GNE - Genesis Energy

[bull....]

A decade on many of the major banks overseas are still in a mess from the GFC. No way out of this mess other than ultra low interest rates right through into the 2030's and let inflation do its thing, in my opinion. Here people are going to be staring down the barrel of the best term deposit rates from banks being sub 3% later this year and after tax only just keeping up with inflation. Who wants to invest for no return ? Certainly not me !

term depsit rates your getting now will be the best you get for the fore seeable future, they will drop soon under 3 for most maturities im picking. yes once you take off tax and inflation the return is a joke. Be plenty more people leaving term deposits for the likes of gne and other gentailers as maturities come off

[bull....]

I see even investors in New York are starting to talk about genesis energy now , found this blog post written yesterday about genesis energy as a potential bullish mover

https://troybusinessnews.com/a-deeper-look-into-the-charts-for-genesis-energy-gne-nz/149941/


also blog posts in nz

https://www.moneymorning.co.nz/lucky-kiwis-make-27-a-year-on-this-power-stock/2019/02/13/

hes talking about gne returning 27% per annum since listing

[bull....]

this just popped up on yahoo news

https://news.yahoo.com/financially-strong-genesis-energy-limited-202812233.html

3 hours ago - Mid-caps stocks, like Genesis Energy Limited (NZSE:GNE) with a market capitalization of NZ$3.3b, aren't the focus of most investors who prefer ...








wow even talking about it on yahoo now

[bull....]

https://herdongazette.com/genesis-energy-limited-nzsegnes-fcf-growth-near-term-reaches-0-045224/334524/

just poped up on another blog

[mfd]

https://herdongazette.com/genesis-energy-limited-nzsegnes-fcf-growth-near-term-reaches-0-045224/334524/

just poped up on another blog

They all look like template articles with a few numbers plugged in from a report. Hardly a high barrier, and doesn't mean anyone spent more than 5 minutes looking at the company. This thread is getting very excitable.

[bull....]

They all look like template articles with a few numbers plugged in from a report. Hardly a high barrier, and doesn't mean anyone spent more than 5 minutes looking at the company. This thread is getting very excitable.

guess one needs to accept that any news article is merely a lead for further research by yourself. the take is if its popping up over the internet is because it is hot news story which will make some people do research into it.

i will be really excited later this yr at the price im sure

[bull....]

big volumes going thru , div hoovering has begun . way better than hlg sustainable is what counts

[couta1]

big volumes going thru , div hoovering has begun . way better than hlg sustainable is what counts Haha HLG 146 yrs old while GNE just a baby in nappies at 20 yrs old.

[bull....]

Haha HLG 146 yrs old while GNE just a baby in nappies at 20 yrs old.

i think by the end of the yr my gne capital gain + divs will better your hlg capital gain + divs. gentailers are the way sustainable divs thats why there so hot cause people know the yields wont last much longer. hlg has bounces around like a yoyo next report could dis appoint and it will fall 20% like last time.

[couta1]

i think by the end of the yr my gne capital gain + divs will better your hlg capital gain + divs. gentailers are the way sustainable divs thats why there so hot cause people know the yields wont last much longer. hlg has bounces around like a yoyo next report could dis appoint and it will fall 20% like last time. Each to their own but at current prices this and MEL are way overvalued IMO (Not quite as bad as CNU mind you) so I'm wouldn't touch them, happy to get near a years income from my HLG divvies.

[bull....]

4 mil shares today the word is getting out hottest sustainable div on the nzx .... wont last long

[bull....]

More 'widespread' falls"While the pace of falls has slowed in March, the scope of the downturn has become more geographically widespread," Mr Lawless said.

https://www.abc.net.au/news/2019-04-01/australian-property-price-downturn-spreading-corelogic-finds/10957996?section=business

slowdown will come light night comes to day

[see weed]

More 'widespread' falls

"While the pace of falls has slowed in March, the scope of the downturn has become more geographically widespread," Mr Lawless said.

https://www.abc.net.au/news/2019-04-01/australian-property-price-downturn-spreading-corelogic-finds/10957996?section=business

slowdown will come light night comes to day


OK then just ordered 15000 at 3.40. that should help it along:)

[Maverick]

I really aren't getting the warm fuzzies with this company. Firstly, in my former life I ran an electrical company so I am predisposed to HATE power providers. They are the hopeless of the hopeless to deal with.(sorry you poor call center guys , it's not your fault)

That aside, the PE of about 14 is barely exciting when compared to other offerings on the NZX. Reading through the investor presentation I see that their recent rise in profit is solely based on revaluing their stuff over the last two years. It seems to me their normalised "trading" profit has actually slightly reduced.
Sure, if the road show currently running makes this the permanent blue chip (think RYM over its peers) of the power sector then its sp has already done its run and might hold. I doubt it will though IMO.
However, for me , it's a highly competitive sector (so I factor no more than inflation driven profit improvements) and its sp has already become maximised from the roadshow. This term " ultra low inflation environment " applies to all divi stocks, not just Genesis so I don't see it as a specific thing to this particular stock.
To me, buying GNE right now is akin to buying a timeshare which seems exciting at the time amongst the roadshow razzmatazz but regretted two years on. This sp now has plenty of room to fall. Being left with a non growing 7.5% gross divi is not where I personally want to be, but might suit some. I get it that the feeling of owning a utility feels safe ( for us oldies who played monopoly) but so is a petrol station, a company that sells socks, or fast food outlet etc etc.
I am purely a "value" investor and there will be other styles of investing out there which have their own parameters so I am not speaking for them ( such as momentum trading, chart guys etc )
I just don't see why there is so much excitement aimed at this particular company with so many others offering more.

[couta1]

Well said Maverick, I feel a great deal of caution should be exercised when buying the power companies at their current prices.

[stoploss]

Well said Maverick, I feel a great deal of caution should be exercised when buying the power companies at their current prices.
You expecting David Cunliffe back 😂

[boysy]

https://i.stuff.co.nz/timaru-herald/news/111680806/west-coast-storm-deluge-raises-south-island-hydro-lake-levels

[bull....]

last day to get your hands on the divvy folks

[bull....]

I really aren't getting the warm fuzzies with this company. Firstly, in my former life I ran an electrical company so I am predisposed to HATE power providers. They are the hopeless of the hopeless to deal with.(sorry you poor call center guys , it's not your fault)

That aside, the PE of about 14 is barely exciting when compared to other offerings on the NZX. Reading through the investor presentation I see that their recent rise in profit is solely based on revaluing their stuff over the last two years. It seems to me their normalised "trading" profit has actually slightly reduced.
Sure, if the road show currently running makes this the permanent blue chip (think RYM over its peers) of the power sector then its sp has already done its run and might hold. I doubt it will though IMO.
However, for me , it's a highly competitive sector (so I factor no more than inflation driven profit improvements) and its sp has already become maximised from the roadshow. This term " ultra low inflation environment " applies to all divi stocks, not just Genesis so I don't see it as a specific thing to this particular stock.
To me, buying GNE right now is akin to buying a timeshare which seems exciting at the time amongst the roadshow razzmatazz but regretted two years on. This sp now has plenty of room to fall. Being left with a non growing 7.5% gross divi is not where I personally want to be, but might suit some. I get it that the feeling of owning a utility feels safe ( for us oldies who played monopoly) but so is a petrol station, a company that sells socks, or fast food outlet etc etc.
I am purely a "value" investor and there will be other styles of investing out there which have their own parameters so I am not speaking for them ( such as momentum trading, chart guys etc )
I just don't see why there is so much excitement aimed at this particular company with so many others offering more.

i dont know where to start , some of your statements are factually incorrect

power companies future growth is coming from climate change , electric vehicles , population increase etc they are not stagnant businesses anymore.

dividends are sustainable unlike most business

a big reason for the out performance of power companies is they are cheap on a cashflow basis ( mel and gne are the cheapest hence why they are outperforming the others)

everytime interest rates decrease or the time horizon for rate increases is pushed further out it makes there valuations even cheaper on a cashflow basis because there earnings are increasing every year , not stagnating. as an example gne in 2021 will get a substantial boost in cashflow because of drop off in gas contracts. thats why my cashflow valuation says its cheap for 2021 earnings.
rbnz drops rates makes it even cheaper going forward.
it is not the blue chip of power companies but offers a good return of them all based on valuation thats what the market is seeing it as cheap and why it is outperforming. market is repricing them.

that link to article i posted while back saying gne has returned 27% every yr since listing in 2014 and could well return same again this yr , pretty good in my books

heres a news story today nz interest rate coming as early as may , makes power companies look even more attractive again

https://www.goodreturns.co.nz/article/976514619/markets-tip-imminent-ocr-cut.html

[couta1]

I must be morphing into the bull cause I'm feeling a sense of caution about the market as everyone piles in chasing yield, metrics are stretched big time in many companies now, there are still value plays out there like OCA and a few others but I reckon keeping one hand on the exit door would be a good strategy to employ going forward.

[blackcap]

dividends are sustainable unlike most business



l[/URL]

How are dividends sustainable when they are greater than net profit? I know cashflows are greater than profit so divs can be paid from there and that is due to depreciation. But what happens when the asset is fully depreciated and you need to spend on the infrastructure to maintain the future cash flows?

[percy]

I must be morphing into the bull cause I'm feeling a sense of caution about the market as everyone piles in chasing yield, metrics are stretched big time in many companies now, there are still value plays out there like OCA and a few others but I reckon keeping one hand on the exit door would be a good stategy to employ going forward.

Agreed.
After selling shares to buy the new house, and then loading up on 18th June last year my combined GNE and MEL [xd] holdings are up 34.855%.Do I sell a few.?
Maybe it is TINA,ie There is no alternative.?
I will also have some further funds to invest in a couple of months.So have been looking for another company or companies to invest in,however I have noticed all the property companies' share prices have moved up.
I have a lot more work to do to find a company on modest ratios that has the capacity to pay increasing dividends.I really do not want to add to my overweight positions in HGH and TRA,but I may be forced to do so.!..lol.

