Charisma Energy Services Limited Q3 2025 Financial Analysis: A Turnaround Story

Charisma Energy Services Limited (SGX: 5QT) released its unaudited condensed interim results for the third quarter and nine months ended 30 September 2025. The report reveals a company in the midst of a significant turnaround, driven by major debt restructuring, divestments, and renewed operational focus on its Sri Lanka hydro and new solar projects.

Key Financial Metrics

*N/M: Not meaningful due to swing from loss to profit.

Historical Performance Trends

For the nine months ended 30 September 2025, Charisma Energy posted a stunning turnaround:

• Net profit of US\$41.5 million vs. net loss of US\$1.2 million in the prior year period.
• Revenue of US\$4.1 million, down 18% YoY due to lower Sri Lanka hydro generation output and reduced tariffs.
• Gross profit fell 20% YoY to US\$2.7 million, reflecting weaker revenue offset by lower costs.
• EPS swung from a loss (-9.46 US cents) to a profit (34.56 US cents), though share consolidation makes direct comparison less meaningful.

The dramatic profit swing is due almost entirely to a US\$42.1 million one-off gain on debt forgiveness following a major financial restructuring exercise.

Exceptional Earnings and Expenses

The quarter and year-to-date results were dominated by exceptional items:

• Debt Forgiveness: A US\$42.1 million gain was recognized after the completion of a court-sanctioned Scheme of Arrangement, which slashed group debt from US\$70.6 million to US\$5.1 million and converted former liabilities into equity and/or new convertible debt.
• Professional Fees: Administrative and marketing expenses dropped sharply as restructuring work was completed.
• No major asset revaluations or impairments were reported in the current period.

Divestments, Fundraising, and Corporate Actions

Charisma Energy undertook sweeping changes this year:

• Divestment: The company divested its non-core China photovoltaic business (CES Yichang), resulting in the derecognition of deferred consideration receivables.
• Restructuring and Share Consolidation: A 1,000:1 share consolidation was completed in June 2025, resetting the share count from over 13 billion to 273 million.
• Fundraising: S\$13.6 million was raised via new share issuance to Yin Khing Investments Limited and conversion of debt to equity.
• Convertible Debt: A S\$8.2 million, 5-year convertible loan was issued at 10% interest, convertible at S\$0.084/share, classified as equity.
• Outstanding financial liabilities were reduced to a fraction of prior levels.

Balance Sheet and Cash Flow Highlights

• Net asset position: Swung from negative US\$50.9 million at end-2024 to positive US\$12.5 million at end-Q3 2025.
• Cash and bank balances: US\$10.8 million at 30 September 2025, up from just US\$0.2 million at end-2024 after release of previously restricted cash.
• Current assets now exceed current liabilities, improving working capital health.

Macroeconomic and Industry Factors

The company’s Sri Lanka mini hydro operations remain exposed to weather volatility. Lower rainfall in Q3 2025 led to a ~44% YoY decline in quarterly revenue. The Sri Lankan energy market, however, is projected to grow at 4.5% CAGR to 2044, with a national target of 70% renewables by 2030. Charisma is also developing a new 5MW solar project under a 20-year power purchase agreement, diversifying its renewable portfolio.

Related-Party Transactions and Unusual Fund Flows

The main related-party transaction was interest paid on convertible debt to CMIL, a subsidiary of the controlling shareholder. All such transactions were below the disclosure threshold or occurred before CMIL became a related party post-restructuring. No material new related-party risks are evident.

Dividend Policy

No dividend was declared for the quarter or year-to-date. The stated reason is the need to conserve cash for future investments and acquisitions.

Significant Risks and Outlook

• Weather risk: Power generation remains highly sensitive to rainfall and climate patterns in Sri Lanka.
• Currency/Political risk: The Sri Lankan rupee and regulatory environment are potential sources of volatility.
• Debt risk: The restructuring has sharply reduced leverage, but the new convertible loan remains a key financial instrument.
• Growth opportunity: The new solar PPA signals future growth potential if execution is successful.

Conclusion and Recommendation

Overall, Charisma Energy’s Q3 2025 results mark a dramatic financial turnaround driven by exceptional, non-recurring gains from debt restructuring and asset divestments. The company has emerged with a clean balance sheet and strong cash position. Operationally, however, quarterly and year-to-date revenues and profits from ongoing businesses declined due to weather-related factors, and the core earnings power of the business remains modest.

• If you currently hold the stock: The successful balance sheet repair reduces insolvency risk and provides a platform for potential growth in renewables. However, operational results remain weak and volatile. Investors should closely monitor the implementation of new projects (like solar in Sri Lanka) and watch for a sustained recovery in operating earnings before considering adding to positions. Consider reducing exposure if the share price rallies solely on restructuring news without underlying profit improvement.
• If you do not currently hold the stock: The company is now financially viable and may offer turnaround potential, but the investment case rests on the successful ramp-up of new renewable projects and improved operational execution. Wait for evidence of consistent, profitable growth from core operations, not just one-off gains, before initiating a new position.

Disclaimer: This analysis is based solely on the company’s published financial report for Q3 2025. It does not constitute investment advice. Investors should conduct their own due diligence and consider their risk appetite before making investment decisions.

View CharismaEnergy Historical chart here