Contact said the combination with Manawa would create a more diversified, resilient and efficient Contact business with complementary hydro assets, able to offer larger volumes of fixed-price electricity to the market.
Major Manawa shareholders, Infratil and Tect Holdings (who between them hold or control about 77.9% of Manawa shares), have committed to vote in favour of the scheme subject to certain conditions.
Contact said the scheme was subject to New Zealand Commerce Commission approval and is targeted for implementation in the first half of 2025.
Manawa – previously Trustpower - is a renewable electricity generator with 25 hydro schemes around New Zealand.
The company has about 500 megawatts of generation capacity which is weighted towards winter.
The company also has more than 1200MW of geographically diversified, secured development options in wind and solar.
“This acquisition will make Contact Energy a stronger, more resilient electricity company for New Zealand with a more diversified generation portfolio across the North and South Islands,” Contact chief executive Mike Fuge said.
“Our hydro assets are complementary, with different seasonal generation profiles, which will help Contact to better manage dry-year risk and to sell larger volumes of fixed price electricity into the market than we could independently,” he said.
“Access to this type of hedging adds resilience and support for New Zealand’s large energy users and independent retailers to reduce their exposure to spot market prices in dry years,” he said.
Contact chair Rob McDonald said the combination with Manawa would result in a combined development pipeline of more than 10 terawatt hours and would further enhance Contact’s strong development capabilities, accelerating Contact’s strategy to grow renewable generation while decarbonising its portfolio.
“The combination is an important step for the New Zealand energy market and energy transition, providing greater ability to invest in future generation capacity, enhancing market security and ultimately contributing to reducing wholesale prices long-term.”
Manawa chairman Deion Campbell will join the Contact board after implementation of the scheme.
Manawa is expected to contribute about $220m of normalised earnings before interest, tax, depreciation, amortisation and financial instruments to Contact.
The cash consideration and repayment of outstanding Manawa bank debt and bonds will be funded via new committed Contact bank debt facilities.
Manawa’s directors have unanimously recommended Manawa shareholders vote in favour of the scheme.
Craigs Investment Partners portfolio manager Monhandeep Singh said the offer was attractive.
“While this is a chunky premium, the Manawa share price has been in a five-year slide from a peak of around $9 per share,” he said.
Singh said Infratil will end up with a 9.5% stake in Contact and have another $180m come in the door if the deal goes ahead.
“Given Infratil has been raising equity in recent years to fund attractive growth prospects in the data centre and renewables space, the additional cash (while still maintaining exposure to the New Zealand electricity market via Contact) appears a good outcome,” he said in a research note.
Contact has engaged UBS New Zealand Limited and Cameron Partners Limited / Rothschild & Co as joint financial advisers and Bell Gully as its legal adviser.
Manawa last month advised it faced a sharply lower earnings forecast for the 2025 year after one of its customers defaulted on a payment.
Lower power generation conditions would also hit earnings, Manawa said.
The company said then it expected earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) for the March 2025 year to be in the range of $95-$115m.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
