barr Custodians Limited

FNZ Custodians Limited

Custodial Services Limited

Investment Custodial Services Limited

Forsyth Barr Custodians Limited

Custodial Services Limited

FNZ Custodians Limited

Total for top 20

Number of
CEN040
bonds

28,034,000

11,643,000

% of CEN040
bonds

28.03

11.64

6,200,000

5,038,000

4,872,000

4,281,000

3,189,000

2,842,000

2,419,000

2,381,000

2,316,000

1,730,000

1,530,000

1,358,000

1,129,000

1,060,000

800,000

795,000

765,000

647,000

6.20

5.04

4.87

4.28

3.19

2.84

2.42

2.38

2.32

1.73

1.53

1.36

1.13

1.06

0.80

0.77

0.65

HSBC Nominees (New Zealand) Limited

FNZ Custodians Limited

BNP Paribas Nominees NZ Limited

Tea Custodians Limited

Citibank Nominees (NZ) Ltd

Custodial Services Limited

National Nominees New Zealand Limited

Forsyth Barr Custodians Limited

Cogent Nominees Limited

Custodial Services Limited

HSBC Nominees (New Zealand) Limited

JB Were (NZ) Nominees Limited

Custodial Services Limited

Risk Reinsurance Limited

Custodial Services Limited

Investment Custodial Services Limited

Custodial Services Limited

Private Nominees Limited

Woolf Fisher Trust Inc

New Zealand Methodist Trust Association

Number of
CEN050
bonds

12,500,000

8,942,000

7,550,000

6,680,000

6,050,000

5,018,000

5,000,000

4,384,000

4,382,000

4,097,000

3,730,000

3,647,000

3,101,000

3,000,000

2,818,000

2,242,000

1,326,000

1,000,000

950,000

874,000

% of CEN050
bonds

12.5

8.94

7.55

6.68

6.05

5.02

5.00

4.38

4.10

3.73

3.65

3.10

3.00

2.82

2.24

1.33

1.00

0.95

0.87

83,029,000

83.04

Total for top 20

87,291,000

87.29

Distribution of CEN040 bonds and bondholders at 30 June 2020

Distribution of CEN050 bonds and bondholders at 30 June 2020

Size of holding

1,001–5,000

5,001–10,000

10,001–50,000

50,001–100,000

100,001 and over

Total

Number of
bondholders

% of
bondholders

Number of
bonds

% of bonds

Size of holding

Number of
bondholders

% of
bondholders

Number of
bonds

% of bonds

181

351

10.54

20.51

51.57

6.27

184,000

695,000

4,910,000

1,709,000

11.11

92,502,000

100.00

100,000,000

0.18

0.70

4.91

1.71

92.50

100.00

1,001–5,000

5,001–10,000

10,001–50,000

50,001–100,000

100,001 and over

Total

102

206

2.92

22.33

49.51

10.68

14.56

26,000

443,000

2,796,000

1,675,000

95,060,000

100.00

100,000,000

0.03

0.44

2.80

1.68

95.05

100.00

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Contact INTEGRATED REPORT 2020Additional disclosuresNZX waivers
There were no waivers granted by NZX or relied on by Contact in the 12 months
preceding 30 June 2020.

Stock Exchange listings
Contact’s ordinary shares are listed and quoted on the NZX Main Board and the
Australian Securities Exchange (ASX) under the company code ‘CEN’. Contact also
has three issues of retail bonds listed and quoted on the NZX Debt Market under
the company codes ‘CEN030’, ‘CEN040’ and ‘CEN050’. Contact’s listing on the ASX
is as a Foreign Exempt Listing. For the purposes of ASX listing rule 1.15.3, Contact
confirms that it continues to comply with the NZX listing rules.

Exercise of NZX disciplinary powers
NZX did not exercise any of its powers under Listing Rule 9.9.3 in relation to Contact
during FY20.

Auditor fees
KPMG has continued to act as auditors of the company. The amount payable by
Contact and its subsidiaries to KPMG as audit fees in respect of FY20 was $560,000.
The fees for other services undertaken by KPMG during FY20 totalled $50,500.
These related to other assurance activities: reviews of Contact’s green borrowing
programme, greenhouse gas emissions and Global Reporting Initiative (GRI)
indicators, supervisor reporting and scrutineering at the annual meeting.

Donations
In FY20 Contact donated $400,000 of free power for St John, Women’s Refuge and
the Salvation Army during the response to COVID-19, and $40,000 towards iwi
and hapū COVID-19 response initiatives in Taupō. A further $2,000 of charitable
donations were made. No political contributions were made during the year.

Credit rating
Contact Energy Limited has a Standard & Poor’s long-term credit rating
of BBB/stable and short-term rating of A-2.

The $150 million unsubordinated, unsecured fixed-rate bonds issued in
September 2015 are rated BBB by Standard & Poor’s.

The $100 million unsubordinated, unsecured fixed-rate bonds issued in
February 2017 are rated BBB by Standard & Poor’s.

The $100 million unsubordinated, unsecured fixed-rate bonds issued in
March 2019 are rated BBB by Standard & Poor’s.

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Contact INTEGRATED REPORT 2020Additional disclosuresSustainability disclosures
Memberships of associations or advocacy organisations

Holds a position on the governance body Member/participant

Electricity Retailers’ Association of
New Zealand (ERANZ)

Gas Industry Company

Business New Zealand (Energy Council,
Major Companies Group, Corporate Affairs Group,
Corporate Taxpayers Group)

Sustainable Business Council

Australasian Investor Relations Association

Climate Leaders Coalition

Champions for Change

Drive Electric

Electricity Authority Market Development

Advisory Group

Hugo Group

Liquefied Petroleum Gas Association

NZ Initiative

ERANZ Retailer Revenue Assurance Advisory Forum

ERANZ Retailers’ Operational Forum

ERANZ Vulnerable Customer & Medically
Dependent Customer (VCMDC) Working Group

ERANZ Policy Committee

ERANZ Communications Committee

ERANZ Data Working Group

NZ Hydrogen Association

Generator Forum

ENA Technical Implementation Working Group

ENA Joint Implementation Working Group

Wellington Chamber of Commerce

Women in Geothermal

International Geothermal Association

NZ Geothermal Association

External commitments

Organisation/Group

Climate Leaders
Coalition

Date of
adoption

July 2019

Commitment

1. To measure our greenhouse gas emissions, have them
independently verified and publicly report on them.

2. Adopt targets grounded in science that will deliver
substantial emissions reductions so organisations
contribute to being carbon neutral by 2050. These
targets will be considered in current planning cycles.

3. Assessing our climate change risks and publicly

disclosing them.

4. Proactively support our people to reduce their

emissions.

5. Proactively support our suppliers to reduce their

emissions.

6. Committed to the Paris Agreement Target to keep
warming below 2 degrees and to further pursue
efforts to limit temperature increases to 1.5 degrees.

Science Based Targets
initiative – Committed

March 2018 We commit to progressing emission reduction in line

with verified target.

Emissions data as at 30 June 2020
Contact uses the Greenhouse Gas Protocol to guide its emissions reporting.
Emissions are reported on an operational control basis with a base year of FY18,
which represents the first year of Contact’s reporting of Scope 1, 2 and 3 emissions.
As per the Contact Energy Policy for the recalculation of base year emissions
data, any structural, methodological or other changes identified that change the
emissions reported by more than 5 per cent will trigger a recalculation of the base
year and the current reporting year.

Our emissions data includes all gases as per the most recent Intergovernmental
Panel on Climate Change (IPCC) report. Emission factors are sourced from the
Ministry for the Environment except in the following cases:

• Scope 1 – Gas field specific emissions factors are provided by the supplier and
Geothermal field specific factors approved under the Climate Change Unique
Emissions Factor regulations 2009. SF6 is sourced from the IPCC 5th assessment
report.

• Scope 3 – Category 1 and 2 emissions factors are sourced from the Carnegie
Mellon University Economic Input-Output Life Cycle Assessment. For more
detail on FY19 emissions refer to the Greenhouse Gas Inventory document
on our website.

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Contact INTEGRATED REPORT 2020Additional disclosuresClimate-related risks
The table following presents an overview of Contact’s most material climate-related
risks and opportunities in the short, medium and long term.

In 2019, we commissioned NIWA to model the potential impacts of climate change
on our operations. We modelled two scenarios: a business-as-usual scenario where
greenhouse gas concentrations continue unabated (Representative Concentration
Pathway 8.5), and a mitigation scenario with a global effort to heavily reduce
concentrations (RCP 2.5). Under either scenario we saw that most sites will
experience a tripling of the number of hot days, with spring and summer expected
to become drier and winter wetter. Our hydro catchment is likely to have increased
inflows, with potential for hydro generation increasing – especially under the
business-as-usual scenario.

Given this, and also what we know about the transitional risks of climate change,
such as changing stakeholder expectations and behaviours, the potential of
regulatory change, we have identified a range of risks which we have then rated as
low, medium, or high based on the likelihood, time-horizon and potential impact/
size of the opportunity or risk.

We use our existing risk management systems to capture, monitor and report
on climate-related risks. Risks rated high are also monitored by the leadership
team and the Board Audit and Risk Committee. The Board Health, Safety and
Environment Committee has formal oversight of climate-related issues and reviews
climate-related risks. The full Board, when setting strategy, also considers a wide
range of risks and environmental factors, and the work our teams do to understand
issues such as climate change, contributes to their decision-making.

Scope 1 emissions

Emissions (tCO2e)

Thermal Generation
Emission Intensity
(tCO2e per MWh)

Total Generation
Emission Intensity
(tCO2e per MWh)

FY20

FY19

FY20

FY19

FY20

FY19

Fuel used for
thermal generation

723,536

777,4671

Fuel used for
geothermal
generation

Total fuel used
for generation

Fuel used in vehicles

Fugitive emissions
– SF6

196,868

207,436

920,403

984,903

0.532

0.550

0.109

0.111

270

880

122

Total Scope 1

920,677

985,905

1. FY19 figure updated due to finalised data becoming available (estimates were used previously).

Scope 2 and 3 emissions

Scope

Category

FY20 tCO2e

FY19 tCO2e

Indirect Emissions (Scope 2) Electricity consumption

Indirect Emissions (Scope 3) Purchased goods and services

Capital goods

Fuel and energy

Upstream transportation

Waste

Business travel

Employee commuting

Use of sold products

Downstream leased assets

Franchises

Subtotal

Total (Scope 1, 2 and 3)

1,258

39,397

18,052

91,857

123

719

606

1,3741

35,267

6,536

175,811

628

148

1,256

5142

166,310

301,640

306

445

2,069

317,384

524,314

1,239,319

1,511,593

1. FY19 figure updated due to finalised data becoming available (estimates were used previously).

2. FY19 figure restated due to calculation error.

3. No emissions from franchises due to Contact’s sale of the LPG business Rockgas Limited in FY19.

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Contact INTEGRATED REPORT 2020Additional disclosures

Short term (now–2022)

Medium term (2022–2035)

Long term (2035–onwards)

These may impact near-term financial results, including
those that may materialise within the current reporting cycle.

May materially impact financial results over the longer term
and may require us to adjust our strategy.

Risks that could fundamentally impact the long-term
strategy and business model.

Market transition risks and opportunities

Contact’s
emissions
profile

Leading the
market to
decarbonise

Thermal
transition

New
technology

• Reputational impact of continued use of thermal and high

• National imperative to reduce carbon emissions through

• Stakeholder rejection of fossil fuels including natural gas.

emissions generation.

• Heightened scrutiny from investors on environmental,
social, governance (ESG) performance of businesses.
• Rising stakeholder expectations increase the pace of
change in which businesses must adapt/respond to
climate-related issues.

• New opportunities and markets developed to support

low-carbon transition activities.

• Opportunity to deepen relationships with customers who

are looking to decarbonise.

• Opportunity for renewable generation to displace thermal.
• Potential for high-emissions industries to favour gas as a

transition fuel, resulting in increased gas use and emissions
in the short term.

policy and other means.
• Rising gas and carbon costs.

