Manawa Energy Limited Updates Earnings Guidance Amid Market Challenges

Highlights:

• Revised Earnings Guidance: Manawa Energy Limited (NZX: MNW) has updated its EBITDA forecast for FY2025 to a range of NZ$95 million to NZ$115 million, down from the previous NZ$130 million to NZ$150 million.
• Impact of Market Conditions: Extended dry and calm weather has significantly reduced hydroelectric and wind generation volumes, leading to elevated costs for energy shortfall purchases.
• Mitigation Efforts: Manawa Energy has terminated its Electricity Supply and Services Agreement with a defaulting electricity retailer to reduce further risk exposure and is actively working to recover outstanding debt.

Provision for Potential Bad Debt

Manawa Energy Limited (NZX: MNW) has revised its earnings guidance for the fiscal year ending March 31, 2025. The company, which serves as a wholesale intermediary for an electricity retailer now in default on its payment terms, has had to account for a potential bad debt related to this contract. This scenario is unprecedented within Manawa Energy, and the company does not have similar arrangements with other parties.

In response to the default, Manawa Energy will terminate its Electricity Supply and Services Agreement with the retailer, enabling the company to take immediate steps to minimize further exposure. The company aims to recover as much of the outstanding debt as possible.

Impact of Market Conditions

Manawa Energy is also grappling with adverse market conditions. An extended period of dry and calm weather has significantly impacted the generation volumes from its hydroelectric schemes. Additionally, the electricity volumes provided under Manawa's wind Power Purchase Agreements have decreased. The company is purchasing any shortfalls in energy to meet its contractual supply commitments at prices significantly higher than historical norms.

Revised Earnings Guidance

Due to these factors, Manawa Energy now expects its EBITDA for the year to be between NZ$95 million and NZ$115 million, a reduction from the previous guidance of NZ$130 million to NZ$150 million issued in May 2024. The provision for the potential bad debt accounts for approximately half of this revision.

The updated earnings guidance is based on several assumptions, including:

• Hydro generation volumes of approximately 1,713 GWh, down from the previously forecasted 1,880 GWh. This adjustment takes into account current low storage levels and a gradual return to long-term inflow expectations for run-of-river assets.
• FY25 wind PPA offtake volumes of about 600 GWh, below the earlier forecast of 650 GWh, due to lower volumes year-to-date and a softer outlook for the remainder of August.
• Current ASX forward pricing reflecting actual spot pricing throughout the period.
• No material adverse events.
• Approximately NZ$6.5 million in new development operating expenses.

Manawa Energy continues to navigate these challenges with strategic adjustments to mitigate risks and optimize recovery efforts.

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