Corporate Action: Contact Raises Equity to Fund New Geothermal Power Station: Do Not Subscribe

Narrow-moat Contact Energy is raising NZD 400 million in equity to help fund a geothermal power station at Tauhara. We forecast the geothermal development to be earnings- and value-accretive, leading us to upgrade our fair value estimate 3% to NZD 6.80 per share. The equity raising is priced at a slight premium to our new fair value estimate, so we recommend not subscribing. But we don't have a strong view as the raising price is comfortably within our 3-star range and marginally below the current share price. Depending on their personal investment goals, it might make sense for some investors to subscribe, particularly if the share price, and thus issue price, falls below our fair value estimate.