• Transition to lower-carbon economy creates more demand

for electricity.

• Opportunities for innovative customer and technology

solutions.

• Increased opportunity for renewable developments.

• Increased electricity demand.
• Wider options for new generation development.

• Continued requirement for thermal peaking plant in
New Zealand to ensure affordable security of supply.

• Potential for massive renewable overbuild, and massive

distributed generation.

• Customer adoption of new technologies and/or energy-

• Distributed technologies increase competition for the

• New technology makes current generation redundant and/

efficient solutions impacts on demand for grid-connected
electricity.

development of new generation.

or impacts demand significantly.

Regulation

• Changes to regulation impacts on costs of business and/or

• New regulation requires Contact to reduce emissions

licence to operate.

faster than planned.

• New Zealand’s costs become higher relative to globe, which
results in production moving offshore and reduced demand.

Physical risks and opportunities

Temperature
increases

• Changes to maintenance requirements as temperatures

increase.

• Changes to electricity demand as temperatures change.
• Health, safety and wellbeing impacts on people working

in warmer conditions.

• Impacts on the efficiency and availability of generation

plants.

• Implications on resource consent requirements which may

increase costs and/or impact on licence to operate.

• Impacts on operational plant may require change in design.

Access to
natural
resources

• Changes to hydro inflows impact on our renewable

• Increased demand and competition for natural resources,

generation.

• Drilling programme requires access to significant volumes

of water.

including fresh water, impacts on access to natural
resources for generation.

• Consent renewal required for Wairākei in 2026. Changes
in regulation may impact on access to water, consent
conditions and/or costs.

• Water storage requirements change.
• Increased hydro inflows create opportunities to increase
generation output, but may also increase flood risk and
require spilling at hydro.

Intensity
of storms

• Increased potential for erosion issues.
• Disruption to physical works during storms.

• Storm-water systems require redesign and/or

• Increased flood risk around rivers and lakes impacts on

replacement to meet changing capacity requirements.
• Potential for increased power outages due to transmission

failure caused by storms.

generation operations.

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Contact INTEGRATED REPORT 2020Additional disclosuresGeothermal assets data as at 30 June 2020

Compliance
with CBI
standards
(< 100
gCO2e/
KWh)

Emissions
intensity
(gCO2e/
KWh)

Poihipi

Tauhara

Te Mihi

Te Huka

Wairākei

Tenon and
Nature’s Flame1

Ohaaki2

Geothermal
portfolio total/
average

Eligible Green
Asset total/average

Total Green Debt
Instruments

Green Asset Ratio

Book value
$m

Generation
(GWh)

Emissions
(tCO2e)

151

140

506

103

814

335

–

1,415

198

1,045

137

13,643

–

50,839

10,244

21,513

2,132

112

1,835

340

3,470

98,757

197,128

N/A

291

1,723

3,130

98,371

1,400

1.23

1. Includes direct heat sold to Tenon and Nature’s Flame.
2. Ineligible green asset in relation to Contact’s Green Borrowing Programme.

Yes

Green Borrowing Programme
In line with our commitment to a low-carbon economy, Contact has a Green
Borrowing Programme to finance Contact’s past and future renewable energy
generation investments. This is a progressive approach to financing and provides
investors and lenders with an opportunity to access a broad range of accredited
green debt instruments where proceeds have been applied to eligible green assets.

The Green Borrowing Programme is described in Contact’s Green Bond Framework
(‘Framework’), which aligns with the Green Bond Principles and is certified by the
Climate Bonds Initiative (CBI) under Climate Bond Standard V2.1 with assurance
from KPMG.

The Framework, CBI certification and KPMG’s annual assurance statement are
available on our website. The Framework articulates which of Contact’s debt
instruments and assets qualify as green, and provides for a comprehensive
compliance and disclosure regime to ensure the Climate Bonds Standard V2.1
is always met, in turn ensuring that the existing CBI certification remains in place.
A key compliance metric is the Green Ratio whereby the total green asset value
must be at least equal to total green debt instruments (i.e. a ratio of 1.0 minimum).
This indicator is reported on a half-yearly basis.

The following table sets out the total green asset value and total green debt
instruments for the current reporting period, and confirms that the Green Ratio is
met at 1.23. Contact confirms to the best of its knowledge that its Green Borrowing
Programme continues to remain in compliance with the CBI certification in place,
including the requirements of the Climate Bonds Standard V2.1.

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Contact INTEGRATED REPORT 2020Additional disclosuresWorkforce by gender and employment type at 30 June1

FY20

headcount # Females

# Males

Total

Fixed
term Permanent Part time Full time

Officers2

Corporate

Customer

Generation

Total

FY19

Officers2

Corporate

Customer

Generation

Total

516

343

934

505

323

889

324

439

316

415

192

272

495

189

258

474

Employee diversity at 30 June3

491

332

893

473

315

845

113

109

444

315

821

432

298

780

1. Gender is recorded by self-identification.
2. ‘Officers’ means the CEO and members of Contact’s Leadership Team.
3. Ethnicity total % adds up to more than 100%. This is because individuals can choose to identify multiple ethnicities.

FY20

Officers

Corporate

Customer

Generation

Total

FY19

Officers

Corporate

Customer

Generation

Total

Females

Males

Under 30

30–50

Over 50 Undisclosed

Māori

Pasifika

Asian

European

Other

AMELA Undisclosed

33%

61%

63%

21%

47%

33%

58%

63%

20%

47%

67%

39%

37%

79%

53%

67%

42%

37%

80%

53%

12%

29%

20%

15%

34%

23%

33%

62%

47%

44%

47%

67%

60%

43%

44%

45%

67%

23%

47%

32%

33%

24%

22%

47%

31%

10%

17%

50%

35%

36%

40%

37%

67%

42%

39%

40%

33%

25%

35%

29%

33%

44%

26%

35%

31%

17%

29%

33%

25%

29%

16%

27%

25%

26%

Board diversity at 30 June

Board of Directors FY20

Board of Directors FY19

Male

57%

Female

Total

Under 30

30–50

Over 50

43%

100%

43%

57%

European /
Pākehā

Total

100%

Māori

Pasifika

Total

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Contact INTEGRATED REPORT 2020Additional disclosures

Supply chain impacts

Number of suppliers assessed for environmental and social impacts.

Number of suppliers identified as having significant actual and potential negative
environmental and social impacts1.

Percentage of suppliers with which improvements have been agreed upon as a result
of assessment.

Percentage of suppliers with which relationships have been terminated as a result
of assessment, and why.

1. The actual and potential impacts we have identified in our supply chain includes local job creation, fair pay,

reducing greenhouse gas emissions, decarbonisation and electrification, hazardous chemicals management,
waste minimisation and containment, health and safety of workers and human rights.

Safety data at 30 June

Injury Type

First aid

Medical treatment

Lost Time

Fatality

Occupational Disease

Days Lost

Injury Rate1

Severity Rate2

Employee – Male Employee – Female

Contractor

1.7

0.9

12.2

81.1

1. TRIFR – Recordable injuries per million hours worked.

2. Days lost per million hours worked.

Employee absentee rate at 30 June

Total scheduled days

Total absence days

Lost days as a percentage

Females

106,506

4,394

Males

All Employees

126,630

2,603

233,137

6,996

TCFD Index

Disclosure

Describe the Board’s oversight of climate-related risks and opportunities.

Describe management’s role in assessing and managing climate-related risks
and opportunities.

Describe the climate-related risks and opportunities the organisation has
identified over the short, medium and long term.

Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning.

Describe the resilience of the organisation’s strategy, taking into consideration
different climate-related scenarios, including a 2 degree or lower scenario.

Describe the organisation’s processes for identifying and assessing
climate-related risks.

Describe how processes for identifying, assessing and managing climate-related
risks are integrated into the organisation’s overall risk management.

Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with its strategy and risk management process.

Disclose Scope 1, 2 and if appropriate 3 greenhouse gas (GHG) emissions,
and the related risks.

Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.

Page
number

62, 63

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Contact INTEGRATED REPORT 2020Additional disclosuresPg

Information

Description

Information

GRI Index

Description

Strategy and analysis

102–14

Statement from the most senior
decision maker

4–7

Organisational profile

102–1

102–2

102–3

102–4

Name of the organisation

Contact Energy Ltd

Brands, products, and/or services

Headquarter location

Locations of operations

13 Contact operates only in

102–5

Ownership and legal form

102–6

102–7

Markets served

Scale of the organisation

New Zealand. For GRI reporting
purposes our ‘significant location
of operation’ is New Zealand.

Listed New Zealand
Limited Liability Company

Total employees

Number of operations

Net revenue

GWh sold

Total capitalisation broken down by
debt and equity

Quantity of products and services
provided

11% of total Contact employees
were covered by collective
bargaining agreements as at
30 June 2020. Contractor data
not collected.

Employee statistics

Employees covered by collective
bargaining agreements

102–8

102–41

102–9

102–10

Organisation’s supply chain

15–17

Significant changes regarding size,
structure, or ownership

No significant changes

Report profile

102–11

Precautionary approach

Not specifically addressed.
Potential adverse environmental
impacts are addressed through
adaptive management including
official (often publicly notified)
resource consent assessments.

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102–12

102–13

External charters, principles, or
other initiatives

ISO14001

Memberships in associations and
advocacy organisations

Identified material aspects and boundaries

102–45

102–46

Entities included in the
organisation’s consolidated
financial statements

Process for defining the report
content

18–19

102–47

List of material topics

102–48

Restatements of information

102–49

Significant changes of aspect
boundaries compared to previous
years

Stakeholder engagement

102–40

102–42

102–43

102–44

Stakeholder groups

Stakeholder identification and
selection

Approaches to stakeholder
engagement

Key topics and concerns raised
by stakeholders

18–19

For the majority of our material
topics, the impacts occur within the
operational boundary. For some
topics, Biodiversity, Water, Climate
Change and Energy Hardship,
impacts can be felt downstream of
our operational boundary, or we
are contributing to a larger issue.
Health and safety impacts are
also created by companies in our
supply chain. In all cases, our focus
is on areas which we can control or
influence.

No restatements in this reporting
period.

No significant changes.

102–50

102–51

102–52

102–53

102–54

Reporting period

Financial year

Date of most recent previous
report

The previous report was dated
12 August 2019.

Reporting cycle

Annual

Contact point for questions

100

Chosen ‘In accordance’ option,
GRI index

This report has been developed in
accordance with the core GRI 2018
guidelines.

Contact INTEGRATED REPORT 2020Additional disclosuresDescription

Information

102–56

External assurance for the report

Governance

102–18

Governance structure.
Committee responsible for
decision-making on economic,
environmental and social topics.

Ethics and integrity

102–16

Organisation’s values, principles,
standards and norms of
behaviour, and codes of ethics

Category: environmental

DMA

Water

Integrated Report 2020 has not
been assured against GRI. FY20
Greenhouse Gas emissions totals
in our GHG Inventory underwent
limited assurance.

41 According to the WRI Aqueduct

Global Water Tool, Contact assets
are all in low or low-medium water
risk areas. We have therefore not
reported data by ‘water stress areas’.

303–3

303–4

303–5

DMA

304–3

DMA

305–1

305–2

305–3

305–4

305–5

DMA

Total water withdrawal by source

Total water discharge by
destination

Total water consumption

Biodiversity

Habitats protected or restored

Emissions

Direct (Scope 1) greenhouse gas
emissions

Gross location-based Scope 2
emissions

Gross Scope 3 emissions

GHG emissions intensity

Reduction of GHG emissions

Reliable renewable energy

Own measure Percentage of renewable
generation

Category: social

DMA

403–2

Occupational health and safety

Workplace injuries

66 Contractor data not available

for absentee rate, occupational
disease rate and fatalities.

