The company that forced power generation Manawa Energy into a trading halt is Auckland-based commercial and industrial electricity retailer Prime Energy, Newsroom has confirmed.
Manawa downgraded its earnings forecast by $35 million on Thursday morning, saying half of that was due to provision for a bad debt. That debt – which works out to about $17m – was run up by a power retailer defaulting on its payment terms.
Manawa’s share price fell 7.9 percent. It declined to name the retailer but, on Thursday afternoon, Newsroom identified the company as Prime Energy. It’s understood Prime and Manawa are working through a process to resolve the dispute.
“We are working with them, but that’s all I can say at present,” Prime’s chief customer officer Neil Brumfit says. “There’s a lot of discussions and water to go under the bridge yet.”
That’s reiterated by owner and chief executive Michael Skates: “We are in discussions currently,” he texts from inside a meeting.
He disputes the $17m figure.
Prime Energy sells power to commercial and industrial customers, boasting that it is giving them a greater level of control and ease of use. “We are empowering New Zealand businesses by giving the power back to you,” its website says.
According to the most recent Electricity Authority, it has 1681 connections. On the company’s website, these have included the likes of VPlas, the plastic rotomoulding manufacturer, Southern Gas Services, and Snap Fitness gyms in Auckland.
The company launched in Auckland in 2011, and expanded through the North Island and then into the South Island from 2014. It’s connections have increased by 153 percent since 2012 – the most rapid expansion of any of the companies that have been round for all those 12 volatile years.
Companies Office records show ASB and Panasonic have had debts secured against the company. Motor vehicle lenders also have had lending secured against a Porsche Cayenne, a BMW X5, a Range Rover and a Toyota Highlander 4×4.
Other power retailers had been pleading for the company to be identified, saying they were all coming under suspicion until the company is named.
Luke Blincoe, chief executive of Electric Kiwi, which recently stopped taking new customers because of the difficult market conditions, told Newsroom: “It’s categorically not us, and I implore Manawa Energy to name who it is, so I can stop taking these calls!”
In a statement to the NZX, Manawa Energy (formerly Trustpower) said it acted as a wholesale intermediary for the electricity retailer concerned, which was in default of its payment terms with Manawa.
“As a result, it has become necessary for Manawa to provision for a potential bad debt on this contract. This arrangement is unique within Manawa, and it does not have similar arrangements with any other party.
“Manawa will today terminate the Electricity Supply and Services Agreement with the electricity retailer. This will allow Manawa to immediately initiate steps to reduce the risk of further exposure.”
In March, Prime Energy was in the headlines when it led a $6m capital raise to help Lightyears Solar build three new community-scale solar farms this year, totalling 18MW in Wairarapa and Canterbury. Prime already had a long-term purchase agreement to take power from Lightyears’ Waiuku Solar Farm.
Clayton Delmarter, Manawa Energy’s chief executive, told Newsroom that the retailer’s customers would be notified.
“Due to confidentiality, and the sensitivity of the process we are working through with them, we are unable to disclose the name of the customer.”
Snap Fitness franchisee David McCarthy, who operates 14 of the country’s 59 Snap-branded gyms, says – entirely by coincidence – he had switched from Prime to Powershop this week.
His Auckland gyms are all open 24/7, so they consume a bit of power. And since June, Prime had increased his monthly power bill by 25 percent.
So on Wednesday, he switched to Powershop, saving thousands of dollars a month – but as a small-to-medium business operator, he has some sympathy for Prime.
He’d rather support an independent than a brand like Powershop, which is owned by big gentailer Meridian. “It looks to me like all the gentailers are subsidising their retail arms,” he says.
“They’re able to sell their power internally to their retail arms for a price that they’re not offering on to these independent retailers like Prime. And so Prime just isn’t an option.
“We’re also a small guy, right? So I’m in the same boat, and we’ve actually always tried to support the small guy as best we can.
“It would be good if everybody was on the same playing field. If you’re not, it’s almost impossible to compete – especially against large government owned gentailers who make all the power and then sell the power.”
In Manawa Energy’s NZX statement, issued by chief financial officer Phil Wiltshire, the company said it would work to recover as much of the outstanding debt from the power retailer as possible.
The bad debts come at the worst possible time, when Manawa is also being impacted by adverse electricity market conditions.
“In particular, the extended dry and calm sequence experienced for a number of months is having a significant impact on the generation volumes from Manawa’s hydroelectricity schemes and is also reducing the electricity volumes provided to Manawa under the wind power purchase agreements,” Wiltshire’s statement says.
“Purchases of any energy shortfalls to meet its contractual supply commitments are occurring at extremely elevated prices relative to historic norms.”
The company told investors that it now expects its earnings before interest, tax and depreciation to be in the range of $95m to $115m – down from earnings guidance just three months ago of $130m to $150m.
“Approximately half of the change in earnings guidance is due to the provision for the potential bad debt,” Wiltshire’s statement says.
Other factors behind the revised earnings guidance include hydro generation volumes of about 1,713GWh, which are below the previous forecast volume of 1,880GWh.
And the wind generation of 600GWh is also down on the previously forecast 650GWh.
