Utilities Sector
NZ Energy Generation & Distribution
How They Make Money
Interactive Sankey diagrams showing the financial flow from revenue through operating costs, EBITDAF, and net profit.
Contact Energy (CEN)View Company
FY2025 Financial Flow
Mercury Energy (MCY)View Company
FY2025 Financial Flow
Financial Comparison: CEN vs MCY
Scroll horizontally to see all data
| Metric | CEN | MCY | Difference |
|---|---|---|---|
| Total Revenue | $3,439M | $2,950M | +$489M |
| EBITDAF | $872M | $850M | MCY +3.3% |
| Depreciation | $273M | $295M | 10.0% vs 7.9%+$22M |
| EBIT | $599M | $555M | MCY +1.3% |
| Net Profit | $331M | $310M | MCY +0.9% |
Revenue Scale
Contact Energy generates $489M more revenue annually from higher wholesale volumes.
Profitability
Mercury Energy has superior EBITDAF margin (28.7% vs 25.4%), indicating more efficient operations.
Business Model
Both are vertically integrated, with Contact focused on wholesale markets and Mercury on renewable hydro.
Capital Intensity
Mercury has higher depreciation (10.0% vs 7.9% of revenue), reflecting significant renewable asset investment.
All Utilities Companies
FAQs About NZX Utilities
What companies are in the NZX Utilities sector?
The NZX Utilities sector primarily consists of electricity generation and distribution companies, including Contact Energy (CEN), Mercury Energy (MCY), Genesis Energy (GNE), Meridian Energy (MEL), and Manawa Energy (formerly Trustpower). These companies generate electricity from renewable sources (hydro, geothermal, wind) and retail it to consumers and businesses across New Zealand.
How do utilities companies make money in New Zealand?
NZX utilities companies generate revenue through two main streams: (1) Electricity generation - selling wholesale electricity to the national grid from their power stations, and (2) Retail operations - selling electricity directly to residential and commercial customers. Most major utilities are vertically integrated, operating both generation assets and retail businesses. They earn profits through the margin between generation costs and retail prices, with profitability influenced by factors like wholesale electricity prices, generation volumes, retail customer numbers, and operational efficiency.
What is EBITDAF in utilities companies?
EBITDAF stands for Earnings Before Interest, Tax, Depreciation, Amortization, and Fair Value movements. It's a key profitability metric for utilities companies that shows operating performance before accounting for capital structure, depreciation on generation assets, and fair value changes in financial instruments (like electricity hedges). For example, Contact Energy reported EBITDAF of $872M on revenue of $3,439M (25.4% margin) in FY2025, while Mercury Energy achieved $850M on revenue of $2,950M (28.7% margin), demonstrating Mercury's superior operational efficiency despite lower absolute revenue.
What is the difference between Contact Energy and Mercury Energy?
Both are major vertically-integrated utilities, but they differ in scale and generation mix. Contact Energy (CEN) is larger with $3.4B in annual revenue versus Mercury's $3.0B, and has more exposure to thermal generation (gas-fired plants) alongside renewables. Mercury Energy (MCY) is predominantly focused on renewable hydro and geothermal generation. Mercury demonstrates higher operational efficiency with a 28.7% EBITDAF margin compared to Contact's 25.4%, while Contact generates higher absolute profits due to its larger revenue base. Contact's depreciation is 7.9% of revenue versus Mercury's 10.0%, reflecting Mercury's more capital-intensive renewable asset base.
Are NZX utilities companies good dividend stocks?
NZX utilities companies are traditionally considered strong dividend stocks due to their stable, regulated revenue streams from electricity generation and retail. They typically generate consistent cash flows with EBITDAF margins between 25-29%, which supports regular dividend payments. The sector's capital-intensive nature (requiring significant investment in generation assets) means companies balance dividend payments with ongoing capital expenditure needs. Investors should review each company's dividend history, payout ratio, and capital investment plans when evaluating dividend sustainability.
How does renewable energy affect utilities profitability?
New Zealand's utilities are predominantly renewable (over 80% of generation from hydro, geothermal, and wind), which provides both advantages and challenges. Renewable generation has lower ongoing fuel costs compared to thermal (gas/coal) generation, improving long-term margins. However, it requires high upfront capital investment, reflected in higher depreciation (around 8-10% of revenue). Hydrology risk significantly impacts profitability - dry years reduce hydro output, forcing companies to buy expensive thermal generation or wholesale electricity. Companies with diverse generation portfolios (hydro + geothermal + wind + gas) can better manage these risks and maintain stable profitability across varying weather conditions.
What factors drive electricity prices in New Zealand?
New Zealand wholesale electricity prices are driven by: (1) Hydrology - rainfall levels affecting hydro generation capacity, (2) Gas prices - influencing thermal generation costs, (3) Demand patterns - seasonal variations and economic activity, (4) Transmission constraints - limitations in moving power between North and South Islands, and (5) Generation outages - planned maintenance or unexpected failures. Retail prices are influenced by wholesale costs plus distribution network charges, metering costs, regulatory levies, and retail margins. The spot market operates with prices set every 30 minutes based on supply-demand balance, creating volatility that utilities manage through hedging strategies.
What is the market capitalization of the utilities sector?
The total market capitalization of the NZX Utilities sector is approximately $38.5 billion, making it one of the larger sectors on the New Zealand stock exchange. This represents the combined value of all publicly-listed electricity generation and distribution companies. The sector's substantial market cap reflects the critical infrastructure these companies operate, their stable revenue streams, and their importance to New Zealand's energy security and decarbonization goals.