[bull....]

How are dividends sustainable when they are greater than net profit? I know cashflows are greater than profit so divs can be paid from there and that is due to depreciation. But what happens when the asset is fully depreciated and you need to spend on the infrastructure to maintain the future cash flows?

divs are used against free cash flow not net profit. power companies are building wind to increase capacity all from existing cashflows at the moment and have stated no major power stations needed for yrs.

cen pays out 100% of free cash the others dont

[blackcap]

divs are used against free cash flow not net profit. power companies are building wind to increase capacity all from existing cashflows at the moment and have stated no major power stations needed for yrs.

cen pays out 100% of free cash the others dont

I know that. The question is how sustainable is the free cash flow. Because at some point you are going to have to use the cash to build new infrastructure. The depreciation rates are there for a reason, or have the bean counters applied a higher rate than the asset is depreciating by?

[bull....]

I know that. The question is how sustainable is the free cash flow. Because at some point you are going to have to use the cash to build new infrastructure. The depreciation rates are there for a reason, or have the bean counters applied a higher rate than the asset is depreciating by?

i already answered it power companies are already building new generation in nz from existing cash flows also they are getting more power from existing infrastructure.

[blackcap]

i already answered it power companies are already building new generation in nz from existing cash flows also they are getting more power from existing infrastructure.

So borrowing to pay for dividends really.

Are you telling me that the $110m per annum that is left over after dividends and finance expense is enough investment to keep future cash flows per share going?

I see in 2017 they borrowed $500m to be able to purchase some investments worth $355m and pay a dividend of $164m. That does not look like investment from free cash flows.

[RTM]

……….. one hand on the exit door would be a good strategy to employ going forward.

Yes....I've been wondering a bit about the exit door from time to time. I really do wonder how easy it might be to get through it with many of my stocks in the event of a real collapse of prices.
Suspect I'll be left high and dry ! Hopefully with most of the dividends still intact.

[bull....]

So borrowing to pay for dividends really.

Are you telling me that the $110m per annum that is left over after dividends and finance expense is enough investment to keep future cash flows per share going?

I see in 2017 they borrowed $500m to be able to purchase some investments worth $355m and pay a dividend of $164m. That does not look like investment from free cash flows.

no im saying they dont need to build any major power stations at the moment or the fore seeable future . wind farms are very cheap to build than big hydro stations and both mcy and gne have wind projects lined up theres a peak plant due open next yr taranaki , plant up nth land plenty of capacity to meet demand fore seeable future.

none of them borrow to pay divs and of course you would have to borrow to build new infrastructure. cashflow would pay for the int on loan

[bull....]

Dollar drops as markets see rising chance of interest rate cut next month

For the first time in more than six years, more businesses expect a decline in their activity in the next three months than expect an improvement.
The Institute of Economic Research (NZIER) warned the survey showed further downside risk for economic growth, which has already been slowing after two weak quarters in the second half of 2018.


https://www.stuff.co.nz/business/111719494/business-confidence-points-to-further-slowdown-for-the-nz-economy


dont forget the CGT fluffing has stopped many doing any business decisions as well which will affect growth going forward

[bull....]

watch the rba for incase surprise rate cut today

[stoploss]

watch the rba for incase surprise rate cut today

Would be a BIG surprise to the market . Only one economist picking it .

[bull....]

big drop yesterday after div , must been the panic merchants baling on the slightest drop

[bull....]

Headwinds in the domestic and global economy are likely to see the central bank cut rates in May and August, according to the pricing of wholesale interest rate markets. Gloomy business confidence figures this week further add to the expectation of an imminent OCR cut, economists said.

https://www.goodreturns.co.nz/article/976514636/price-war-heats-up-with-asb-move.html

[bull....]

Kiwibank's economists see a fairly strong chance that the Official Cash Rate will go as low as 0.75% next year, while they're predicting that the Kiwi dollar, "our beautiful bird", is about to be "broken".

https://www.interest.co.nz/bonds/98955/kiwibank-economists-say-theres-40-chance-reserve-bank-might-have-continue-cutting

get your income while you can

[Beagle]

Hmmmm...might pay to get a few overseas shares to benefit from a falling Kiwi too.
We're well positioned with our gentailier shares for sure, especially GNE !

[BlackCross]

Morningstar has a valuation of $2.20 (reduce) on GNE with the main reason being "..At current prices, Genesis is overvalued. Our main concern is that 25%-30% of EBITDA comes from Kupe, which has volatile earnings and will deplete over the next decade or so...."

All power companies look a bit overpriced to me but that doesn't mean they won't go higher still.

[blackcap]

Morningstar has a valuation of $2.20 (reduce) on GNE with the main reason being "..At current prices, Genesis is overvalued. Our main concern is that 25%-30% of EBITDA comes from Kupe, which has volatile earnings and will deplete over the next decade or so...."

All power companies look a bit overpriced to me but that doesn't mean they won't go higher still.

Don't worry, Morningstar have this one wrong. Future generation and capital investment into future energy is being paid for out of free cash flows with plenty left over for big divvies.

[bull....]

Morningstar has a valuation of $2.20 (reduce) on GNE with the main reason being "..At current prices, Genesis is overvalued. Our main concern is that 25%-30% of EBITDA comes from Kupe, which has volatile earnings and will deplete over the next decade or so...."

All power companies look a bit overpriced to me but that doesn't mean they won't go higher still.

yes and they have zel at $8.30 maybe you be better investing in zel if your a morningstar follower. anyway on a more serious note i dont think many on here take morning star valuations seriously

[Beagle]

Moaning star...right up there with share clarity lol

[couta1]

I agree with Morningstar re the stock being overvalued, probably worth around $2.30-$2.40.

[Snoopy]

Morningstar has a valuation of $2.20 (reduce) on GNE with the main reason being "..At current prices, Genesis is overvalued. Our main concern is that 25%-30% of EBITDA comes from Kupe, which has volatile earnings and will deplete over the next decade or so...."



Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divide the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.

SNOOPY

[bull....]

Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divided the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.

SNOOPY

hope your using an appropriate discount rate in your valuation which takes account of declining interest rates forward. makes a big difference to valuation of cashflows.

[SilverBack]

Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divided the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.

SNOOPY

You still read a newspaper?

[bull....]

https://www.bloomberg.com/news/articles/2019-04-09/imf-cuts-global-growth-outlook-to-lowest-since-financial-crisis?srnd=premium-asia

IMF Cuts Global Growth Outlook to Lowest Pace Since Crisis
get your income why you still can

[Snoopy]

You still read a newspaper?

Interesting you picked up on the 'newspaper' reference. I did pause for thought before I wrote it.

I could have written
"It will be rather higher than the PE ratios you see bandied about elsewhere on the internet."

That wouldn't be true though, because the internet does steer people towards others with similar views. So I am sure there are other places on the internet that uncritically support investment in Genesis Energy for income.

Or I could have written:

It will be rather higher than the PE ratios you see 'bandied about on the nzx website'.

That would mean I was indirectly saying that one web reference was more important than another. Or 'my idea is better than yours'. Whatever the relative merits of two differing web views it doesn't make for a convincing argument.

A newspaper, without identifying any particular one, is under editorial control and does not publish reactive brain farts. So I used the word 'newspaper' with the idea that what is written in there is double checked and not as wedded to one or other side of the argument. If you figure out a more 21st century way of saying the same thing I am all ears.

To directly answer your question, I do favour reading the printed word at night, because too much 'blue light' makes it harder to sleep.

SNOOPY

[bull....]

Many banks rush to cut term deposit rates, leaving few outliers and fewer options to lock in what were already considered low rates before they are trimmed even lower

Some of the cuts are substantial, exceeding -30 basis points

https://www.interest.co.nz/personal-finance/99111/many-banks-rush-cut-term-deposit-rates-leaving-few-outliers-and-fewer-options

get your income while you can

[Snoopy]

It is now 'normalised result' reconciliation time. I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p31 of AR2016



EBITDAF$335.3m


less Emission Unit Trading Net Gain {$21.0m-$15.5m}($5.5m)


less One off Gain on value of Turbine Parts($6.9m)


Total: Normalised EBITDAF$322.9


less Net Finance Expense ($2.0m - $65.2m) ($63.2m)


less Depreciation, Depletion & Amortisation ($127.5m)


Total: NPBT (normalised)$132.2


less Income Tax @ 28%($37.0m)


Total: NPAT (normalised) $95.2



Note that the declared after tax profit for Genesis Energy over FY2016 was $184.2m. Yet the 'normalised profit' (repeatable profit, pulling out one off events), is only a little more than half this figure!


The above is an exercise I did on the FY2016 results. It is now two years out of date, and not being a shareholder any longer, I haven't repeated the exercise. However, it was clear at the time that the profitability of Genesis as declared was approximately twice the underlying profitability. That means that in the medium term, I would have expected Genesis's imputed dividends to halve. Of course this hasn't happened (yet). The lack of hydro storage has meant a very profitable time for Huntly. But this kind of weather event is not guaranteed to repeat and large capital expenditure is looming for Genesis if they wish to remain a top four gentailer. The further you look to the future the worse the picture looks.


Many banks rush to cut term deposit rates, leaving few outliers and fewer options to lock in what were already considered low rates before they are trimmed even lower

Some of the cuts are substantial, exceeding -30 basis points

https://www.interest.co.nz/personal-finance/99111/many-banks-rush-cut-term-deposit-rates-leaving-few-outliers-and-fewer-options

get your income while you can

"Be greedy when others are fearful and fearful when others are greedy"
(Warren Buffett)

SNOOPY

[bull....]

The above is an exercise I did on the FY2016 results. It is now two years out of date, and not being a shareholder any longer, I haven't repeated the exercise. However, it was clear at the time that the profitability of Genesis as declared was approximately twice the underlying profitability. That means that in the medium term, I would have expected Genesis's imputed dividends to halve. Of course this hasn't happened (yet). The lack of hydro storage has meant a very profitable time for Huntly. But this kind of weather event is not guaranteed to repeat and large capital expenditure is looming for Genesis if they wish to remain a top four gentailer. The further you look to the future the worse the picture looks.