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Description

Self–selected

TISR

Self–selected

Process safety data

Information

Diversity and equal opportunity

31–32

DMA

405–1

405–2

Gender, age and ethnicity
statistics

Ratio of the basic salary and
rem of women to men for each
employee category

Self–selected

Staff engagement

DMA

413–1

Local communities

Community engagement and
development

DMA

Customer experience

Own measure Customer satisfaction
(Net Promoter Score)

DMA

Customer wellbeing

Own measure Description of activities

36–38

21–22

undertaken to support customer
wellbeing

DMA

Energy Hardship

21–22

Own measure Reduction of customer debt

expressed as a percentage

DMA

308–2

414–2

DMA

307–1

419–1

Supply chain

Negative environmental impacts
in the supply chain and actions
taken

Negative social impacts in the
supply chain and actions taken

Compliance

Non-compliance with
environmental laws and
regulations

Non-compliance with laws and
regulations in the social and
economic area

DMA

Financial sustainability

Own measure Financial performance in FY20

Contact INTEGRATED REPORT 2020Additional disclosuresFinancial
statements

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020Financial statements

Contents

About these financial statements

Statement of comprehensive income

Statement of cash flows

Statement of financial position

Statement of changes in equity

Notes to the financial statements

A. Our performance

A1. Segments

A2. Earnings

A3. Free cash flow

B. Our funding

B1. Capital structure

B2. Share capital

B3. Distributions

B4. Borrowings

B5. Net interest expense

C. Our assets

C1. Property, plant and equipment and

intangible assets

C2. Goodwill and asset impairment testing

D. Our financial risks

D1. Market risk

D2. Liquidity risk

D3. Credit risk

E. Other disclosures

E1. Tax

E2. Operating expenses

E3. Inventory

E4. Trade and other receivables

E5. Provisions

E6. Profit to operating cash flows

E7. Hedging activities

E8. Financial instruments at fair value

E9. Financial instruments at amortised cost

E10. Share-based compensation

E11. Related parties

E12. Contingencies

E13. New accounting standards

E14. Post balance date events

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020About these financial statements
For the year ended 30 June 2020

These financial statements are for Contact, a group made
up of Contact Energy Limited, the entities over which it has
control or joint control and its associate.

Contact Energy Limited is registered in New Zealand under the Companies Act
1993. It is listed on the New Zealand Stock Exchange (NZX) and the Australian
Securities Exchange (ASX) and has bonds listed on the NZX debt market. Contact
is an FMC reporting entity under the Financial Markets Conduct Act 2013.

Contact’s financial statements are prepared:

• in accordance with New Zealand generally accepted accounting practice (GAAP)
and comply with New Zealand equivalents to International Financial Reporting
Standards (IFRS) and IFRS as appropriate for profit-oriented entities

• in millions of New Zealand dollars (NZD) unless otherwise noted
• on a historical cost basis except for derivatives held at fair value
• using the same accounting policies for all reporting periods presented
• with certain comparative amounts reclassified to conform to the current year’s

presentation.

Estimates and judgements are made in applying Contact’s accounting policies.
Areas that involve a higher level of estimation or judgement are:

• useful lives of property, plant and equipment and intangible assets (note C1)
• impairment testing of cash-generating units (CGUs) and future generation

development capital work in progress (note C2)

• fair value measurement of financial instruments (notes D1 and E8)
• unbilled retail electricity and gas revenue (note E4)
• provision for future restoration and rehabilitation obligations (note E5)
• the determination of the Rio Tinto announcement on 9 July 2020 as a material

non-adjusting event (note E14).

The financial statements at 30 June 2020 include estimates and judgements in
respect of the potential impact of COVID-19 on Contact’s financial position and
results. Whilst these reflect all available information at the date these financial
statements are authorised, it is noted that there is significant uncertainty with
regards to the medium- and long-term effects of COVID-19 on the New Zealand
economy and electricity market. Further information is provided on specific
impacts of COVID-19 in relation to the goodwill and asset impairment testing
(note C2) and the provision for impairment of receivables (note E4). No adjustments
have been made to the carrying value of any other assets at 30 June 2020 as a result
of COVID-19.

On 9 July 2020, Rio Tinto announced that it would start planning for the wind-down
of operations and the eventual closure of New Zealand Aluminium Smelters (NZAS)
in August 2021. The impact of this decision on Contact is considered in note E14.

The financial statements were authorised on behalf of Contact’s Board of Directors
on 7 August 2020.

Robert McDonald
Chair

Dame Therese Walsh
Chair, Audit & Risk Committee

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020

Statement of
comprehensive income
For the year ended 30 June 2020

Statement of
cash flows
For the year ended 30 June 2020

Note

Revenue and other income

Operating expenses

Significant items

Depreciation and amortisation

Net interest expense

Profit before tax

Tax expense

Profit from continuing operations

Discontinued operation

Profit from discontinued operation after tax

Gain on sale of discontinued operation

Profit

Items that may be reclassified to profit/(loss):

Change in hedge reserves (net of tax) – continuing
operations

Change in hedge reserves (net of tax) – discontinued
operation

Comprehensive income

Profit per share (cents) – basic

Profit per share (cents) – diluted

Profit per share (cents) from continuing operations

(5)

(220)

(55)

171

(46)

125

–

125

(10)

–

115

17.5

17.4

17.5

(205)

(70)

239

(69)

170

165

345

(43)

(3)

299

48.2

23.7

2020

2,073

2019

2,460

Receipts from customers

(1,622)

(1,955)

Payments to suppliers and employees

Interest paid

Interest received

Tax paid

Operating cash flows

Purchase of assets

Capitalised interest

Investment in joint venture/associate

Acquisition of Energyclubnz

Note

2020

2,058

(1,598)

(49)

–

(70)

341

(94)

(6)

(3)

Proceeds from sale of assets/operations (net of tax)

–

Investing cash flows

Dividends paid

Proceeds from borrowings

Repayment of borrowings

Financing cash flows

Net cash flow

Add: cash at the beginning of the year

Cash at the end of the year

(106)

(280)

108

(66)

(238)

(3)

2019

2,490

(1,977)

(69)

(47)

401

(63)

–

(8)

–

390

319

(251)

100

(525)

(676)

Profit per share (cents) from discontinued operation

–

24.5

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020

Statement of
financial position
at 30 June 2020

Cash and cash equivalents

Trade and other receivables

Inventories

Intangible assets

Derivative financial instruments

Total current assets

Inventories

Property, plant and equipment

Intangible assets

Goodwill

Investments in joint venture/associate

Derivative financial instruments

Total non-current assets

Total assets

Trade and other payables

Tax payable

Borrowings

Derivative financial instruments

Provisions

Total current liabilities

Borrowings

Derivative financial instruments

Provisions

Deferred tax

Other non-current liabilities

Total non-current liabilities

Total liabilities

Net assets

Share capital

Retained earnings

Hedge reserves

Share-based compensation reserve

Shareholders’ equity

Note

E11

2020

191

331

–

2019

196

298

4,026

4,126

227

179

119

4,565

4,896

190

220

501

978

653

1,774

2,275

2,621

1,528

1,134

(49)

2,621

246

179

4,656

4,954

185

127

394

969

676

1,778

2,172

2,782

1,523

1,288

(39)

2,782

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020

Statement of
changes in equity
For the year ended
30 June 2020

Balance at 1 July 2018

Profit

Change in hedge reserves (net of tax)

Change in share-based compensation reserve

Change in share capital

Dividends paid

Balance at 30 June 2019

Profit

Change in hedge reserves (net of tax)

Change in share-based compensation reserve

Change in share capital

Dividends paid

Balance at 30 June 2020

Note

E10

Share
capital

1,520

–

1,523

–

1,528

Retained
earnings

Other
reserves

Shareholders’
equity

1,194

345

–

(251)

1,288

125

–

(280)

1,134

–

(46)

–

(29)

–

(10)

(2)

–

(41)

2,727

345

(46)

(251)

2,782

125

(10)

(2)

(280)

2,621

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Contact INTEGRATED REPORT 2020Financial statements for the year ended 30 June 2020Notes to the financial statements

A. Our performance

A1. Segments
Contact reports activities under the Wholesale segment and the Customer
segment. There have been no significant changes to Contact’s operating segments
in the current year.

The Wholesale segment includes revenue from the sale of electricity to the
wholesale electricity market, to Commercial & Industrial (C&I) customers and to
the Customer segment, less the cost to generate and/or purchase the electricity
and costs to serve and distribute electricity to C&I customers.

The Customer segment includes revenue from delivering electricity, natural gas,
broadband and other products and services to mass market customers less the
cost of purchasing those products and services, and the cost to service customers.

‘Unallocated’ includes corporate functions not directly allocated to the operating
segments.

The Customer segment purchases electricity from the Wholesale segment
at a fixed price in a manner similar to transactions with third parties.

A2. Earnings
The tables on the next pages provide a breakdown of Contact’s revenue and
expenses, earnings before interest, tax, depreciation and amortisation, fair value
adjustments and other significant items (EBITDAF) by segment, and a reconciliation
from EBITDAF and underlying profit to profit reported under NZ GAAP.

EBITDAF and underlying profit are used to monitor performance and are non-
GAAP profit measures. Significant items are excluded from EBITDAF and
underlying profit when they meet criteria approved by the Board of Directors.

The significant items in this reporting period are:

• ‘Change in fair value of financial instruments’. Made up of movements in the

valuation of electricity price derivatives that are not accounted for as hedges,
hedge accounting ineffectiveness and the effect of credit risk on the valuation
of hedged debt and derivatives (notes D1, E7 and E8).

• ‘Increase in Holidays Act provision’. Additional provision recognised in respect

of Contact’s discretionary short-term incentive scheme (note E5).

The significant revenue categories are:

• Electricity and gas revenue

Electricity and gas revenue (including mass market electricity, C&I electricity,

gas and LPG) is recognised when energy is supplied for customer consumption.
Mass market electricity includes net revenue for AA Smartfuel rewards. Revenue
is initially recognised net of prompt payment discounts.

• Wholesale electricity, net of hedging
Revenue received from electricity generated and sold through the wholesale

market, the net settlement of electricity hedges sold on the electricity futures
markets and to generators, other retailers and industrial customers. Revenue is
recognised as the energy is delivered.

• Electricity-related services revenue
Revenue from the sale of complementary products and services to the wholesale
market for the provision of instantaneous reserves, frequency keeping and other
ancillary services. Revenue is recognised as the services are provided.

Revenue recognition involves the calculation of unbilled revenue accruals for mass
market, C&I electricity and gas, as well as the recognition of contract assets (note E4).

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 20202020

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Mass market electricity

C&I electricity – Fixed Price

C&I electricity – Spot

Wholesale electricity, net of hedging

Electricity-related services revenue

Inter-segment electricity sales

Gas

Steam

Broadband

LPG

Total revenue

Other income

Total revenue and other income

Electricity purchases, net of hedging

Electricity purchases – Spot

Electricity-related services cost

Inter-segment electricity purchases

Gas and diesel purchases

Gas storage costs

Carbon emissions

Generation transmission & reserves costs

Electricity networks, levies & meter costs – Fixed Price

Electricity networks, levies & meter costs – Spot

Gas networks, transmission & meter costs

Broadband costs

Other operating expenses

LPG purchases

Total operating expenses

EBITDAF

Depreciation and amortisation

Net interest expense

Tax on underlying profit

Underlying profit

Significant items

Change in fair value of financial instruments

Gain on sale of Rockgas and AGS Facility

Increase in Holidays Act provision

Tax on significant items

Profit

Underlying profit per share (cents)

Wholesale

Customer

Unallocated

Eliminations

Total

–

275

791

332

–

1,449

–

1,449

(635)

(14)

(7)

–

(90)

(22)

(24)

(32)

(95)

(2)

(9)

–

(93)

–

(1,023)

426

861

–

952

957

–

(332)

(24)

–

(4)

–

(414)

–

(37)

(17)

(79)

–

(907)

–

(25)

–

(25)

(1)

–

(332)

–

(333)

–

(333)

–

332

–

333

–

860

275

791

–

2,068

2,073

(635)

(14)

(7)

–

(114)

(22)

(28)

(32)

(509)

(2)

(46)

(17)

(196)

–

(1,622)

451

(220)

(55)

(47)

129

–

(5)

