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Contact Energy (NZSE:CEN) Could Be 17% Undervalued As It Launches Green Bond

Simply Wall St · 1d ago

Contact Energy (NZSE:CEN) has launched a NZ$225 million subordinated, unsecured and callable climate or green bond, a funding move that can reshape how investors think about the stock’s capital structure and sustainability profile.

At a share price of NZ$8.59, Contact Energy has seen its short term share price soften, with a 90 day share price return that declined 5.08%. Longer term investors still sit on a 3 year total shareholder return of 28.03% and a 5 year total shareholder return of 36.91%. This suggests the new NZ$225 million climate or green bond is landing in a period where short term momentum is fading, while the long term track record remains intact.

Compare Contact Energy’s move into labelled green debt with a curated 223 resilient stocks with low risk scores that also balance funding needs with a focus on resilience and capital discipline.

So does Contact Energy’s new green bond reflect confidence in the underlying earnings machine, or is it mostly a response to softer sentiment around the shares? The valuation picture gives the next clue.

Most Popular Narrative: 17% Undervalued

Contact Energy’s most followed valuation narrative places fair value at NZ$10.35 per share, above the recent NZ$8.59 close. This frames the new green bond as one more piece in a broader renewable build out story rather than a standalone funding stunt.

Continued expansion and optimization of geothermal and hydro generation capacity, with more than $2.4b committed to renewable projects over five years and an 11 TWh development pipeline including Tauhara 2, Te Mihi 2 and additional hydro from Manawa, provides scope for higher future revenue and earnings as new low marginal cost output displaces thermal generation.

See why 39 investors see Contact Energy as 17% undervalued.

Result: Fair Value of NZ$10.35 (UNDERVALUED)

Still, lower wholesale power prices and any repeat of grid related incidents could quickly challenge the idea that Contact Energy’s earnings profile is insulated.

Find out about the key risks to this Contact Energy narrative.

Next Steps

Sentiment around Contact Energy is mixed, with both concerns and bright spots in focus, so consider moving quickly and weigh the full picture for yourself using 3 key rewards and 2 important warning signs.

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