"Be greedy when others are fearful and fearful when others are greedy"
(Warren Buffett)

SNOOPY

look at the profits you have missed by selling gne on your analysis. as pointed out gne has returned 27%/yr to shareholders since listing according to the posted report. cashflows are are much better way of analysis than npat in my opinion.

[Raz]

look at the profits you have missed by selling gne on your analysis. as pointed out gne has returned 27%/yr to shareholders since listing according to the posted report. cashflows are are much better way of analysis than npat in my opinion.

Yes and the share price is on the up..again

[horus1]

I would not own these shares and I am in the Industry.

[pierre]

I would not own these shares and I am in the Industry.

Could you help us by elaborating on the reasons for your opinion?

[horus1]

The profitability of the Gen/Retailers is made by the high charges they are charging to domestic consumers. Energy is 15-20C/Kwhr whereas Tiwai get it for about 5.5c/Kwhr.with a gauranteed supply which domestics do not have. That is where the margins are in domestic . The generation is a near monopoly except for the fact that the price of solar and batteries are declining by about 10-15% per year. This is economic for customers now. When you look overseas the industry is being canibilised by the new technologies all driven out of a need to get rid of CO2. In NZ the industry is 65% non CO2,which is not the same as renewable, and when carbon taxes are applied at a realistic level electricity prices will go up substantially with consequential loss of volumes. On the other hand EV's will increase the electricity volumes but fuel cells will obliderate the industry.
make your own decisions.
I have along history ,successfully, in the Industry. Reformed it twice, and think the present EPR is a masterful political document which does not address the main problems in the industry.

[bull....]

The profitability of the Gen/Retailers is made by the high charges they are charging to domestic consumers. Energy is 15-20C/Kwhr whereas Tiwai get it for about 5.5c/Kwhr.with a gauranteed supply which domestics do not have. That is where the margins are in domestic . The generation is a near monopoly except for the fact that the price of solar and batteries are declining by about 10-15% per year. This is economic for customers now. When you look overseas the industry is being canibilised by the new technologies all driven out of a need to get rid of CO2. In NZ the industry is 65% non CO2,which is not the same as renewable, and when carbon taxes are applied at a realistic level electricity prices will go up substantially with consequential loss of volumes. On the other hand EV's will increase the electricity volumes but fuel cells will obliderate the industry.
make your own decisions.
I have along history ,successfully, in the Industry. Reformed it twice, and think the present EPR is a masterful political document which does not address the main problems in the industry.

what you say could well be true , but dont you think it will be years before batteries ever get powerful enough to replace power stations and i cant see the govt providing subsidies for people to get solar therefore it still remains an uneconomic proposition for most people

[Beagle]

The profitability of the Gen/Retailers is made by the high charges they are charging to domestic consumers. Energy is 15-20C/Kwhr whereas Tiwai get it for about 5.5c/Kwhr.with a gauranteed supply which domestics do not have. That is where the margins are in domestic . The generation is a near monopoly except for the fact that the price of solar and batteries are declining by about 10-15% per year. This is economic for customers now. When you look overseas the industry is being canibilised by the new technologies all driven out of a need to get rid of CO2. In NZ the industry is 65% non CO2,which is not the same as renewable, and when carbon taxes are applied at a realistic level electricity prices will go up substantially with consequential loss of volumes. On the other hand EV's will increase the electricity volumes but fuel cells will obliderate the industry.
make your own decisions.
I have along history ,successfully, in the Industry. Reformed it twice, and think the present EPR is a masterful political document which does not address the main problems in the industry.

You've "conveniently"? over looked the fact included in the retail price is about 9 cents per kw/hr charged by Transpower for transmission charges.
The only people I know that are putting in solar are the very wealthy. Joe average simply cannot afford the up front capex and if they borrow the money the payback is so long most people wouldn't bother and the average person changes their house WELL before the payback period becomes effective. There is also the issue of how long the invertors and lithium ion batteries last, a rather awkward thing that the companies installing solar rather "conveniently" don't bother telling their customers about.

[GTM 3442]

For battery technology, the Chinese are making some big investments in various forms and variations of vanadium redox technology.

[stoploss]

I have along history ,successfully, in the Industry. Reformed it twice, and think the present EPR is a masterful political document which does not address the main problems in the industry.
Max Bradford is it ?

[iceman]

You've "conveniently"? over looked the fact included in the retail price is about 9 cents per kw/hr charged by Transpower for transmission charges.
The only people I know that are putting in solar are the very wealthy. Joe average simply cannot afford the up front capex and if they borrow the money the payback is so long most people wouldn't bother and the average person changes their house WELL before the payback period becomes effective. There is also the issue of how long the invertors and lithium ion batteries last, a rather awkward thing that the companies installing solar rather "conveniently" don't bother telling their customers about.

Well put Beagle and my thoughts exactly. Joe average is many years away from installing solar, wind or any alternative power generation to supply their homes. Ditto for any large scale solar generation. I installed solar panels on my home 2 years ago and have a hybrid vehicle, so am comfortable with the investment, but mainly a feel good result though. I suspect economically I would have been better of putting the money into GNE shares. No doubt this will happen more in the future but I think we are a long way away from this in NZ, where much of our generation is not so unfriendly to the environment with 2/3 non CO2 emitting.

[Lewylewylewy]

Most folk wouldn't pay effectively years up front for energy, even if the price of the tech drops. The only way i can see that happening is through some government green policy, which is unlikely if power companies use green power.

Maybe if the greens got into power on the back of an economically successful year with lots of funds in the coffers, it could happen... but my guess is unlikely at the moment. I like the discussion though.

[horus1]

I have 5Kw of solar and going to 15. Pay back on the 5 has been 5years but we did it ourselves mostly. I agree have to have the capital but I have that . The batteries are getting cheaper. You are correct the Govt is biased since they own 50% of the generators and that is why the market has not been straightened out. There have been two studies showing the generators are making excessive profits buty they get ignored.
Stop loss I reformed in 87/88 and in 93-96 .Not Bradford.

[iceman]

I have 5Kw of solar and going to 15. Pay back on the 5 has been 5years but we did it ourselves mostly. I agree have to have the capital but I have that . The batteries are getting cheaper. You are correct the Govt is biased since they own 50% of the generators and that is why the market has not been straightened out. There have been two studies showing the generators are making excessive profits buty they get ignored.
Stop loss I reformed in 87/88 and in 93-96 .Not Bradford.

May I ask why you are going to 15 Kw ? Are you efficiently going to store your production or do you use it all during the day ? I've looked into increasing mine but would achieve little other than selling more production cheaply back to the grid, which is not economical. Have also been looking at whether it is an option to get a couple of neighbours to join the same retailer and for them to buy my excess production at an agreed price, which would be significantly less than what they pay now and I would get more than just selling it back to the grid. If we can negotiate this, I'd quickly increase my capacity !

[iceman]

I have 5Kw of solar and going to 15. Pay back on the 5 has been 5years but we did it ourselves mostly. I agree have to have the capital but I have that . The batteries are getting cheaper. You are correct the Govt is biased since they own 50% of the generators and that is why the market has not been straightened out. There have been two studies showing the generators are making excessive profits buty they get ignored.
Stop loss I reformed in 87/88 and in 93-96 .Not Bradford.

May I ask why you are going to 15 Kw ? Are you efficiently going to store your production or do you use it all during the day ? I've looked into increasing mine but would achieve little other than selling more production cheaply back to the grid, which is not economical. Have also been looking at whether it is an option to get a couple of neighbours to join the same retailer and for them to buy my excess production at an agreed price, which would be significantly less than what they pay now and I would get more than just selling it back to the grid. If we can negotiate this, I'd quickly increase my capacity !

[iceman]

Sorry for the repeat post above. Not sure how it happens but my slow internet in the Southern Ocean does not allow me to edit nor delete it :0(

[Beagle]

Well put Beagle and my thoughts exactly. Joe average is many years away from installing solar, wind or any alternative power generation to supply their homes. Ditto for any large scale solar generation. I installed solar panels on my home 2 years ago and have a hybrid vehicle, so am comfortable with the investment, but mainly a feel good result though. I suspect economically I would have been better of putting the money into GNE shares. No doubt this will happen more in the future but I think we are a long way away from this in NZ, where much of our generation is not so unfriendly to the environment with 2/3 non CO2 emitting.
My neighbour just put some solar...I must get around to asking him whether he did a full cost-benefit analysis. Just curious if you did one Iceman ? The numbers I have seen generally show a payback period of > 15 years which simply doesn't work if one wants a more than 6% return on capital. Good for you though doing your bit for the environment.

Interestingly, just as an aside my environmental engineer friend reckons some people are spending $30-40K for a professionally installed system to go completely off grid. Heaps of solar, small wind turbine, massive battery bank and invertor and a diesel back up generator. The only way he reckons this makes sense for most people is if they live in a fairly remote location and have to pay heaps to get power to their new home.

[horus1]

Iceman, the !5KWh comes with a 10KWHR battery . Have 1 electric car and will get a second.Save $5500 on fuel per year and the car charger only works when the solar is on. We buy and sell on the spot thru Flick which is where the real benefits come in. The keys are to do a lot of it yourself, paybacks are a lot less than 15 years , that is the industry story. If you really want to make it work hard you go off grid. as Beagle notes above , more and more in remote areas will do that. Overseas the trends are clear because of subsidies but the prices are reducing so fast that they compensate and are equivalent to subsidies.In the states solar farms are being installed on long term contracts for 2.2c/Kwhr Us $ .
New technology is coming thru all the time . In China , solar subsidies are being reduced for EV's but they are being increased for Fuel cells which I believe will be better than EV's for transport. If Fuel cells become common the Electricity industry is dead.
If you want to see the affects of change and what it can do just look at coal prices dropping ,the same can happen in Electricity and will.