125

18.0

Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020 Wholesale

Customer

Unallocated

Eliminations

Total
continuing
operations

Discontinued
operation

2019

Mass market electricity

C&I electricity – Fixed Price

C&I electricity – Spot

Wholesale electricity, net of hedging

Electricity-related services revenue

Inter-segment electricity sales

Gas

Steam

Broadband

LPG

Total revenue

Other income

Total revenue and other income

Electricity purchases, net of hedging

Electricity purchases – Spot

Electricity-related services cost

Inter-segment electricity purchases

Gas and diesel purchases

Gas storage costs

Carbon emissions

Generation transmission & reserves costs

–

388

1,044

314

–

1,817

1,827

(901)

(27)

(10)

–

(98)

(17)

(21)

(40)

863

–

943

948

–

(314)

(18)

–

(3)

–

Electricity networks, levies & meter costs – Fixed Price

(139)

(421)

(3)

(8)

–

(99)

–

(1,363)

464

–

(38)

(6)

(81)

–

(881)

Electricity networks, levies & meter costs – Spot

Gas networks, transmission & meter costs

Broadband costs

Other operating expenses

LPG purchases

Total operating expenses

EBITDAF

Depreciation and amortisation

Net interest expense

Tax on underlying profit

Underlying profit

Significant items

Change in fair value of financial instruments

Gain on sale of Rockgas and AGS Facility

Remediation for Holidays Act non-compliance

Tax on significant items

Profit

Underlying profit per share (cents)

s
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–

(26)

–

(26)

(1)

–

(314)

–

(315)

–

(315)

–

314

–

315

–

862

388

1,044

–

2,445

2,460

(901)

(27)

(10)

–

(116)

(17)

(24)

(40)

(560)

(3)

(46)

(6)

(205)

–

(1,955)

505

(205)

(70)

(64)

166

(5)

170

23.2

–

(2)

–

(7)

(37)

(46)

–

(3)

–

165

–

175

1.4

Total

862

388

1,044

–

2,503

2,519

(901)

(27)

(10)

–

(116)

(17)

(26)

(40)

(560)

(3)

(46)

(6)

(212)

(37)

(2,001)

518

(205)

(70)

(67)

176

170

(5)

345

24.6

Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020A3. Free cash flow
Free cash flow is a non-GAAP cash measure that shows the amount of cash Contact
has available to distribute to shareholders, reduce debt or reinvest in growing the
business. A reconciliation from EBITDAF to NZ GAAP operating cash flows and to
free cash flow is provided below.

EBITDAF

Tax paid

Note

Change in working capital, net of investing and
financing activities

Non-cash items included in EBITDAF

Significant items, net of non-cash amounts

Net interest paid, excluding capitalised interest

Operating cash flows

Stay in business capital expenditure

Operating free cash flow

Proceeds from sale of assets/operations (net of tax)

Free cash flow

Operating free cash flow per share (cents)

2020

451

(70)

–

(49)

341

(51)

290

–

290

40.4

2019

518

(47)

(7)

(2)

(65)

401

(60)

341

390

731

47.5

During the current reporting period, interest paid and interest received were
reclassified to operating cash flows, to better reflect the purpose and use of the
underlying instruments.

Stay in business capital expenditure is required to maintain our business operations
and includes major plant inspections and replacements of existing assets.

B. Our funding

B1. Capital structure
Contact’s capital includes equity and net debt. Our objectives when managing
capital are to ensure Contact can pay its debts when they are due and to optimise
the cost of our capital.

To manage the capital structure, the Board of Directors may adjust the amount and
nature of distributions to shareholders, issue new shares and increase or repay debt.

Contact manages its capital structure to support a BBB credit rating and a gearing
ratio suitable to the nature of our business.

Borrowings

Shareholders’ equity

Total capital funding

Gearing ratio

Note

2020

1,198

2,621

3,819

31.4%

2019

1,096

2,782

3,878

28.3%

B2. Share capital
Share capital comprises ordinary shares listed on the NZX and ASX. Certain
ordinary shares are held in trust on behalf of employees under the Contact Share
scheme (note E10). All shareholders are entitled to receive distributions and to
make one vote per share.

Balance at 30 June 2019

Share capital issued

Balance at 30 June 2020

Comprised of:

Ordinary shares

Contact Share

Note

Number

716,774,782

1,357,102

718,131,884

717,853,729

E10

278,155

1,523

1,528

1,529

(1)

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

B3. Distributions
Earnings and operating free cash flow per share

cps

2
8
4

5
7
4

4
0
4

5
7
1

4
7
1

6
4
2

0
8
1

Profit
(basic)

Profit
(diluted)

Underlying
profit
(basic)

Operating free
cash flow
(basic)

2020
2019

Weighted average

Number of shares (basic)

Number of shares (diluted)

2020

2019

717,652,455

716,623,167

718,964,789

716,715,206

The basic earnings per share calculation uses the weighted average number of
shares on issue over the period.
The diluted weighted average number of shares takes into account the number
of share options, Performance Share Rights and Deferred Share Rights that are
currently exercisable or will become exercisable because vesting depends only
on an employee staying with Contact or it is likely vesting conditions will be met.

Dividends paid

Paid during the year ended

Cents per share

2018 final

2019 interim

30 June 2019

2019 final

2020 interim

30 June 2020

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19.0

16.0

23.0

16.0

136

115

251

165

115

280

On 7 August 2020, the Board resolved to pay a 65% imputed final dividend
of 23 cents per share on 15 September 2020. On 7 August 2020, Contact had
$7 million of imputation credits available for use in future periods.

B4. Borrowings
Borrowings are recognised initially at fair value less financing costs and subsequently
at amortised cost using the effective interest rate method. Some borrowings
are designated in fair value hedge relationships, which means that any changes
in market interest and foreign exchange rates result in a change in the fair value
adjustment on that debt.

Borrowings denoted with an asterisk (*) are Green Debt Instruments under Contact’s
Green Borrowing Programme, which has been certified by the Climate Bonds Initiative.
At 30 June 2020 Contact remains compliant with the requirements of the programme.
Further information is available on the Sustainability section on Contact’s website.

Coupon

Floating

Various

5.28%

3.46%

4.40%

4.63%

4.19%

4.09%

3.63%

3.55%

4.33%

3.85%

Floating

3.95%

4.44%

4.51%

Bank overdraft

* Commercial paper

* Drawn Bank facilities

Lease obligations

* Wholesale bonds

* USPP notes – US$56m

* Retail bonds – CEN030

* Retail bonds – CEN040

* USPP notes – US$22m

* USPP notes – US$51m

* USPP notes – US$42m

* Retail bonds – CEN050

* USPP notes – US$58m

* USPP notes – US$43m

* Export credit agency facility

* USPP notes – US$15m

* USPP notes – US$23m

* USPP notes – US$30m

Face value of borrowings

Deferred financing costs

Maturity

< 3 months

Various

May 2020

Dec 2020

Nov 2021

Nov 2022

Dec 2023

Aug 2024

Dec 2025

Nov 2027

Dec 2027

Dec 2028

Total borrowings at amortised cost

Fair value adjustment on hedged borrowings

Carrying value of borrowings

Current

Non-current

2020

2019

120

–

150

100

1,058

(4)

1,054

144

1,198

220

978

150

100

1,015

(5)

1,010

1,096

127

969

Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

Changes in borrowings

Borrowings at the start of the year

Net cash borrowed/(repaid)

Non-cash change in lease obligations

Non-cash change in deferred financing costs

Non-cash change in fair value adjustment

Borrowings at the end of the year

2020

1,096

2019

1,494

(425)

(8)

Cash and cash equivalents
Cash and cash equivalents exclude bank overdrafts which are included within
borrowings. Contact trades electricity price derivatives on the ASX market using
a broker that holds collateral on deposit for margin calls. At 30 June 2020, this
collateral was $44 million (2019: $17 million) and is included within cash.

B5. Net interest expense

1,198

1,096

Interest expense on borrowings

Unwind of discount on provisions

Capitalised interest

Interest income

Net interest expense

Note

2020

(56)

(5)

–

(55)

2019

(69)

(5)

–

(70)

Interest expense on borrowings is made up of interest on drawn debt and interest
rate swaps, interest on finance leases and the unwind of deferred financing costs.

Interest expense relating to finance leases for the period is $2 millon (2019: $2 millon).

Short-term funding
Contact uses bank facilities for general corporate purposes including to manage
its liquidity risk (note D2). While drawings under our bank facilities are typically for
periods of three months or less, the amounts drawn down can be rolled for the term
of the facility. Drawn facilities are classified as current when the facility will expire
within one year of the reporting period end.

Contact’s total bank facilities (including undrawn facilities of $566 million at
30 June 2020) have a range of maturities as follows:

Maturity $m

Between 1 and 2 years

Between 2 and 3 years

More than 3 years

2020

325

195

110

630

2019

165

120

125

410

$430 million of these bank facilities form part of Contact’s Green Borrowing
Programme.

Lease obligations
Contact’s leases predominately relate to property and connections to the national
electricity grid. These assets are included in the carrying value of property, plant
and equipment (note C1).

Security
Contact’s Deed of Negative Pledge and Guarantee and its United States Private
Placement (USPP) note agreements restrict Contact from granting security
interest over its assets, subject to certain permitted exceptions. Because of these
restrictions, Contact’s borrowings are all unsecured, except for lease obligations
secured over the leased assets. The Deed of Negative Pledge and Guarantee and
the USPP note agreements contain various debt covenants, all of which Contact
complied with during the reporting period.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

C. Our assets

C1. Property, plant and
equipment and intangible assets
Contact’s property, plant and equipment (PP&E) and
intangible assets include:

• Generation plant and equipment: hydro, geothermal

and thermal power stations, and geothermal wells and
pipelines.

• Computer software: our SAP system that is used for
customer service and billing, finance functions and
generation asset management, which has a value of
$194 million (2019: $216 million) and a remaining life
of nine years.

All assets are recognised at cost less accumulated
depreciation or amortisation and impairments. Generation
plant and equipment acquired before 1 October 2004
is recognised at deemed historical cost, which is the fair
value of those assets at 1 October 2004, less accumulated
depreciation and accumulated impairment losses.

The useful economic life of Taranaki Combined Cycle plant
assets (excluding those depreciated on operating hours)
was reassessed during the year for accounting purposes as a
result of changes in the external environment, and the likely
outcome that the plant will be closed once operating hours
are fully utilised. As a change in accounting estimate, this was
applied from 1 July 2019, and has resulted in an $18 million
increase to depreciation in the year ended 30 June 2020.

Included within additions for the year ended 30 June 2020 is
capitalised interest of $6 million in relation to capital works
underway at the Tauhara geothermal field.

Property, plant and equipment

Cost

Generation
plant and
equipment

Other land,
buildings,
plant and
equipment

Capital work
in progress

Leased
assets

Balance at 1 July 2018

5,593

108

Additions

Transfers from capital work in progress

Disposals

–

Balance at 30 June 2019

5,627

111

Additions

Transfers from capital work in progress

Disposals

(3)

–

Balance at 30 June 2020

5,658

119

Depreciation and impairment

Balance at 1 July 2018

Depreciation charge

Disposals

Balance at 30 June 2019

Depreciation charge

Disposals

(1,538)

(160)

–

(1,698)

(177)

(92)

(6)

–

(98)

(4)

–

Balance at 30 June 2020

(1,872)

(102)

Carrying value

At 30 June 2019

At 30 June 2020

3,929

3,786

151

(22)

–

156

(22)

–

197

(1)

–

(1)

–

(1)

155

196

–

(1)

–

(28)

(3)

–

(31)

(3)

–

(34)

Total

5,912

–

(1)

5,954

–

(3)

6,035

(1,659)

(169)

–

(1,828)

(184)

(2,009)

4,126

4,026

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

Intangible assets

Cost

Balance at 1 July 2018

Additions

Transfers to assets held for sale

Disposals

Balance at 30 June 2019

Additions

Disposals

Balance at 30 June 2020

Amortisation

Balance at 1 July 2018

Amortisation charge

Balance at 30 June 2019

Amortisation charge

Disposals

Balance at 30 June 2020

Carrying value

At 30 June 2019

At 30 June 2020

Current

Non-current

Computer
software and
capital work
in progress

Carbon
emission
units

Other

Total

447

–

467

(2)

482

(185)

(36)

(221)

(36)

(256)

246

226

–

226

–

28)

(26)

–

457

–

(28)

481

(28)

486

(185)

36)

(221)

(36)

(256)

260

230

227

Capital commitments

At 30 June 2020, Contact was committed to $8 million of capital expenditure
(2019: $22 million) and $33 million of carbon forward contracts (2019: $38 million),
of which $33 million is due within one year of the reporting period end and $8 million
is due between one to two years of the reporting period end.

