Contact Energy has confirmed it reached an agreement to take over electricity generator Manawa Energy in a near $2.3-billion merger.

Contact would pay a combination of cash and its own shares to the equivalent of $5.95 for each Manawa share - and it hopes to finalise the arrangement by early next year.

CEO Mike Fuge says this investment will help diversify Contact's generating portfolio.

"What this enables us to do is to firm up our wholesale portfolio and provide more products to commercial industrial New Zealand."

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