[percy]

I use approx $1,400 worth of electricity a year.Having 8,254 GNE shares,[$26,000] produces dividends to pay my power bill.Owning a good few more GNE and MEL the power bill is not a problem.
I have decide not to swap my Nissan Slyphy, for a Nissan Leaf, as the price difference of approx $14,000 is enough to pay for my petrol for the next 7.5 years.

[horus1]

Good on you Percy. I owned Flick shares but sold to Z . If the share price of GNE falls it will be more than the divs are worth, so far they have gone up and I am wrong but I do Ok investing in the Sharemarket.

[Beagle]

I use approx $1,400 worth of electricity a year.Having 8,254 GNE shares,[$26,000] produces dividends to pay my power bill.Owning a good few more GNE and MEL the power bill is not a problem.
I have decide not to swap my Nissan Slyphy, for a Nissan Leaf, as the price difference of approx $14,000 is enough to pay for my petrol for the next 7.5 years.

Like you I own shares in several and pay for the power bill several times over with dividends, likewise I pay for the Beagle clans fuel with ZEL dividends. Having a natural hedge against these costs makes common sense to me. On top of that the gains since acquisition of these shares have been very rewarding !!

[iceman]

Iceman, the !5KWh comes with a 10KWHR battery . Have 1 electric car and will get a second.Save $5500 on fuel per year and the car charger only works when the solar is on. We buy and sell on the spot thru Flick which is where the real benefits come in. The keys are to do a lot of it yourself, paybacks are a lot less than 15 years , that is the industry story. If you really want to make it work hard you go off grid. as Beagle notes above , more and more in remote areas will do that. Overseas the trends are clear because of subsidies but the prices are reducing so fast that they compensate and are equivalent to subsidies.In the states solar farms are being installed on long term contracts for 2.2c/Kwhr Us $ .
New technology is coming thru all the time . In China , solar subsidies are being reduced for EV's but they are being increased for Fuel cells which I believe will be better than EV's for transport. If Fuel cells become common the Electricity industry is dead.
If you want to see the affects of change and what it can do just look at coal prices dropping ,the same can happen in Electricity and will.

Thanks for the response and detail horus1. It sure is an interesting debate in an industry with technological advances moving ahead very fast and getting much cheaper.

Beagle, yes I did a cost-benefit analysis. It requires quite a bit of guess work because we are dealing with nature for production and future energy prices being unknown. My best conservative estimate prior to installation was 12-13 years payback, assuming no maintenance on the solar system. Experience in the first year indicated 11-12 years. Then I bought a hybrid main family vehicle and charge it mainly on solar or after midnight on very cheap rates. I now believe my pay back time is down to about 7-8 years, again assuming no maintenance.

[winner69]

Like you I own shares in several and pay for the power bill several times over with dividends, likewise I pay for the Beagle clans fuel with ZEL dividends. Having a natural hedge against these costs makes common sense to me. On top of that the gains since acquisition of these shares have been very rewarding !!

Interesting conceptual way of looking at things

You forgot to mention the ‘free’ three round the world trips with Mrs beagle courtesy of AIR (divies)

[Beagle]

Thanks for the response and detail horus1. It sure is an interesting debate in an industry with technological advances moving ahead very fast and getting much cheaper.

Beagle, yes I did a cost-benefit analysis. It requires quite a bit of guess work because we are dealing with nature for production and future energy prices being unknown. My best conservative estimate prior to installation was 12-13 years payback, assuming no maintenance on the solar system. Experience in the first year indicated 11-12 years. Then I bought a hybrid main family vehicle and charge it mainly on solar or after midnight on very cheap rates. I now believe my pay back time is down to about 7-8 years, again assuming no maintenance.

That's pretty good mate. Can't complain about that sort of payback period ! I know you bought a plug-in hybrid so it must be quite cool charging up off your solar system and then driving for free.


Interesting conceptual way of looking at things

You forgot to mention the ‘free’ three round the world trips with Mrs beagle courtesy of AIR (divies)

LOL quite right :)..Mrs Beagle not a great traveller though so might have to spend that on something else.

[couta1]

LOL quite right :)..Mrs Beagle not a great traveller though so might have to spend that on something else.[/QUOTE] Like a trip to Zermatt.Lol

[Raz]

LOL quite right :)..Mrs Beagle not a great traveller though so might have to spend that on something else. Like a trip to Zermatt.Lol[/QUOTE]

You lot appear way too frugal for that, perhaps an additional trip to Queenstown...

[Baa_Baa]

These references to 'free' energy through solar and divis are not really free at all are they?

The solar energy cost a big up front capital expense amortised against reduced or no future energy costs from the grid (not including maintenance costs), whereas spending a divi is just the same as spending any other income stream on petrol, I'd rather my divis went into more asset investments than going into consumption costs.

Maybe it's just how we look at things, I don't see anything 'free' about either rationalisation for the costs of consuming energy.

[iceman]

Totally correct Baa Baa. In my case it will take at least 7-8 years from installation of solar before I start getting any free energy. Time will tell if maintenance and or replacement is required by then. Whichever way we look at it, this sort of investment is a marathon, not a sprint, a bit like the sharemarket for many of us :-)

[percy]

Different investment objectives for me.
Goal to have enough SPK shares for their dividends to cover my phone account.
Same with the power companies.
Gives me a warm fuzzie feeling.Very pleasant.

[Jerry]

If you live in ChCh or top of the South NextGen is a good solar option. I have solar on the roof and NextGen pay me twice what Trustpower used to for it, and I pay only 70% for the power that comes the other way into the home. Have a look at their website. https://nextgen.energy/

[RupertBear]

Different investment objectives for me.
Goal to have enough SPK shares for their dividends to cover my phone account.
Same with the power companies.
Gives me a warm fuzzie feeling.Very pleasant.

:lol::lol::lol::lol: Made my night!

[Beagle]

Different investment objectives for me.
Goal to have enough SPK shares for their dividends to cover my phone account.
Same with the power companies.
Gives me a warm fuzzie feeling.Very pleasant.

I'm with you on this one. Many people are sitting on huge profits from their power company shares over the years and thanks to their own astute investment skills they are indeed getting free power.
Many people, myself included, could withdraw their original capital invested and still have enough free shares left in various power companies to generate enough dividends to cover all their future power bills. Free shares or free power ? Who cares the key word is FREE :cool:

[Jantar]

I would not own these shares and I am in the Industry. You ARE in the industry, or WERE in the industry?
The only person to have reformed it twice was never actually in the industry at all.

[bull....]

just released In the year to March 2019, the inflation rate was 1.5 percent, down from 1.9 percent in the December 2018 year.

http://www.scoop.co.nz/stories/BU1904/S00491/cigarette-price-rise-offsets-cheaper-petrol.htm

lower inflation , big drop

means lower interest rates coming

[bull....]

Today's data may add to the view that the central bank could cut the OCR as early as May

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12223137

[Beagle]

Today's data may add to the view that the central bank could cut the OCR as early as May

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12223137

Very weak business confidence and consumer confidence are other reasons to cut sooner than later.

[bull....]

Very weak business confidence and consumer confidence are other reasons to cut sooner than later.

yes and in cgt if it happens and it will be gloomier

[Beagle]

yes and in cgt if it happens and it will be gloomier

Sure will and the ever increasing tax take, (tax by fiscal creep) just keeps on keeping on. Ludicrous that people earning over such a modest figure as $48,000 per annum are paying at least 30% tax on every extra dollar over $48,000 plus 15% GST, (soon to be 17.5% ?) CGT, very high taxes on liquor, tobacco, local government rates with GST on top and on and on and on it goes. Rant over lol

[macduffy]

Are you just floating the "soon to be 17.5% GST" Beagle or is there some evidence/indication of this?

[bull....]

markets pricing in 80% chance rate cuts in may now

get your income why you can

[Beagle]

Are you just floating the "soon to be 17.5% GST" Beagle or is there some evidence/indication of this?

Just floating it. As long as its done contemporaneously with a meaningful cut to income tax rates.

[kiwico]

Just floating it. As long as its done contemporaneously with a meaningful cut to income tax rates.

I'd be surprised if the left increased GST as it is normally reported as hitting the poorest hardest and that's their voting base. They were in uproar when John Key moved from 12.5% to 15% as it was deemed to have the greatest effect on those whom spend most of their income, i.e. those on lower salaries. I wouldn't be surprised to see higher tax rates in some form but unlikely IMHO to be GST.

[Fuzzy Dunlop]

It also places a disproportionate burden on Winston's demographic, even with commensurate income tax reductions. That said, we have one of the most broad-base GST systems around and should use it, with carefully targeted income tax reductions.

[Raz]

no comments today...breaks the ramp??

[peat]

It also places a disproportionate burden on Winston's demographic, even with commensurate income tax reductions. That said, we have one of the most broad-base GST systems around and should use it, with carefully targeted income tax reductions.

It's too broad, get rid of necessities from GST then raise to 20% it ! A simple answer. I know its more difficult, so they say - but other places exclude bread, milk, veges, from GST so it cant be too hard.

Oh a soft downgrade today. I guess divvy will be maintained. Given it doesn't actually relate to profit. :p

[Beagle]

no comments today...breaks the ramp??

Its been very dry in the North Island and they are towards the lower end of guidance range.
Won't affect the dividend and doesn't change the medium term value of the company.

[boysy]

to highlight the point of how dry the NI hydro catchment currently is - past 4 weeks inflows the 3rd driest on record with storage sitting at the 1st %ile - polar opposite in the SI catchment with it being the 4th wettest on record and storage sitting at 95%ile

https://www.energylink.co.nz/sites/default/files/HydroWatchWeekly_20190418.pdf

[freddagg]

to highlight the point of how dry the NI hydro catchment currently is - past 4 weeks inflows the 3rd driest on record with storage sitting at the 1st %ile - polar opposite in the SI catchment with it being the 4th wettest on record and storage sitting at 95%ile

https://www.energylink.co.nz/sites/default/files/HydroWatchWeekly_20190418.pdf

Hope there are lots of coal shipments on the way or cold showers are looming for North Islanders

[boysy]

Well certainly won't be a fun time to be on flick or paying wholesale prices - saving grace is the southern hydro catchments are basically full - just hope it continues to rain in the south ....