Cost
Contact capitalises the costs to purchase and bring assets into service. When
Contact develops an asset, employee time and other directly attributable costs
are capitalised and held as capital work in progress until the asset is commissioned.

Contact capitalises costs to obtain resource consents and to drill geothermal
exploration wells. These costs are expensed if the existing area of operations that
they relate to is unsuccessful or abandoned. All other geothermal exploration costs
are expensed.

Carbon emission units are purchased to offset our emissions under the New Zealand
Emissions Trading Scheme (ETS). The units are measured at weighted average
cost. They are classified as current assets when they will be used to offset our ETS
obligations at balance date or obligations expected to be incurred within one year
of balance date.

Depreciation and amortisation
The cost of Contact’s assets is spread evenly over their useful lives (straight line
method) or, for certain thermal assets, over the equivalent operating hours (EOH)
those assets are expected to be of benefit to Contact.

Management estimates an asset’s useful life or EOH and this is reviewed annually.

Land, capital work in progress and carbon emission units are not depreciated or
amortised. The depreciation and amortisation rates for all other assets are:

Asset

Generation plant and equipment

Straight line

Equivalent operating hours

Other buildings, plant and equipment

Computer software

Rate/hours

1–33%

40,000–100,000

2–33%

5–50%

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

C2. Goodwill and asset impairment testing
Contact has two cash-generating units (CGUs): Wholesale and Customer.
The Customer CGU includes goodwill of $179 million (2019: $179 million).
Capital work in progress (CWIP) includes $140 million (2019: $98 million)
related to future generation developments not allocated to a CGU.

The recoverable amount of an asset or CGU is calculated as the higher of its
value in use and fair value less costs to sell. Every reporting period management
estimates the value in use expected to be recovered from Contact’s CGUs and
future generation development in CWIP. An impairment is recognised when the
value in use or fair value less costs to sell is lower than the carrying value.

Determining value in use involves estimating future cash flows for each CGU.
These cash flows are adjusted for future growth based on historical inflation and
discounted at a post-tax discount rate between 6% and 7% to arrive at the present
value, or value in use, of each CGU. The future generation development is assessed
separately, however, key inputs are the same as for the Wholesale CGU plus an
estimate of plant commissioning costs.

No impairments were recognised in the current or prior period. Future cash flows
were assessed on the basis that the New Zealand Aluminium Smelter continues
to operate. Post balance date events in this respect are set out in note E14.

The key inputs to CGU and future generation development cash flows, and their
method of determination, are (right):

Customer CGU

Post-tax discount rate
and inflation

External WACC report prepared by Cameron Partners and
implicit inflation rate

Customer numbers
and churn

Actual customer numbers adjusted for historical churn data
and expected market trends

Margin per customer

Estimated future capital
expenditure and operating
costs

Cost of purchased energy

Actual margin per customer adjusted for expected
market changes

Budgeted capital and operating expenditure, reflecting
historical levels and known differences

ASX future electricity prices adjusted for location and
seasonal shape

Wholesale CGU and future generation development

Post-tax discount rate
and inflation

External WACC report prepared by Cameron Partners,
and implicit inflation rate

Wholesale electricity
price path

Generation volume and mix

Estimated future capital
expenditure and operating
costs

Gas price

Modelled wholesale prices based upon ASX future electricity
prices adjusted for location and seasonal shape, and price
estimates based on an analysis of expected demand and cost
of new supply for periods not quoted on the ASX market

Generation strategy based on expected demand, hydro
volumes and expected market pricing

Budgeted capital and operating expenditure, reflecting
historical levels and known differences

Contracted gas prices, otherwise Contact’s best estimate
of future prices

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020COVID-19
The impairment testing includes assumptions relating to the impact of COVID-19
on future cash flows. Forecast sales volumes, prices, gross margins, changes in
working capital, foreign exchange rates and discount rates have been reassessed
and updated as appropriate due to the significant changes in economic and market
conditions. Uncertainty remains over the impact of COVID-19 in the medium to
long term.

Sensitivities
The calculation of the value in use for the CGUs is most sensitive to the inputs for
wholesale electricity prices and the post-tax discount rate.

Wholesale electricity prices are influenced by a number of factors that are difficult
to predict, in particular weather, which can impact short term prices. Wholesale
electricity prices may also be adversely affected by a reduction in demand, the
availability of fuel and generation capacity in the wholesale electricity market, and
competitor and transmission system availability.

The post-tax discount rate is an estimate of Contact’s weighted average cost of
capital and is influenced by a number of external factors such as the risk-free rate
and inflation.

The sensitivity of the valuation model to the wholesale electricity prices and
discount rate, where all other inputs remain constant, is as follows:

Significant unobservable inputs

Sensitivity

Impact $m

Post-tax discount rate

Wholesale electricity price path

-1%
+1%

+10%
-10%

+1,490
-994

+374
-374

The value in use exceeded the carrying value for all sensitivities carried out.
There is interrelation between the key inputs in the valuation. Any changes in
the price path and post tax discount rate would not occur in isolation and would
drive other changes which could also impact the value in use.

D. Our financial risks

Contact’s financial risk management system mitigates exposure to market, liquidity
and credit risks by ensuring that material risks are identified, the financial impact is
understood, and tools and limits are in place to manage exposures. Written policies
provide the framework for Contact’s financial risk management system.

D1. Market risk
Interest rate risk
Contact has fixed and floating rate debt and is exposed to movements in interest
rates. For fixed rate debt the exposure is to falling interest rates as Contact
could have secured that debt at lower rates, while for floating rate debt there is
uncertainty of future cash interest payments.

Contact manages these risks through the use of interest rate swaps (IRS) and cross-
currency interest rate swaps (CCIRS) to ensure that the total debt portfolio has an
appropriate amount of fixed and floating rate exposure. The risk is monitored by
assessing the notional amount of debt on a fixed and floating basis and ensuring this
is in accordance with set policies.

Foreign exchange risk
Contact is exposed to movements in foreign exchange rates through its
commitments to pay certain suppliers and United States Private Placement (USPP)
note holders.

To mitigate this risk, forward foreign exchange contracts are used to fix future
cash flows in NZD terms. Foreign debt is hedged through the use of CCIRS, which
converts foreign currency principal and interest payments to NZD at a fixed
exchange rate.

Commodity price risk
Contact is exposed to electricity price risk through the sale and purchase of
electricity on the wholesale electricity market. Contact’s integrated wholesale and
customer businesses provide a natural hedge for most of this exposure. Derivatives
may be used to fix the price at which Contact buys or sells any residual exposure to
electricity price risks. In addition, Contact is party to fixed price, variable volume
electricity price derivatives to provide cover in extreme price situations.

Contact is also exposed to natural gas price risk on purchases of natural gas. Short
and long term gas purchase contracts are used to fix the price of gas. These are not
derivative financial instruments.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020
Summary of derivative financial instruments
A summary of the exposures from derivatives and the impact on Contact’s financial
position, grouped by type of hedge relationship.

2020

Notional amount of derivatives

Maturity years

Average rate/price3

Carrying value of derivatives – asset

Carrying value of derivatives – liability4

Carrying value of hedged borrowings

Fair value adjustments to borrowings

2019

Notional amount of derivatives

Fair value
hedge

Cash flow
and fair value
hedge

IRS

188

CCIRS

447

Cash flow hedge 1

No hedge
relationship

Electricity
price
derivatives

Electricity
price
derivatives 2

5,247 GWh

385 GWh

IRS

660

2021–2024

2020–2028

2020–2026

2020–2024

2020–2023

1.7%

2.4%/0.765

3.9%

$70/MWh

$96/MWh

–

199

(12)

238

131

(1)

578

(132)

–

(90)

–

(33)

–

(3)

–

447

620

3,024 GWh

428 GWh

Maturity years

Average rate/price3

2020–2024

2020–2028

2020–2026

2019–2022

2019–2023

3.1%

3.7%/0.765

4.3%

$67/MWh

$93/MWh

Carrying value of derivatives – asset

Carrying value of derivatives – liability4

Carrying value of hedged borrowings

Fair value adjustments to borrowings

–

245

(8)

(4)

524

(78)

–

(77)

–

(29)

–

(3)

–

Total

156

(127)

777

(144)

(113)

769

(86)

1. In addition to the derivatives disclosed, Contact had foreign exchange derivatives at 30 June 2020 with a notional value of $9 million and a carrying value of nil.

2. Notionals, maturities and average prices for electricity price hedges not in hedge relationships do not include fixed price, variable volume contracts and

options not yet called.

3. Average interest rates for IRS and CCIRS are based on their pay legs. For pay-float swaps (CCIRS and IRS in fair value hedges), the rate comprises the

floating base rate plus the margin.

4. The CCIRS liability arises from the cash flow hedge component.

5. USD.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020
The change in fair value of derivatives recognised in the
Statement of Comprehensive Income, within significant
items and within other comprehensive income (OCI),
is provided on the right grouped, by type of hedge
relationship.

Further information on hedging activities and fair
value of derivatives is provided in notes E7 and E8.

Sensitivities
The graph (right) summarises the impact on derivative
valuations of possible changes in forward wholesale
electricity prices and forward interest rates. The analysis
assumes that all variables were held constant except
for the relevant market risk factor.

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2020

Change in fair value recognised in significant items
• Hedge ineffectiveness
• Hedge effectiveness
• Non-hedge movements
• Fair value adjustments to hedged borrowings
Total change in fair value in significant items

Hedge effectiveness recognised in OCI

Amounts reclassified to profit/(loss)

2019

Hedge effectiveness recognised in OCI

Amounts reclassified to profit/(loss)

Hedging impact on CFHR

2020 Forward electricity prices (+/-10%)

2019 Forward electricity prices (+/-10%)

2020 Forward interest rates

(+100/-25bps)

2019 Forward interest rates

(+100/-25bps)

Hedging impact on post-tax profit/(loss)

2020 Forward electricity prices (+/-10%)

2019 Forward electricity prices (+/-10%)

2020 Forward interest rates

(+100/-25bps)

2019 Forward interest rates

(+100/-25bps)

Fair value
hedge

Cash flow
and fair
value hedge

Cash flow hedge

No hedge
relationship

IRS

CCIRS

IRS

Electricity
price
derivatives

–

(4)

–

(2)

–

(54)

–

(32)

–

(2)

–

(20)

–

(19)

–

(24)

(31)

(6)

–

(2)

–

(2)

–

$m (Unfavourable)

$m Favourable

Total

(2)

(58)

–

(37)

–

(34)

(57)

(5)

(25)

(20)

(15)

(10)

(5)

Increase in rate/price Decrease in rate/price

Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

D3. Credit risk
Total credit risk exposure is measured by the financial
instruments in an asset position of $374 million
(2019: $316 million). To minimise credit risk exposure,
Contact has a policy to only transact with credit worthy
counterparties and to not exceed internally imposed
exposure limits to any one counterparty. Where
appropriate, collateral is obtained. Further information
on customer related credit risk is provided in note E4.

D2. Liquidity risk
To manage liquidity risk, Contact maintains a diverse portfolio of funding, debt maturities are spread over a
number of years, and any new financing or refinancing requirements are addressed with an appropriate lead
time. Contact maintains a buffer of undrawn bank facilities over its forecast funding requirements to enable
it to meet any unforeseen cash flows.

Management monitors the available liquidity buffer by comparing forecast cash flows to available facilities,
to ensure sufficient liquidity is maintained in accordance with internal limits.

