Contact Energy says its $33 million purchase of the Hawke's Bay-based Whirinaki power plant gives it more options when electricity prices are high.
The Crown-owned diesel-fired plant was put up for sale after Meridian turned down the option to acquire it as part of a Government-mandated asset swap to boost competition.
Contact's chief executive Dennis Barnes says it'll be used to offer hedge products to energy users who want greater certainty about future electricity prices, as well as give the company greater protection when hydro use is restricted because of either a dry year or plant failure.
He says the plant will not be run much more than it has been historically.
Mr Barnes says it shouldn't affect Contact's investment plans, which are focused on developing geothermal in the central North Island.
He says it may move the plant to Taranaki or south Auckland, though any decision is at least a couple of years away and will depend on finding more gas.