[freddagg]

Well certainly won't be a fun time to be on flick or paying wholesale prices - saving grace is the southern hydro catchments are basically full - just hope it continues to rain in the south ....

Transmission line constraints between south and north may be the biggest problem.

[boysy]

Some interesting links re the HVDC transfers - transfer capability to 1200MW north and 850MW south.

https://www.transpower.co.nz/system-operator/operational-information/hvdc-transfer

https://www.transpower.co.nz/sites/default/files/bulk-upload/documents/HVDC%20Capacity.pdf

[freddagg]

Some interesting links re the HVDC transfers - transfer capability to 1200MW north and 850MW south.

https://www.transpower.co.nz/system-operator/operational-information/hvdc-transfer

https://www.transpower.co.nz/sites/default/files/bulk-upload/documents/HVDC%20Capacity.pdf

Thats a lot of power.
I divided it by the population of the North Island and came up with 7.8kWh per person per day. Almost enough for 2 showers a day.

[boysy]

One would think a fair bit of that power would be used for non residential purposes afterall, that being said shows huge power flows north

[Beagle]

MEL look to be best positioned...naturally I have some so am also well positioned lol
LPG powers my showers so I should be all good this winter.

[bull....]

Its been very dry in the North Island and they are towards the lower end of guidance range.
Won't affect the dividend and doesn't change the medium term value of the company.

dry weather one off which can just as quickly be re couped this yr with a upgrade once we get rain. div still very nice in the mean time

[bull....]

i see moaningstar upgraded there price , must have realised it was and still is looking silly lol

[Snoopy]

It is now 'normalised result' reconciliation time. I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p31 of AR2016



EBITDAF$335.3m


less Emission Unit Trading Net Gain {$21.0m-$15.5m}($5.5m)


less One off Gain on value of Turbine Parts($6.9m)


Total: Normalised EBITDAF$322.9


less Net Finance Expense ($2.0m - $65.2m) ($63.2m)


less Depreciation, Depletion & Amortisation ($127.5m)


Total: NPBT (normalised)$132.2


less Income Tax @ 28%($37.0m)


Total: NPAT (normalised) $95.2



Note that the declared after tax profit for Genesis Energy over FY2016 was $184.2m. Yet the 'normalised profit' (repeatable profit, pulling out one off events), is only a little more than half this figure (52%)!


I got a big shock when I carried out this calculation in 2016. Big enough to push me to sell out of Genesis Energy. But was I too hasty to react to a one off atypical year? With the continuing enthusiasm shown for Genesis Energy on this forum, maybe it is time to look again?

It is now 'normalised result' reconciliation time. I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p33 of AR2017



EBITDAF$332.5m



less Emission Unit Trading Net Gain {$16.9m-$16.3m}($0.6m)


add back Business Acquisition Costs$6.9m


Total: Normalised EBITDAF$338.8m


less Net Finance Expense ($1.6m - $62.1m) ($60.5m)


less Depreciation, Depletion & Amortisation ($174.6m)


Total: NPBT (normalised)$103.7m


less Income Tax @ 28%($29.0m)


Total: NPAT (normalised) $74.7m



Note that the declared after tax profit for Genesis Energy over FY2017 was $118.7m. Yet the 'normalised profit' (repeatable profit, pulling out one off events), is only 63% this figure!

SNOOPY

[Snoopy]

I got a big shock when I carried out this calculation in 2016. Big enough to push me to sell out of Genesis Energy. But was I too hasty to react to a one off atypical year? With the continuing enthusiasm shown for Genesis Energy on this forum, maybe it is time to look again?

It is now 'normalised result' reconciliation time. I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p33 of AR2017



EBITDAF$332.5m


less Emission Unit Trading Net Gain {$16.9m-$16.3m}($0.6m)


add back Business Acquisition Costs$6.9m


Total: Normalised EBITDAF$338.8m


less Net Finance Expense ($1.6m - $62.1m) ($60.5m)


less Depreciation, Depletion & Amortisation ($174.6m)


Total: NPBT (normalised)$103.7m


less Income Tax @ 28%($29.0m)


Total: NPAT (normalised) $74.7m



Note that the declared after tax profit for Genesis Energy over FY2017 was $118.7m. Yet the 'normalised profit' (repeatable profit, pulling out one off events), is only 63% this figure!


It is now 'normalised result' reconciliation time for FY2018 I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p25 of AR2018



EBITDAF$360.5m



less Emission Unit Trading Net Gain {$42.0m-$43.7m}($1.7m)



Total: Normalised EBITDAF$358.8m


less Net Finance Expense ($1.0m - $75.3m) ($74.3m)


less Depreciation, Depletion & Amortisation ($205.7m)


Total: NPBT (normalised)$78.8m


less Income Tax @ 28%($22.1m)


Total: NPAT (normalised) $56.7m



Note that the declared after tax profit for Genesis Energy over FY2018 was $19.8m. Yet the 'normalised profit' (repeatable profit, pulling out one off events), is 286% this figure. This is quite a contrast to the previous two years where 'declared profit after tax' was significantly greater than 'underlying profit after tax'. So what is it that has caused this turnaround?

Two items in the income statement have substantially reduced the reported NPAT. There has been a one off ($48.8m) revaluation downwards in the value of generation assets. There has been a substantial increase in income tax expense (to $50.5m), relating to 'items that will not be reclassified'. These items are not reflective of current year cashflows. So the $164m paid out in dividends over the year is reflective of neither the 'underlying net profit' nor the 'declared net profit'. The dividend payment is nevertheless 208% of the underlying net profit.

Some would say that dividend availability from the gentailers should be based on free cashflow, not net profit. This view is legitimate. But it conveniently ignores the fact that paying out a dividend in excess of NPAT is in effect giving shareholders their own capital back with a tax bill. It is not a tax efficient way to reward shareholders.

I am not motivated to re-enter Genesis Energy on the basis of updating by analysis. That is because the underlying ability for Genesis to pay imputed dividends is only roughly half what they have been paying. Halve the dividend yield you see posted on the websites and the yield on Genesis shares quoted today looks extremely unattractive. Shareholders (and potential shareholders) beware!

SNOOPY

[bull....]

snoopy there npat results have been all over the place last 10yrs ( history there) up some yrs down other yrs.

yet in the last 10yrs operating cash flow has increased markedly as well as dividends increasing. hence my view that sustainable dividends should be viewed from cash flow not npat

gne has the most room to increase divs of all the gentailers based on div payout to free cash flow which by the way i believe is how most of the gentailers measure

[Beagle]

Cashflow is King and how all the other gentailiers base their dividends.
These are a bond proxy Snoopy and all that matters is cash flow and their ability to pay dividends.

[Snoopy]

Cashflow is King and how all the other gentailers base their dividends.
These are a bond proxy Snoopy and all that matters is cash flow and their ability to pay dividends.


That sounds like rear vision mirror analysis to me Beagle. Yes I think Genesis have done extraordinarily well, given the rag tag of assets they were created from. And yes cashflow has been good.

But the cashflow has come from a depleting gas field and running down the existing power generating assets. Genesis have the most retail customers but do not have a matching power generating ability. Genesis have been particularly agile with the wholesale market participation to get around this. But for how long can they continue to out-think the other market players? The Rankine units are on their last legs and Mercury Energy has put their hand up to build the next major North Island based generation, not Genesis. Genesis had a trial program of installing solar panels on school roofs that could have been a pointed to the future. But where has this initiative gone under new CEO Mark England?

My impression is that Genesis is being asset stripped for cashflow. Surely a massive increase in Capex will be required soon or Genesis could become involved in the kind of price squeeze that has caused the likes of 'Flick' and other retailers short of generation so much recent pain.

Look through the front screen Beagle, and you will see the much touted free cashflow is anything but 'free'. If the free cashflow becomes 'not so free' then you fall back on relying on earnings for dividends. And if Genesis use normalised earnings as a basis for that, then dividends could halve. Guess which way the share price will go in sympathy?

SNOOPY

[Snoopy]

gne has the most room to increase divs of all the gentailers based on div payout to free cash flow which by the way i believe is how most of the gentailers measure.


GNE does not have the same ability to access the 'thin air capital' that comes from the appreciation of sufficient long lived renewable generation assets in the market that other power market players; like Mercury Energy, Meridian and Contact Energy have. GNE need their free cashflow for reinvestment far more than the others. Mercury needs no new capital to build their new wind farm. It is all funded by the increase in balance sheet value of those Waikato River dams. Genesis can't pull the same trick.

If the company is not to shrink to oblivion, Genesis is going to have to access some of that 'apparently free cashflow' soon IMO, for reinvestment purposes. That means lower dividends for shareholders.

SNOOPY

[blackcap]

Cashflow is King and how all the other gentailiers base their dividends.
These are a bond proxy Snoopy and all that matters is cash flow and their ability to pay dividends.

I would disagree with that statement Beagle if I may. Cashflow is king yes, but in the end you have no capital (it has depreciated) and your cashflow is zero. So you need to take that into account when valuing this company.
What is the DCF valuation of 16c, 16c, 17c, 17c, 18c, 18c, 19c, 19, ...... for 20 years and then a terminal value of zero when you do a NPV with a WACC of say 5%. Would be an interesting exercise. Over 20 years comes out to $3.21 (thanks Excel). But make the WACC 8%% and your valuation is only $2.00.

I know all very simple back of envelope stuff but I would worry about cash flows being sustainable ad infinitum.

[Beagle]

All good points so here's my rebuttal.