Information on contracted cash flows in the table below is presented on an undiscounted basis.

CCIRS cash flows are included within Borrowings in the table below. US dollar inflows on the CCIRS offset the
US dollar outflows on the USPP notes.

2020

Trade and other payables

Borrowings

Electricity price derivatives – net settled

IRS – net settled

Foreign exchange derivatives – inflow

Foreign exchange derivatives – outflow

2019

Trade and other payables

Borrowings

Electricity price derivatives – net settled

IRS – net settled

Foreign exchange derivatives – inflow

Foreign exchange derivatives – outflow

Total
contractual
cash flows

(163)

(1,226)

(39)

(20)

(6)

Less than
1 year

1–2 years

2–5 years

(163)

(303)

(29)

(10)

(6)

–

(195)

(6)

–

(448)

(4)

–

More than
5 years

–

(280)

–

(1,448)

(505)

(207)

(456)

(280)

(159)

(1,229)

(26)

(33)

(4)

(159)

(186)

(18)

(10)

(4)

–

(121)

(6)

(8)

–

(518)

(3)

(14)

–

(404)

–

(1)

–

(1,447)

(373)

(135)

(535)

(405)

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

E. Other disclosures

E1. Tax
Tax expense is made up of current tax expense and deferred tax expense. Current
tax expense relates to the current financial reporting period while deferred tax will
be payable in future periods.

E2. Operating expenses
Other operating expenses (note A2) include total labour costs of $99 million
(2019: $99 million). Labour costs include contributions to KiwiSaver of $3 million
(2019: $3 million).

Audit fees paid to Contact’s auditor (KPMG) amounted to $560,000 for review of
the interim, and audit of the year end, financial statements (2019: $509,000). Other
fees paid to the auditor were $2,500 for scrutineering at the Annual meeting (2019:
$2,500), $44,500 for other assurance work (2019: $nil), and $3,500 for supervisor
reporting (2019: $3,500). Other assurance work relates to review of greenhouse
gas emissions reporting, Global Reporting Initiative indicators and our Green
Borrowings Programme.

E3. Inventory
Contact’s inventories comprise gas in storage for use in thermal generation,
consumables and spare parts for power stations, and diesel fuel for use in the
Whirinaki power plant. Inventory gas is measured at weighted average cost.
All inventories are stated at cost.

Inventory gas

Consumables and spare parts

Diesel fuel

Current

Non-current

2020

2019

–

Tax is recognised in profit, except when it relates to items recognised directly in OCI.

A legislative change in the year ended 30 June 2020 has reinstated tax depreciation
on buildings; accordingly Contact is able to claim tax depreciation on these assets
from 1 July 2020. This has resulted in a decreased deferred tax liability in respect of
those assets.

Profit before tax – continuing operations

Tax at 28%

Tax effect of adjustments:
• Prior period adjustments
• Reinstatement of tax depreciation on buildings
• Other
Tax expense – continuing operations

Current

Deferred

2020

171

(48)

(1)

(2)

(46)

(67)

2019

239

(67)

(1)

–

(1)

(69)

(125)

Contact’s deferred tax liability is calculated as the difference between the carrying
value of assets and liabilities for financial reporting purposes and the values used for
taxation purposes.

Balance at 1 July 2018

Recognised in profit/(loss)

Recognised in OCI

Recognised in other reserves

Balance at 30 June 2019

Recognised in profit/(loss)

Recognised in OCI

Recognised in other reserves

PP&E and
intangible
assets

Derivative
financial
instruments

(780)

–

(728)

–

(1)

–

Other

–

(2)

Total

(751)

(676)

(2)

(653)

Balance at 30 June 2020

(712)

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

E4. Trade and other receivables

Trade receivables

Unbilled receivables

Provision for impairment

Net trade receivables

Contract assets

Prepayments

2020

2019

102

(3)

174

191

(2)

176

196

Trade and unbilled receivables are recognised net of discounts based on past
experience of the amount of discounts taken up by customers. Unbilled receivables
represent Contact’s best estimate of retail sales for unread electricity and gas
meters at the end of the reporting period. The estimate uses the consumption
history of customer meters to determine the relevant unbilled amount for
the period.

Ageing of trade receivables past due but not impaired are:

Less than one month

Greater than one month

2020

2019

When Contact has been unable to collect amounts due from customers, those debts
are written off. Trade receivables, net of recoveries, of $3 million (2019: $2 million)
were written off during the reporting period.

COVID-19
Contact has increased its provision for impairment of trade receivables by
$1 million at 30 June 2020 as a result of the expected impact of COVID-19.

Contract assets
Contact capitalises the incremental costs incurred to acquire new customers and
amortises these costs to operating expenses over the expected life of the customer
relationship. Incentives given to customers are also capitalised as a contract asset
and amortised to revenue over a period of one to three years.

Opening balance

Additions

Amortised to revenue

Amortised to operating expenses

Closing balance

2020

2019

(8)

(3)

(6)

(3)

Of the total contract assets balance, $9 million (2019: $8 million) is expected to be
amortised within one year of the reporting period and the remainder between one
to three years of the reporting period end.

E5. Provisions
Contact recognises restoration and environmental rehabilitation provisions for the
expected costs to abandon and restore geothermal wells and generation sites and
to remove asbestos from properties.

Other provisions includes $5 million relating to a change in the legal interpretation of
discretionary payments under the Holidays Act (2019: $1 million for remediation of
the Holidays Act non-compliance).

Balance at 1 July 2019

Created

Released

Utilised

Unwind of discount

Balance at 30 June 2020

Current

Non-current

Restoration/
environmental
rehabilitation

(55)

(3)

(5)

(59)

(4)

(55)

Other

(4)

(5)

–

(9)

(6)

(3)

Total

(59)

(8)

(5)

(68)

(10)

(58)

These provisions are based on estimates of future cash flows to make good the
affected sites at the end of the assets’ useful lives. The expected future cash flows
are discounted to their present value using a pre-tax discount rate equivalent to a
post-tax rate of between 6% and 7%.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

E6. Profit to operating cash flows
A reconciliation of profit to operating cash flows is provided below.

Profit

Depreciation and amortisation

Amortisation of contract assets

Change in fair value of financial instruments

Movement in provisions

Deferred finance costs

Bad debt expense

Share-based compensation

Significant items (net of tax payable)

Changes in assets and liabilities, net of non-cash,
investing and financing activities

Trade and other receivables

Inventories and intangible assets

Trade and other payables

Tax payable

Deferred tax

Operating cash flows

2020

125

220

–

(8)

(3)

(6)

(18)

341

2019

345

205

(2)

(171)

(40)

(13)

401

E7. Hedging activities
Contact has designated derivatives used to manage market risks into fair value
and cash flow hedge relationships. A hedge ratio of 1:1 is applied for all hedge
relationships, as the notional value of the derivative matches the notional value
of the hedged item.

Fair value hedges

Interest rate risk
The derivatives (IRS) Contact uses to manage its interest rate risk meet the criteria
for hedge accounting where they directly relate to issued debt. The hedge is
against future fair value movements in the debt and can be for a portion of the
debt. Contact has designated $188 million of retail bonds into fair value hedge
relationships with receive-fixed, pay-floating IRS. The fixed interest rates and other
terms match the relevant bond to create an economic relationship.

The bonds are recognised at amortised cost. Both the hedged risk and the hedging
instrument (IRS) are recognised at fair value. The change in the fair value of
both items is recognised in profit/(loss) and will offset to the extent the hedging
relationship is effective. There are no material sources of ineffectiveness.

Cash flow hedges
The derivatives Contact uses to manage exposure to wholesale electricity prices,
floating interest rate risk and foreign exchange rates usually qualify for cash flow
hedge accounting. For cash flow hedges, only the derivative is recognised at fair value
with the effective portion of all changes in fair value recognised in the cash flow hedge
reserve. Any ineffective portion is recognised immediately in profit/(loss). Amounts
recognised in the cash flow hedge reserve are reclassified to profit/(loss) or the
Statement of Financial Position according to the nature of the hedged item.

The movement in hedge reserves is reconciled below.

Opening balance

Note

Effective portion of cash flow hedges

Transferred to revenue

Transferred to deferred tax

Closing balance

2020

(39)

(37)

(49)

2019

(57)

(6)

(39)

Included in the closing balance at 30 June 2020 is $2 million relating to the cost
of hedging reserve (2019: $2 million).

Commodity price risk
Contact designates forecast electricity sales and purchases into cash flow hedges
with electricity price derivatives. Volumes are matched to create an economic
relationship. There are no material sources of ineffectiveness.

Interest rate risk
Contact designates a certain level of its floating rate exposure into cash flow
hedges with receive-floating, pay-fixed IRS in line with set internal policies.

An economic relationship exists between the floating rate exposure and the IRS
based on the reference interest rate. Ineffectiveness arises due to IRS that have
been designated into hedge relationships part way through their term. These IRS
were designated on 1 July 2018 on adoption of NZ IFRS 9.

Combined fair value and cash flow hedges
Contact has designated all its USPP notes into both fair value and cash flow hedge
relationships with CCIRS, depending on the component of the USPP note being
hedged:

• For the fair value hedges the change in fair value of the USPP note is recognised

in profit/(loss) to offset the change in fair value of the relevant CCIRS component.

• For the cash flow hedges the change in fair value of the CCIRS component

is recognised in the cash flow hedge reserve.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

• The cost to convert foreign currency cash flows under CCIRS is excluded
from the hedge relationship and recognised in the cost of hedging reserve.

An economic relationship exists based on the reference interest rates, exchange
rate and other terms. There are no material sources of ineffectiveness.

Derivatives not in hedge relationships
These are electricity price derivatives purchased as part of a requirement to
participate in the ASX futures electricity market, financial transmission rights and
electricity price options. All changes in fair value of these derivatives are recognised
directly in profit/(loss).

E8. Financial instruments at fair value
All derivatives are shown gross by instrument in the Statement of Financial Position
(and in note D1) because Contact does not have a legally enforceable right to set
off its assets and liabilities with the same counterparty, except in the event of
default. The fair values of derivatives netted by counterparty are:

CCIRS

Interest rate swaps

Electricity price derivatives

2020
Asset

130

–

134

2020
Liability

2019
Asset

2019
Liability

–

(78)

(27)

(105)

–

(69)

(29)

(98)

Fair value
Contact uses discounted cash flow valuations with market observable data,
to the extent that it is available, in estimating the fair value of all derivatives
and borrowings. The key variables used in these valuations are forward prices
(for the relevant underlying interest rates, foreign exchange rates and wholesale
electricity prices) and discount rates (based on the forward IRS curve adjusted
for counterparty risk).

All inputs are sourced or derived from market information except for forward
wholesale electricity prices which are:

• derived from ASX market quoted prices adjusted for Contact’s estimate of the

effect of location and seasonality, or

• when quoted prices are not available or relevant (i.e. long dated and large contracts),

Contact’s best estimate of the cost of new supply is used. This is derived using
key unobservable inputs, relevant wholesale market factors and management
judgement.

Additional key inputs and assumptions used to determine the fair value of
electricity derivatives include Contact’s best estimate of volumes called over the
life of electricity options, forward quoted commodity prices (e.g. adjustments as
a consequence of initial recognition differences).

The following table provides a breakdown of the fair value of derivatives, excluding
held for sale derivatives in the prior period, by the source of key valuation inputs:

Sourced from market data

Derived from market data

Electricity price estimates

2020

(15)

(11)

2019

(6)

(23)

(20)

The electricity price derivatives most affected by estimates are reconciled below:

Opening balance

Gain/(loss) in profit/(loss):
• wholesale electricity revenue
• change in fair value of financial instruments
Gain/(loss) in OCI

Instruments issued

Closing balance

2020

(23)

–

(3)

(11)

2019

(4)

–

(25)

–

(23)

For these derivatives a 10% increase in the electricity price would result in an
unfavourable movement in fair value of $33 million (2019: $40 million) and
a 10% decrease would result in a favourable movement in fair value of
$29 million (2019: $20 million).

Initial recognition difference
Contact has two agreements in place with Meridian Energy Limited for the supply
of 80MW and 18.75MW of electricity, which form part of the electricity required by
New Zealand Aluminium Smelters Limited to operate its Tiwai smelter. The 80MW
supply agreement has a remaining term of up to 11 years and the 18.75MW supply
agreement runs until December 2022. These supply agreements are recognised
as electricity price derivatives at fair value.

An initial recognition difference arises when the fair value of the derivative differs
from its transaction price. The difference is accounted for by recalibrating the
fair value by a fixed percentage to arrive at a value at inception equal to the
transaction price.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

The calibration adjustment is applied to future valuations and reflects the estimated
future gains or losses yet to be recognised in Statement of Comprehensive Income
over the remaining life of the agreement. The change in calibration adjustment is
provided in the table below:

Opening difference

Initial differences in new hedges

Volumes expired and amortised

Changes for future prices and time

Closing difference

2020

(1)

(4)

2019

–

(3)

(1)

Balance at 1 July 2018

Exercised

Lapsed

Balance at 30 June 2019

Exercised

Lapsed

Balance at 30 June 2020

Options

Number
outstanding

6,145,368

(2,929,087)

(596,100)

2,620,181

(1,110,849)

(9,678)

1,499,654

Price

$5.36

$5.54

$5.32

$5.17

$4.94

$5.54

$5.33

E9. Financial instruments at amortised cost
The value of financial instruments carried at amortised cost is provided in the
table below.

At 30 June 2020, no share options were exercisable.

The table below provides a reconciliation for the number of outstanding PSRs and
DSRs. The exercise price of these awards is nil.

Cash and cash equivalents

Trade and other receivables

Trade and other payables

Borrowings

2020

174

(163)

(1,054)

2019

176

(159)

(1,010)

The fair value of borrowings is $1,215 million (2019: $1,115 million). This fair value
is derived from market data.

E10. Share-based compensation
Equity scheme
Contact provides an equity award to certain eligible employees made up of options,
performance share rights (PSRs) and deferred share rights (DSRs). If performance
hurdles are met, or there is a company change in control, the awards vest and
become exercisable. On exercise, PSRs and DSRs convert to ordinary shares at
no cost to the employee and options convert on payment of the agreed exercise
price or by utilising the option of a facility which cancels the options in return for
an equivalent value in issued shares. There are no loans available. There are no
holding/retention periods or ownership requirements for employees who exercise
equity rights. The awards lapse if the performance hurdles are not met, if they are
not exercised by the lapse date or if an employee voluntarily leaves Contact. The
scheme continues on redundancy but the entitlements are adjusted.

The table following provides a reconciliation of the number of outstanding options
and their weighted average exercise price.

Number outstanding

Balance at 1 July 2018

Granted

Exercised

Lapsed

Balance at 30 June 2019

Granted

Exercised

Lapsed

Balance at 30 June 2020

PSRs

767,565

124,751

DSRs

588,212

859,458

–

(271,932)

(100,475)

(144,840)

791,841

154,164

1,030,898

244,404

(314,638)

(581,968)

(44,852)

586,515

(23,155)

670,179

Share options had a weighted average remaining life of 1 year and 1 month
(2019: 1 year, 9 months), PSRs had 1 year and 10 months (2019: 2 years) and
DSRs had 9 months (2019: 11 months).

Contact Share
Contact Share is Contact’s employee share ownership plan that enables eligible
employees to acquire a set number of Contact’s ordinary shares. The shares are
acquired on market and legally held by a trustee company for a restrictive period
of three years, during which time the employee is entitled to receive distributions
and direct the exercise of voting rights that attach to shares held on their behalf.

At the end of the restrictive period the shares are transferred to the employee.
Employees who leave Contact due to redundancy, and in certain other circumstances,
may have their shares transferred at that time; all other employees who leave Contact
have their shares transferred to an unallocated pool. Shares in the unallocated pool
can be used by the trustee company for future allocations under Contact Share.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

Contact Share

Key inputs in determining the fair values are:

Risk-free interest rate

Expected dividend yield

Expected share price volatility

2020

18%

2019

17%

E11. Related parties
Contact’s related parties include its Directors, the Leadership Team (LT), Simply
and Drylandcarbon.

Simply Energy Limited
Contact owns a 49.9% share of Simply Energy Limited (Simply). Simply is based
in Wellington, New Zealand and provides energy solutions to independent
generators, retailers and commercial energy users. Contact has an option to acquire
the remaining shares in Simply to take full ownership. The purchase price for the
remaining shares will be based on the performance of Simply, with a minimum
purchase price of $7 million and up to a maximum of $15 million of performance
payments.

Drylandcarbon One Limited Partnership
Contact owns a 16.5% share of Drylandcarbon One Limited Partnership
(Drylandcarbon) and at 30 June 2020 is committed to invest up to $16 million
over the next four years. Drylandcarbon is based in Wellington, New Zealand and is
focused on long-term carbon farming and afforestation on economically marginal
land in New Zealand, which will offset some of Contact’s carbon obligations.

Drylandcarbon is accounted for as an associate, as Contact has significant influence
through its participation in Drylandcarbon’s financial and operating policy decisions
being equivalent to the other three foundational investors.

Contact applies the equity method of accounting for its investments in Simply
Energy Limited, a joint venture, and Drylandcarbon One Limited Partnership, an
associate. The initial investments are recognised at cost and are subsequently
adjusted for Contact’s share of the entities’ profits or losses.

Number outstanding

Balance at 1 July 2018

Shares purchased and issued

Transferred to employees

Balance at 30 June 2019

Shares purchased and issued

Transferred to employees

Balance at 30 June 2020

387,645

103,086

(170,890)

319,841

61,015

(102,701)

278,155

These shares have a weighted average remaining life of one year and two months
(2019: one year, three months).

Share-based compensation reserve
The decrease in the share-based compensation reserve of $2 million
is reconciled below:

Opening balance

Exercised share scheme awards

Share-based compensation expense

Current tax on share scheme

Deferred tax on share scheme

Closing balance

Note

2020

2019

(6)

(2)

–

The share-based compensation expense is based on the fair value of the awards
granted adjusted to reflect the number of awards expected to vest. The fair values
of awards granted during the reporting period are:

$ per
share

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2
5
7

4
2
5

6
5
4

3
0
3

PSRs

DSRs

5
4
8

2
8
5

Contact
Share

2020
2019

Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

Contact sold its 50% interest in Rockgas Timaru Limited on 30 November 2018.
Transactions with Rockgas Timaru Limited up to that point and all other related
party transactions are disclosed below:

Received/(paid) $m

Simply Energy Limited

Electricity contracts

Drylandcarbon One Limited Partnership

Capital contributions

Rockgas Timaru Limited

Sale of LPG

Key management personnel

Directors’ fees

LT – salary and other short-term benefits

LT – share-based compensation expense

Balances payable at end of the year

Key management personnel

2020

2019

(4)

–

(1)

(5)

(2)

–

(1)

(5)

(2)

(1)

Members of the Leadership Team and Directors purchase goods and services
from Contact for domestic purposes on normal commercial terms and conditions.
For members of the Leadership Team this includes staff discount available to all
eligible employees.

E12. Contingencies
The Electricity Authority (EA) have issued a preliminary finding on the claim
of an Undesirable Trading Situation (UTS) against Contact and Meridian Energy
in November and December 2019, that there was a UTS between 3 December
and 18 December 2019. In relation to Contact it found that viewed in isolation
the offering behaviour at Contact’s South Island stations during the period did
not cause outcomes that were significant enough to constitute a UTS. If the EA
finds a UTS existed then under the Electricity Participation Code the EA has a
number of remedies available to it including directing that any trades be closed
out or settled at a specific price. Contact has made no provision for this outcome
within these financial statements.

In the normal course of business the Company is subject to inquiries, claims and
investigations. There are no other material matters to disclose in this respect.

E13. New accounting standards
There are no new accounting standards issued but not yet effective which materially
impact Contact.

E14. Post balance date events
Closure of New Zealand Aluminium Smelters
On 9 July 2020, Rio Tinto announced that it would start planning for the wind-down
of operations and the eventual closure of New Zealand Aluminium Smelters (NZAS)
in August 2021.

As a major user of electricity in the South Island, representing around 13% of
total New Zealand demand, an exit of NZAS has a significant impact upon the
electricity market.

The announcement represents a material non-adjusting event to Contact in line
with NZ IAS 10 Events after the Reporting Period. The significant impacts of the
announcement have been assessed as follows:

Asset Impairment Testing
The existing asset impairment testing is set out in note C2. A high level assessment
of the impact of an unmitigated NZAS exit in August 2021 on the value in use of
Contact’s CGUs and future generation development has been completed. The
difference between this and the value in use at 30 June 2020 is as follows:

Impact on 30 June 2020 value in use of NZAS exit
$m

Wholesale CGU

Customer CGU

Future generation development

Expected

(1,391)

(195)

(218)

Given the level of headroom, early indications are that the carrying value of the
Wholesale and Customer CGUs will be supported with no requirement to record
an impairment loss.

The sensitivity of the NZAS exit impairment testing on the CGUs, incorporating
current expected changes to the wholesale electricity prices and discount rate is
demonstrated as follows:

Significant unobservable inputs

Sensitivity

Impact $m

Post tax discount rate

Wholesale electricity price path

-0.5%
+0.5%

+15%
-15%

527
(426)

410
(410)

The range of sensitivities for the post-tax discount rate and wholesale price path
have been altered from our 30 June 2020 sensitivities. The reduction in the WACC
sensitivity range reflects the degree of risk incorporated into the cash flows, and the
increase in the wholesale price range reflects the greater uncertainty in the future
wholesale prices with the announcement by Rio Tinto.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020

Acquisition of Simply Energy Limited
On 7 August 2020, the Board approved the acquisition of the remaining
50.1% shareholding of Simply Energy Limited (see note E11). In addition
to the remaining $2 million payment for the initial 49.9% shareholding, the
fixed consideration of $7 million will be paid over the next two years followed
by a potential variable performance-based payment in December 2022.

A change in the wholesale electricity price path assumptions of -8% individually
would eliminate the headroom on the wholesale CGU valuation. However, there
is interrelation between the key inputs in the valuation, and such a reduction in
the price path may drive other changes which could also impact the value in use.

With an expected significant delay in commissioning, and reduction in wholesale
price path, the current value in use of the Tauhara future generation development
is expected to reduce, therefore Contact expects that it will write off or impair a
portion of the Tauhara capital work in progress in FY21. At this stage the expected
impairment is around $120 million to $140 million of the $140 million CWIP balance
held at 30 June 2020.

Asset useful lives review
With the impacts of an NZAS exit, Contact expects that the useful economic
life of TCC may be further reduced (note C1), with early expectations being
an end of useful life of 31 December 2021. This would lead to an additional
$34 million of depreciation in the year ended 30 June 2021.

At this stage, Contact does not expect to reduce the useful economic lives of the
remainder of its portfolio of assets.

Financial instruments
The exit of NZAS will directly impact the hedging instruments that Contact holds
with Meridian relating to their electricity supply agreement with the smelter.

The reduction in the price path post year end also impacts upon the value of
Contact’s electricity price derivatives.

The impact of applying the updated price path as at 24 July 2020, around two
weeks following Rio Tinto’s announcement, to Contact’s electricity price derivatives
is as follows. The price path has been taken at this date to allow time for the market
to adjust to the news.

Fair value $m

Meridian price derivatives – Cash flow hedge

Meridian price derivatives – Fair value hedge

Other price derivatives – Cash flow hedge

Other price derivatives – Fair value hedge

Price path
30 June 2020

Price path
24 July 2020

(3)

(17)

(4)

–

For electricity price derivatives in a cash flow hedge, the movement will be
recognised in other comprehensive income and the cash flow hedge reserve.
For those held at fair value through profit and loss, the gain/loss will be recorded
in profit or loss.