We are already in a very tight supply situation and that's not going to materially ease in the foreseeable future in my opinion.
GNE paid out just 79% of FCF in its last dividend leaving 21% headroom.
About a quarter of GNE's earnings come from Kupe which will gradually decline over a long period of time...I think conventional thinking is this gradually declines over 15 years but I suspect with new technologies for getting the most out of oil and gas fields this will be more like 20 years, (acknowledge this is speculative on my part).
I think their current substantial yield premium to other sector participants and FCF above that are more than sufficient mitigating factors / safety margin to offset against the slow tailing off of Kupe earnings over a very, very long period of time.
Rankine units, who knows their lifespan for sure ? GNE have said they'll stop operating them from 2030.

GNE have a road map to over $400m in EBITDAF by FY21 as clearly articulated at their most recent investor day which is a considerable uptick from the current years estimated ~ $365m.

For me GNE represents the "bird in the hand" aspect to these power companies and as only part of my portfolio in this sector my approach is simply that I'll worry about declining earnings in the 2030's and in the meantime bank over a decade's worth of significantly higher dividends than I get from the other gentailiers.

I have plenty of other companies that will grow dividends over time so have no qualms about owning a stake in one that may experience some decline in the 2030's.

[bull....]

GNE does not have the same ability to access the 'thin air capital' that comes from the appreciation of sufficient long lived renewable generation assets in the market that other power market players; like Mercury Energy, Meridian and Contact Energy have. GNE need their free cashflow for reinvestment far more than the others. If the company is not to shrink to oblivion, it is going to have to access some of that 'apparently free cashflow' soon IMO, for reinvestment purposes. That means lower dividends for shareholders.

SNOOPY


Genesis Energy says its 400 MW gas-fired E3p plant could cease year-round operations within five years as part of the company’s initiatives to reduce emissions from its generation activities.

if they build new plant they can borrow the capital and pay it back from there very good cash flows, there assets will last plenty long enough to support this

from there initial share offer

Castle Hill Wind Farm, where GenesisEnergy holds resource consents to establish a wind farm inthe northern Wairarapa. The potential site covers more than20,000 hectares and the consents allow up to 286 windturbines with a potential generation capacity of up to 860MW. Should this proceed, its scale is yet to be determined.The terms of the consents give Genesis Energy until 2023 to proceed.

pretty big

[Beagle]

WOW that could be quite a site / sight, 20,000 hectares of wind turbines making 860 MW !...could be a bit of a tourist attraction too !
Maybe they intersperse mega solar panels between the wind turbines as well ? Maybe I don't need to worry about declining earnings in the 2030's after all :)

[bull....]

WOW that could be quite a site / sight, 20,000 hectares of wind turbines making 860 MW !...could be a bit of a tourist attraction too !
Maybe they intersperse mega solar panels between the wind turbines as well ? Maybe I don't need to worry about declining earnings in the 2030's after all :)

exactly borrow the capital at these low rates makes perfect sense to build this project . the returns from these wind farms are huge that what ift are doing with long reach

i dont think they would need to reduce divs to cover the new debt from there div payout to free cash flow ratio , plenty of headroom

[Snoopy]

if they build new plant they can borrow the capital and pay it back from there very good cash flows, there assets will last plenty long enough to support this

from there iniGenesis Energy says its 400 MW gas-fired E3p plant could cease year-round operations within five years as part of the compatial share offer

Castle Hill Wind Farm, where GenesisEnergy holds resource consents to establish a wind farm inthe northern Wairarapa. The potential site covers more than20,000 hectares and the consents allow up to 286 windturbines with a potential generation capacity of up to 860MW. Should this proceed, its scale is yet to be determined.The terms of the consents give Genesis Energy until 2023 to proceed.

pretty big


OK Bull, let's see how such a construction project would stack up in cashflow terms. 860MW is a lot of power, and I would doubt the whole thing would go ahead in one hit. So let's say they go for 430MW to start with. Conveniently, when fully operational, that could compensate for the loss of Unit 5 at Huntly ( 403MW) , should management choose to shut it down. (In practice it would not compensate because it would only generate up to 430MW with optimum wind inputs - but I digress).

There is a bit of information on wind farm construction costs here:

http://www.windenergy.org.nz/the-cost-of-wind-energy

"The Ministry of Business Innovation and Employment in its latest Electricity Demand and Generation Scenarios Summary (August 2016) has estimated the long run marginal cost (LRMC) of wind energy at between $90 and $105 MWh. They also have a 10% lower cost model which has wind from $80+ MWh. Many in the industry now consider, with improvements in technology and the benefit of economies of scale from increased world-wide demand, wind farms can be built in New Zealand with a LRMC of $70 to $80 MWh."

That paragraph I have written above is encouraging in the sense that it suggests unlike other construction costs, the cost of building a wind farm may actually be coming down. However the wording is poor. A Long Run Marginal Cost must surely be expressed as 'per MWh' not 'MWh'. And in order to determine that cost, there must be an underlying assumption of what percentage of time the wind turbines are able to deliver their generating power. This would vary from site to site and the underlying figure is not given.

I am going to make a few crude ball park assumptions to drive this analysis further. I shall assume that the effective utilization rate of the wind resource is 20%. This means that over a year a 430MW wind power station will produce:

0.2 x 430MW x 365 x 24 = 753,000 MWh = 753GWh

of energy.

If the initial cost is set to cover 20 years of service without a major capital upgrade, then we are budgeting on total energy production of:

20 x 753GWh = 15,060GWh

$75/MWh construction costs (because the station would not get built unless construction costs were under the long run marginal cost) indicates a total construction budget of:

$75/MWh x 15,060,000MWh = $1,130m

Using a funding cost of 5%, the annual interest bill to service such a debt would be:

0.05 x $1,130m = $56.5m

The number of shares on issue are 1,000m

So the cashflow per share needed to service this loan is:

$56.5m / 1000m = 5.7c

Most recent twelve months of dividends amount to: 8.6cps + 8.45c = 17.05c

This means Genesis Energy shareholders can look forward to a dividend cut of:

5.7c / 17.05c = 33%

once the first half of this wind farm goes ahead.

Any Questions?

SNOOPY

[Snoopy]

Genesis Energy says its 400 MW gas-fired E3p plant could cease year-round operations within five years as part of the company’s initiatives to reduce emissions from its generation activities.


e3p is the new core of generation at Huntly. So I am quite surprised to hear that closure is a consideration for Genesis. If e3p is shut, along with the remaining Rankine units, that would mean 'Unit 5', a peaker supply unit, is the only generation at Huntly left. I am not sure that Genesis would keep Huntly open just for that.

More likely is that e3p would be re-purposed as a peaker station (this is how I would more likely interpret 'cease year round operations'), to be run in conjunction with a new Castle Hill Wind Farm.

Carbon charges significantly increasing are another specific headwind for Genesis that the other big four gentailers do not have.

From p14 AR2018 "Our carbon hedging strategy has saved us over $20 million this financial year and will provide an ongoing buffer against carbon price volatility in the coming years."

From p16 AR2018, the 'Carbon Dioxide Emissions' graph shows an emission profile of 1600kt CO2 (FY2017) to 2200kt CO2 (FY2018).

During 2016, New Zealand's Emission Trading Scheme changed to a domestic only model. A financial history of the NZ emissions trading scheme may be found here:

http://motu-www.motu.org.nz/wpapers/16_06.pdf

With the study period ending at the start of 2016, Emission Prices in the NZ ETS were trending upwards. As of April 2016, prices were more than $NZ13 per unit. Each unit corresponds to one tonne of CO2 emissions.

Current carbon prices can be tracked here:

http://www.carbonnews.co.nz/default.asp

On 29th April 2019, the last traded unit price was $25.65, up from a spot price of around $17 a year earlier.

If Genesis were to pay for the FY2018 emissions at an April 2018 spot price, the annual bill would be:

2,200,000 t x $17/ t = $37.4m

If Genesis were to pay for the FY2018 emissions at an April 2019 spot price, the annual bill would be:

2,200,000 t x $25.65/ t = $56.4m

This means, from a carbon trading scheme position, Genesis are looking at an underlying increase in Carbon Unit cost of $20m per year. (The actual price paid will be influenced by how well Genesis have managed to hedge their future payments, relative to their hedging last year). Putting this in 'cashflow per share' terms we are looking at a reduction in cashflow going forwards of:

$20m / 1,000m = 2cps

This would be an indicator of the kind of cashflow headwind a shareholder might expect, based on the 2018 carbon generation footprint going. forwards. This would likely flow through as a reduction in dividend if Huntly was being used for base load generation. With peak load generation the situation would be different because these higher carbon costs would likely be offset by higher wholesale electricity prices received.

SNOOPY

[bull....]

OK Bull, let's see how such a construction project would stack up in cashflow terms. 860MW is a lot of power, and I would doubt the whole thing would go ahead in one hit. So let's say they go for 430MW to start with. Conveniently, when fully operational, that could compensate for the loss of Unit 5 at Huntly ( 403MW) , should management choose to shut it down. (In practice it would not compensate because it would only generate up to 430MW with optimum wind inputs - but I digress).

There is a bit of information on wind farm construction costs here:

http://www.windenergy.org.nz/the-cost-of-wind-energy

"The Ministry of Business Innovation and Employment in its latest Electricity Demand and Generation Scenarios Summary (August 2016) has estimated the long run marginal cost (LRMC) of wind energy at between $90 and $105 MWh. They also have a 10% lower cost model which has wind from $80+ MWh. Many in the industry now consider, with improvements in technology and the benefit of economies of scale from increased world-wide demand, wind farms can be built in New Zealand with a LRMC of $70 to $80 MWh."

That paragraph I have written above is encouraging in the sense that it suggests unlike other construction costs, the cost of building a wind farm may actually be coming down. However the wording is poor. A Long Run Marginal Cost must surely be expressed as 'per MWh' not 'MWh'. And in order to determine that cost, there must be an underlying assumption of what percentage of time the wind turbines are able to deliver their generating power. This would vary from site to site and the underlying figure is not given.