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Contact INTEGRATED REPORT 2020Notes to the financial statements for the year ended 30 June 2020Independent auditor’s report

To the shareholders of Contact Energy Limited

Report on the audit of the consolidated financial statements

Opinion

In our opinion, the accompanying
consolidated financial statements of
Contact Energy Limited (the ’company’),
the entities over which it has control or
joint control and its investment in associate
(the ‘group’) on pages 70 to 95:

i. present fairly in all material respects
the Group’s financial position as at
30 June 2020 and its financial
performance and cash flows for
the year ended on that date; and

ii. comply with New Zealand Equivalents
to International Financial Reporting
Standards and International Financial
Reporting Standards.

We have audited the accompanying
consolidated financial statements which
comprise:

• the consolidated statement of

financial position as at 30 June 2020;

• the consolidated statements of

comprehensive income, changes in
equity and cash flows for the year
then ended; and

• notes, including a summary of
significant accounting policies
and other explanatory information.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

We are independent of the group in accordance with Professional and Ethical
Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the
New Zealand Auditing and Assurance Standards Board and the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants
(‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the auditor’s
responsibilities for the audit of the consolidated financial statements section
of our report.

Our firm has also provided other services to the group in relation to trustee
reporting, annual meeting scrutineering and other assurance for Greenhouse gas
emissions reporting, Global Reporting Initiative indicators and Green Borrowings
Programme reporting. Subject to certain restrictions, partners and employees of
our firm may also deal with the group on normal terms within the ordinary course

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of trading activities of the business of the group. These matters have not impaired
our independence as auditor of the group. The firm has no other relationship with,
or interest in, the group.

Scoping
The scope of our audit is designed to ensure that we perform adequate work to be
able to give an opinion on the consolidated financial statements as a whole, taking
into account the structure of the group, the financial reporting systems, processes
and controls, and the industry in which it operates.

The context for our audit is set by the group’s major activities in the financial year
ended 30 June 2020. The customer business had a continued focus on creating
positive customer experiences with the wholesale business focused on accelerated
decarbonisation of New Zealand’s energy sector. In the current period the external
environment impacts of COVID 19 and post year end the announcement of the
closure of New Zealand Aluminium Smelters has affected the activities of Contact.

Materiality
The scope of our audit was influenced by our application of materiality. Materiality
helped us to determine the nature, timing and extent of our audit procedures and
to evaluate the effect of misstatements, both individually and on the consolidated
financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $8 million determined with reference to a
benchmark of group profit before tax. We chose the benchmark because,
in our view, this is a key measure of the group’s performance

Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the consolidated financial statements in the
current period. We summarise below those matters and our key audit procedures
to address those matters in order that the shareholders as a body may better
understand the process by which we arrived at our audit opinion. Our procedures
were undertaken in the context of and solely for the purpose of our statutory audit
opinion on the consolidated financial statements as a whole and we do not express
discrete opinions on separate elements of the consolidated financial statements.

Contact INTEGRATED REPORT 2020

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The key audit matter

How the matter was addressed in our audit

Carrying value of cash-generating units – Note C1 and C2 of the financial statements

The Group separates its business into two cash-generating units (CGUs) for the purpose of asset
impairment testing. The value of each CGU, including any allocated goodwill, is supported by a
discounted cash flow model which is inherently subjective.

We focused primarily on the generation assets due to the significance of the assets relative to
the Group’s financial position, the impact changes in underlying assumptions may have and the
sensitivity of the generation portfolio to developments and changes in the electricity generation
sector as a whole.

The significant assumptions in the generation model are forward electricity prices, future
generation volumes, forecast operating and asset costs, the terminal growth rate and the discount
rate applied to the future cash flows. All these assumptions involve judgement.

Our work to assess whether the Group should recognise any impairment to the CGUs included
ensuring the methodology adopted in the model is consistent with accepted valuation approaches.
We also assessed whether the modelled cash flows appropriately reflect the Group’s strategy and
budget.

We tested the significant judgements in the modelled cash flows by comparing forward electricity
prices to external market projections, comparing future generation volumes to historical volumes,
comparing operating costs and asset renewal costs to historical levels and budgets and assessing
any impact in changes in the cost structure of generation sites. We also compared the model’s
terminal growth and discount rates to our own independently determined rates.

We challenged the assumptions by performing a sensitivity analysis, considering a range of likely
outcomes based on various scenarios.

We are satisfied that the forward electricity prices, future generation volumes, forecast operating
and asset renewal costs, terminal growth rate and discount rate assumptions used by Management
were within acceptable ranges and in line with the current market view.

As an overall test we compared the Group’s net assets at 30 June 2020 of $2.6 billion to its market
capitalisation of $4.5 billion and noted an implied headroom of $1.9 billion.

Future development of generation capital work in progress – Note C1 and C2 of the financial statements

We considered the recoverability of capital work in progress, with a particular focus on the Tauhara
geothermal project that is held for future development at 30 June.

We consider this a key audit matter due to the recoverability assessment being based on
Management’s intention for continued investment in the project; the impact of future
developments in the electricity generation sector and the level of judgement involved in the
assumptions modelled to determine future economic feasibility of this project.

We satisfied ourselves that the recoverability of generation projects held in capital work in progress
for future development were supported by appropriate development plans including an initial
works contract and modelled cash flows at year end.

We considered Contact’s generation asset portfolio strategy and known third party future
generation developments and the potential impact of these on the Tauhara project as well as the
wholesale generation market as a whole.

We tested the significant judgements in the Tauhara project modelled cash flows by comparing:
• Forward electricity prices to external market projections;
• Future generation volumes, operating costs and asset renewal costs to budgets.
• The model’s discount rates to our own independently determined rates.
We challenged the assumptions by performing a sensitivity analysis, considering a range of likely
outcomes based on various scenarios.

Contact INTEGRATED REPORT 2020

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The key audit matter

How the matter was addressed in our audit

Post balance date event disclosure – Note E14 of the financial statements

On 9 July 2020, following the conclusion of its strategic review, Rio Tinto announced that it would
start planning for the exit of New Zealand Aluminium Smelter (“NZAS”) by August 2021.

We considered whether the announcement of NZAS’s closure was an adjusting or non adjusting
post balance date event.

There is judgement involved in determining whether the announcement of the closure of NZAS
reflected conditions that existed at 30 June 2020 and as a result whether it is an adjusting or non
adjusting post balance date event.

As the event is of a material nature, the impact has been quantified by the Group and disclosed in
the financial statements.

There is significant judgement involved in the assumptions used in the revised carrying value of
the generation CGU assessment, the future Tauhara development and reassessment of specific
generation asset useful lives.

Our focus was on the judgments and assumptions impacted by the change in market conditions.

NZ IAS 10 Events after the Reporting Date paragraph 3(b) defines a non-adjusting event as an
event that is indicative of conditions that arose after the reporting period.

We assessed the announcement of the NZAS exit as a change in market conditions that arose
post balance date.

We assessed whether the post balance date event is of a material nature that the financial impact
required disclosure in the financial statements. To assess whether the post balance date events
disclosure was reasonable.

We considered Contact’s change in assumptions in respect of the future strategy of its generation
assets portfolio. We specifically:
• considered the change in the useful economic life of the Taranaki Combined Cycle (“TCC”) plant;

and

• recalculated the estimated increase in depreciation for the year ended 30 June 2021 in respect of

the TCC plant based on the revised useful life to ensure the disclosed financial impact was reasonable.

Our work to assess whether the Group should disclose the financial impact of a subsequent
impairment to the Generation CGU included assessing whether the revised modelled cash flows
appropriately reflect the Group’s strategy and budget.

We obtained Management’s revised generation cash generating unit modelled cash flows. We are
satisfied that the updated forward electricity prices, revised future generation volumes, revised
forecast operating and asset renewal costs, terminal growth rate and discount rate assumptions
used by Management were within acceptable ranges and in line with the market conditions post
balance date.

We assessed Management’s revised cash flows and assumptions in respect of the Tauhara
geothermal project, specifically the impact of the updated forward electricity prices and a
revised commissioning date, on the assessment of recoverability of the carrying value to ensure
the disclosed financial impact was reasonable. We are satisfied that the estimated financial impact
disclosed is within an acceptable range.

We recalculated the impact on the fair value of electricity price derivatives due to the change in
ASX prices post balance date based on the updated price path at 24 July 2020. We are satisfied
that the estimated financial impact disclosed is within an acceptable range.

As an overall test we compared the Group’s net assets at 30 June 2020 of $2.6 billion to its
market capitalisation of $4.1 billion at 30 July and noted an implied headroom of $1.5 billion.

We reviewed the balance sheet to ensure all material estimated financial effects of the post
balance date event were appropriately disclosed.

Contact INTEGRATED REPORT 2020

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Other information
The Directors, on behalf of the group, are responsible for the other information
included in the entity’s Annual Report. Other information includes Key activity this
year, Chair’s and CEO report, Who we are, Accessibility, Reliability, Environmental
sustainability, Governance matters and additional disclosures. Our opinion on the
consolidated financial statements does not cover any other information and we do
not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements our
responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears materially
misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.

Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body.
Our audit work has been undertaken so that we might state to the shareholders
those matters we are required to state to them in the independent auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the shareholders as a body for our audit
work, this independent auditor’s report, or any of the opinions we have formed.

Responsibilities of the Directors for the consolidated financial statements
The Directors, on behalf of the company, are responsible for:

• the preparation and fair presentation of the consolidated financial statements
in accordance with generally accepted accounting practice in New Zealand
(being New Zealand Equivalents to International Financial Reporting Standards)
and International Financial Reporting Standards;

• implementing necessary internal control to enable the preparation of a
consolidated set of financial statements that is fairly presented and free
from material misstatement, whether due to fraud or error; and

• assessing the ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless they either intend to liquidate or to cease operations,
or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements
Our objective is:

• to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due
to fraud or error; and

• to issue an independent auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs NZ will always detect a material misstatement
when it exists.

Misstatements can arise from fraud or error. They are considered material if,
individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial
statements.

A further description of our responsibilities for the audit of these consolidated
financial statements is located at the External Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-
responsibilities/audit-report-1/

This description forms part of our independent auditor’s report.

The engagement partner on the audit resulting in this independent auditor’s report
is David Gates.

For and on behalf of

David Gates
KPMG
Wellington
7 August 2020

Contact INTEGRATED REPORT 2020

Corporate directory

Board of Directors
Robert McDonald (Chair)

Victoria Crone

Whaimutu Dewes

Jon Macdonald

David Smol

Elena Trout

Dame Therese Walsh

Leadership team
Mike Fuge
Chief Executive Officer

Jan Bibby
Chief People Officer

Venasio-Lorenzo Crawley
Chief Customer Officer

Dorian Devers
Chief Financial Officer

James Kilty
Deputy Chief Executive Officer

Catherine Thompson
Chief Corporate Affairs Officer and General Counsel

Jacqui Nelson
Chief Generation Officer

Registered office
Contact Energy Limited
Harbour City Tower
29 Brandon Street
Wellington 6011
New Zealand

T+64 4 499 4001

Find us on Facebook, Twitter, LinkedIn and YouTube
by searching for Contact Energy

Company numbers
NZ Incorporation 660760
ABN 68 080 480 477

Auditor
KPMG
PO Box 996
Wellington 6140

Registry
Change of address, payment instructions and investment
portfolios can be viewed and updated online:

investorcentre.linkmarketservices.co.nz
investorcentre.linkmarketservices.com.au

New Zealand Registry
Link Market Services Limited
PO Box 91976, Auckland 1142

Level 11, Deloitte Centre
80 Queen Street, Auckland 1010

contactenergy@linkmarketservices.co.nz
T + 64 9 375 5998

Australian Registry
Link Market Services Limited,
Locked Bag A14, Sydney
South, NSW 1235
680 George Street, Sydney, NSW 2000

contactenergy@linkmarketservices.com.au
T+61 2 8280 7111

Investor relations enquiries
Matthew Forbes
Investor Relations Manager
investor.centre@contactenergy.co.nz

Sustainability enquiries
Nakia Randle
Sustainability Advisor
nakia.randle@contactenergy.co.nz

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Contact INTEGRATED REPORT 2020contact.co.nz