I am going to make a few crude ball park assumptions to drive this analysis further. I shall assume that the effective utilization rate of the wind resource is 20%. This means that over a year a 430MW wind power station will produce:

0.2 x 430MW x 365 x 24 = 753,000 MWh = 753GWh

of energy.

If the initial cost is set to cover 20 years of service without a major capital upgrade, then we are budgeting on total energy production of:

20 x 753GWh = 15,060GWh

$75/MWh construction costs (because the station would not get built unless construction costs were under the long run marginal cost) indicates a total construction budget of:

$75/MWh x 15,060,000MWh = $1,130m

Using a funding cost of 5%, the annual interest bill to service such a debt would be:

0.05 x $1,130m = $56.5m

The number of shares on issue are 1,000m

So the cashflow per share needed to service this loan is:

$56.5m / 1000m = 5.7c

Most recent twelve months of dividends amount to: 8.6cps + 8.45c = 17.05c

This means Genesis Energy shareholders can look forward to a dividend cut of:

5.7c / 17.05c = 33%

once the first half of this wind farm goes ahead.

Any Questions?

SNOOPY

snoopy cost of debt is less than 5% by issuing bonds.

cost of building wind farms is declining each yr therefore costs today will be lower next yr and lower the next yr after that .... cost to build will be a lot lower than your assumption. also returns from wind are improving all the time.

56m or i would say less is easily covered by existing cash flows as they pay no where near 100% unlike cen who do , you could argue will need to reduce there div to pay for there new plant 1 day

model it on lower costs and higher returns and the proposition looks very attractive as a replacement to exisiting plant ...

[Jaa]

Genesis Energy says its 400 MW gas-fired E3p plant could cease year-round operations within five years as part of the company’s initiatives to reduce emissions from its generation activities.


Any thoughts on why the combined cycle gas powered stations lasted such short times in NZ? Sparky (15yr life) and Southdown (18yrs) are closed and Stratford (might get to 24yrs (https://www.radionz.co.nz/news/business/337304/contact-energy-keeps-power-station-switched-on)) and E3P (might get to 19yrs) are projected to close soon.

Yet, the Rankine units look like they will make it to 40 years? They are a lot more environmentally polluting while coal powered and still more polluting while gas powered (not combined cycle).

[Snoopy]

Snoopy cost of debt is less than 5% by issuing bonds.


Interest on Capital Bonds: $25.8m (AR2018, Note 8).
Capital Bonds on Issue over Year: ($426m +$424.4m) / 2 = $425.2m (AR2018 Note 24)

Indicative Bond Interest Rate = $25.8m / $425,2m = 6.1%



cost of building wind farms is declining each yr therefore costs today will be lower next yr and lower the next yr after that .... cost to build will be a lot lower than your assumption.


Cost of turbines coming down? The 'windenergy' website that I quoted would certainly suggest so. And the average of their lower suggested price range is what I did use in my calculation. Of course turbines require foundations and service roads. I doubt if the cost of that bit of the construction will be coming down. On the contrary, I expect it will rise.

Apparently the annual numbers of wind turbines being built worldwide has increased by eight times between 2007 and 2018. That should help production economies of scale.



also returns from wind are improving all the time.


From

https://newscenter.lbl.gov/2017/08/08/annual-wind-power-report-confirms-technology-advancements-improved-project-performance-low-wind-energy-prices/

"Increased rotor diameters, in particular, have begun to dramatically increase wind project capacity factors. For example, the average 2016 capacity factor among projects built in 2014 and 2015 was 42.6%, compared to an average of 32.1% among projects built from 2004 to 2011 and 25.4% among projects built from 1998 to 2001."

The 'capacity factor' is the average power generated, divided by the rated peak power. Naturally this is very 'site dependent' as well as 'turbine design dependent'.



56m or i would say less is easily covered by existing cash flows as they pay no where near 100% unlike cen who do , you could argue will need to reduce there div to pay for their new plant 1 day

model it on lower costs and higher returns and the proposition looks very attractive as a replacement to exisiting plant ...

Did you consider the reason that Genesis does not return all of their free cashflow to customers is that they need to retain some of it for reasons not related to building a new power station?

A problem is, even a huge windfarm development proposal like 'Castle Hill' wouldn't replace any of Genesis's existing plant. In times of low wind, e3p would still be required. to fill the gap. So Genesis will permanently have a higher cost structure if their 'Castle Hill' wind farm comes on stream.

SNOOPY

[Snoopy]

Any thoughts on why the combined cycle gas powered stations lasted such short times in NZ? Sparky (15yr life) and Southdown (18yrs) are closed and Stratford (might get to 24yrs (https://www.radionz.co.nz/news/business/337304/contact-energy-keeps-power-station-switched-on)) and E3P (might get to 19yrs) are projected to close soon.


I think it all comes down to external market factors. I don't think there is anything technically that would stop all these gas turbines being run for more than 20 years (with a suitable maintenance regime of course). But bringing in a new carbon trading regime could make a perfectly functional gas turbine 'market obsolete'.

Furthermore, if thermal power production was to be retained, there is probably enough design refinement over twenty years that would favour buying a new one for efficiency reasons. I don't think the Boeing 737 jet airliners built today run the same engines as the Boeing 737 jet airliners of twenty years ago, for example. Aircraft engines are just gas turbines when it comes down to it. And rebuilding an old gas turbine power station with a new gas turbine is probably still the cheapest way to produce power, if all other considerations are removed. Compared to the alternatives, gas turbines are cheap.




Yet, the Rankine units look like they will make it to 40 years? They are a lot more environmentally polluting while coal powered and still more polluting while gas powered (not combined cycle).


'Sparky' I see is Contact's Otahuhu Gas Fired power station in South Auckland that has now closed (for those like me who didn't know). The Rankine units may make 40 years. But they haven't been running continuously for 40 years! As an aside, I didn't know that the Rankine units when operating on gas were not combined cycle.

SNOOPY

[bull....]

Now, the Interim Climate Change Committee's report to the Government on the country transitioning to renewable electricity by 2035 has been delayed another two weeks after it was found that the policy would substantially increase electricity prices

https://www.tvnz.co.nz/one-news/new-zealand/very-expensive-way-cut-emissions-energy-expert-talks-government-push-transition-100-renewable-electricity


bigger dividends on the way

[RTM]

Now, the Interim Climate Change Committee's report to the Government on the country transitioning to renewable electricity by 2035 has been delayed another two weeks after it was found that the policy would substantially increase electricity prices

https://www.tvnz.co.nz/one-news/new-zealand/very-expensive-way-cut-emissions-energy-expert-talks-government-push-transition-100-renewable-electricity


bigger dividends on the way

I wouldn't count on it. More like regulation of the industry on the way. What a conundrum for them...especially as they own ~50% of a few power companies.

I have a solar water heating system....SolaHart. It has worked great but is at the end of its life (25 years). I need to replace the roof its sitting on and have been pondering....replacing with a new unit, solar power, gas hot water heating, electric hot water cylinder. I think I'm now decided....I'll be replacing with a new SolarHart unit. Does anyone have one of the newer ones ? If yes...could you PM me...thanks.

[Snoopy]

Now, the Interim Climate Change Committee's report to the Government on the country transitioning to renewable electricity by 2035 has been delayed another two weeks after it was found that the policy would substantially increase electricity prices

https://www.tvnz.co.nz/one-news/new-zealand/very-expensive-way-cut-emissions-energy-expert-talks-government-push-transition-100-renewable-electricity


bigger dividends on the way

'bull', I would hate to go up against you in an Olympic games archery trial. You sure are one 'agile piece of cattle' with that long bow .....

The issue you have highlighted is all about covering off alternative generation options when lake levels are low. If Genesis do build that 'Castle Hill Wind Farm' there is no simple on site way to store energy generated from it. That is why in the energy market we have, the wind-farms always pitch their electricity outputs at prices so low they have to be accepted. The way our electricity market works, the wind farm operators don't get paid at the low rate they offer to the market of course. They get paid at the higher marginal rate offered by other power stations to ensure total supply is there to meet total demand. To go fully renewable on a sustainable basis, wind farms need a battery for storage.

A battery could be an old style lake if a power company owns a wind farm together with a hydro station that is not dedicated to base-load power supply. By this, I mean the company is able to turn on the hydro turbine when there is little generation at the wind farm and vica versa. The other way for the wind farm to operate in all conditions is to have a giant battery storage unit on site, Tesla style. This solution is of course very expensive. The best solution for Genesis would be 'Option 3'.

This solution means running ep3/ 'Unit 5' at Huntly whenever the Castle Hill wind farm can't cope with demand. With no carbon charges this would be by far the cheapest solution. But there is an internal to NZ carbon market. Effectively pricing for carbon units is set to discourage the use of thermal generation. If the 100% renewable strategy is abandoned,, then you are right 'bull' that Genesis may be in a prime position to use Huntly as effectively the fossil fuelled equivalent of the 'storage battery' of the nation. But the climate change effects of using fossil fuel do not go away. So Genesis will pay heavily in terms of 'carbon charges' for doing this, largely offsetting any incremental generation revenue they may gain. Unfortunately for Genesis shareholders this will mean little to no increase in cashflow as a result, and no dividend increase. That is how I see the system operating anyway.

SNOOPY

[bull....]

'bull', I would hate to go up against you in an Olympic games archery trial. You sure are one 'agile piece of cattle' with that long bow .....

The issue you have highlighted is all about covering off alternative generation options when lake levels are low. If Genesis do build that 'Castle Hill Wind Farm' there is no simple on site way to store energy generated from it. That is why in the energy market we have, the wind-farms always pitch their electricity outputs at prices so low they have to be accepted. The way our electricity market works, the wind farm operators don't get paid at the low rate they offer to the market of course. They get paid at the higher marginal rate offered by other power stations to ensure total supply is there to meet total demand. To go fully renewable on a sustainable basis, wind farms need a battery for storage.

A battery could be an old style lake if a power company owns a wind farm together with a hydro station that is not dedicated to base-load power supply. By this, I mean the company is able to turn on the hydro turbine when there is little generation at the wind farm and vica versa. The other way for the wind farm to operate in all conditions is to have a giant battery storage unit on site, Tesla style. This solution is of course very expensive. The best solution for Genesis would be 'Option 3'.

This solution means running ep3/ 'Unit 5' at Huntly whenever the Castle Hill wind farm can't cope with demand. With no carbon charges this would be by far the cheapest solution. But there is an internal to NZ carbon market. Effectively pricing for carbon units is set to discourage the use of thermal generation. If the 100% renewable strategy is abandoned,, then you are right 'bull' that Genesis may be in a prime position to use Huntly as effectively the fossil fuelled equivalent of the 'storage battery' of the nation. But the climate change effects of using fossil fuel do not go away. So Genesis will may heavily in terms of Carbon charges for doing this, largely offsetting any incremental generation revenue. Unfortunately for Genesis shareholders this will mean little to no increase in cashflow as a result, and no dividend increase. That is how I see the system operating.

SNOOPY

just shows the flaws in labours 100% renewable policy rushed out with no idea how they were going to achieve it. genesis was due to retire the coal at huntly but as you have alluded they have an asset now which is potentially very valuable in either senario hence why they have changed tune and will keep it going now. the other option is that potentiallt they can refurbish huntly and built the wind farm which could make the smallest operator by far a much larger operator? plenty of options if you want to spend the money , the market is growing as well makes things more viable.

by the way castle hill is the biggest consented wind farm in nz to date which makes it all the more valuable a asset

http://www.windenergy.org.nz/waverley-wind-farm

[blackcap]

just shows the flaws in labours 100% renewable policy rushed out with no idea how they were going to achieve it. genesis was due to retire the coal at huntly but as you have alluded they have an asset now which is potentially very valuable in either senario hence why they have changed tune and will keep it going now. the other option is that potentiallt they can refurbish huntly and built the wind farm which could make the smallest operator by far a much larger operator? plenty of options if you want to spend the money , the market is growing as well makes things more viable.

All Labour had to do was look at Germany's disaster that is their energiewende program. But no ideology trumps logic.

[iceman]

just shows the flaws in labours 100% renewable policy rushed out with no idea how they were going to achieve it. genesis was due to retire the coal at huntly but as you have alluded they have an asset now which is potentially very valuable in either senario hence why they have changed tune and will keep it going now. the other option is that potentiallt they can refurbish huntly and built the wind farm which could make the smallest operator by far a much larger operator? plenty of options if you want to spend the money , the market is growing as well makes things more viable.

NZ Initiative agrees with you bull https://nzinitiative.org.nz/reports-and-media/reports/switched-on-achieving-a-green-affordable-and-reliable-energy-future/

[bull....]

“We’re hoping that there will be more things to do with them over time – so the conversation is broader than just Waverley,” Jewell told journalists and analysts yesterday.

GENESIS-TILT RELATIONSHIP MAY EXTEND BEYOND WAVERLEY
http://www.sharechat.co.nz/article/70784690/genesis-tilt-relationship-may-extend-beyond-waverley.html

castle hill could transform genesis from ugly duckling to swan lol

[Snoopy]

Just shows the flaws in Labour's 100% renewable policy rushed out with no idea how they were going to achieve it. Genesis was due to retire the coal at Huntly but as you have alluded they have an asset now which is potentially very valuable in either scenario hence why they have changed tune and will keep it going now. the other option is that potentially they can refurbish Huntly and built the wind farm which could make the smallest operator by far a much larger operator? plenty of options if you want to spend the money, the market is growing as well makes things more viable.


Yes I saw Huntly's resource consent goes through to 2037. A major redevelopment at the site is definitely an option. Maybe they could get those local Waikato dairy cows belching into a pipeline to fuel a new generation turbine and help fix our farmer's carbon issues as well? But redevelopment of Huntly would cost money. The Castle Hill wind farm would cost money. Not building Castle Hill means more money must be spent on buying carbon credits. Genesis will effectively have to fight very hard to stay still on whatever path they choose to follow. The more money they spend the higher the interest bill and the lower the cashflow. Ultimately that can only mean lower dividends for Genesis shareholders in the future, however this thing plays out.

SNOOPY

[bull....]

Yes I saw Huntly's resource consent goes through to 2037. A major redevelopment at the site is definitely an option. Maybe they could get those local Waikato dairy cows belching into a pipeline to fuel a new generation turbine and help fix our farmer's carbon issues as well? But redevelopment of Huntly would cost money. The Castle Hill wind farm would cost money. Not building Castle Hill means more money must be spent on buying carbon credits. Genesis will effectively have to fight very hard to stay still on whatever path they choose to follow. The more money they spend the higher the interest bill and the lower the cashflow. Ultimately that can only mean lower dividends for Genesis shareholders in the future, however this thing plays out.

SNOOPY

genesis recently entered an agreement with other big companies to plant forests to mitigate the carbon issue you refer too

Air NZ, Z Energy, Contact, Genesis, join forces to grow forests
https://www.radionz.co.nz/news/business/384699/air-nz-z-energy-contact-genesis-join-forces-to-grow-forests


wont this mitigate your carbon issue in the future?

[Snoopy]

Did you consider the reason that Genesis does not return all of their free cashflow to customers is that they need to retain some of it for reasons not related to building a new power station?


I hadn't caught up with this:

"Genesis also owns 46 percent of the Kupe oil and gas field and is preparing for a $30 million, two-year investment in onshore compression to increase production."

( http://www.sharechat.co.nz/article/70784690/genesis-tilt-relationship-may-extend-beyond-waverley.html)

So $15m per year over 1,000m shares equals 1.5cps. More of that Genesis 'free cashflow' is disappearing. It looks like the issue of a dividend cut has now moved from 'if' to 'when'!

SNOOPY

[Snoopy]

genesis recently entered an agreement with other big companies to plant forests to mitigate the carbon issue you refer too

Air NZ, Z Energy, Contact, Genesis, join forces to grow forests
https://www.radionz.co.nz/news/business/384699/air-nz-z-energy-contact-genesis-join-forces-to-grow-forests

wont this mitigate your carbon issue in the future?

Yes it will. Genesis could plant their own forests as a way to offset their carbon emissions. Or alternatively they could pay carbon charges that are then paid over to someone else to do the forestation. Maybe Genesis doing it themselves is more efficient? Either way Genesis pays though.

SNOOPY

[blackcap]

Intermittent wind and solar cannot stand on their own,” the brief concludes. “They must have some form of back-up power, from reliable coal, natural gas, nuclear units, storage capability from hydroelectric facilities, and/or batteries. Batteries of the size and scope needed for 100-percent renewables are unproven and not cost effective.

Researchers Say Renewable Energy Mandates Cause Large Electricity Price Increases
Anthony Watts / 1 hour ago May 2, 2019
By Tim Benson

A 1-4 Percent In Renewable Generation Raises Electricity Prices By 11-17 Percent

An April 2019 working paper from the Energy Policy Institute at the University of Chicago shows renewable energy mandates (REMs), also known as renewable portfolio standards, are dramatically increasing retail electricity prices and serve as a very expensive way to try to reduce carbon dioxide emissions.

The authors of Do Renewable Portfolio Standards Deliver? found that seven years after REMs are enacted, renewables’ share of electricity generation increases by only 1.8 percent. They also found REMs raise retail electricity prices by 11 percent. After 12 years and a 4.2 percent increase in renewables’ share of generation, these prices rise by 17 percent. Altogether, the total extra electricity costs of REMs to consumers in the states that have enacted an REM are $125.2 billion.

The study also reveals reducing carbon dioxide emissions through an REM costs between $130-$460 per ton of carbon dioxide abated. These increased costs are, at the low end, almost three times higher than the social cost of carbon estimated by the Interagency Working Group set up by the Obama administration, which is roughly $46 per ton for 2020. (It should be noted that whether there is a “social cost” to carbon dioxide emissions at all is debatable.)

Outside of these higher prices, REMs impose other costs. Since wind and solar are so intermittent (having respective capacity factors of just 34.6 and 25.7 percent) and must be backed up by conventional sources of electricity generation, most estimates “do not account for the additional costs necessary to supply electricity when they are not operating.”

The paper also notes “renewable power plants require ample physical space, are often geographically dispersed, and are frequently located away from population centers, all of which raises transmission costs above those of fossil fuel plants.” Further, “[REM-driven] increases in renewable energy penetration can also raise total energy system costs by prematurely displacing existing productive capacity, especially in a period of flat or declining electricity consumption. Adding new renewable installations, along with associated flexibly dispatchable capacity, to a mature grid infrastructure may create a glut of installed capacity that renders some existing baseload generation unnecessary. The costs of these ‘stranded assets’ do not disappear and are borne by some combination of distribution companies, generators, and ratepayers. Thus, the early retirement or decreased utilization of such plants can cause retail electricity rates to rise even while near zero marginal cost renewables are pushing down prices in the wholesale market.”

The findings of this study are not surprising and have been mirrored elsewhere. States with these mandates had electricity prices 26 percent higher than those without. The 29 states with renewable energy mandates (plus the District of Columbia) had average retail electricity prices of 11.93 cents per kilowatt hour (cents/kWh), according to the U.S. Energy Information Administration. On the other hand, the 21 states without renewable mandates had average retail electricity prices of only 9.38 cents/kWh.

In just 12 states, the total net cost of renewable mandates was $5.76 billion in 2016 and will rise to $8.8 billion in 2030, a 2016 study revealed. A 2014 study by the left-leaning Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent and replacing conventional power with solar power triples electricity costs. The American Action Forum estimates the costs of moving the entire country to 100 percent renewable sources would be around $5.7 trillion, and a 2019 brief from the Institute for Eenergy Research estimates that the idea of getting to 100 percent renewable generation is “nothing more than a myth,” and that attempting to do would be a “catastrophe” for our country.

“Intermittent wind and solar cannot stand on their own,” the brief concludes. “They must have some form of back-up power, from reliable coal, natural gas, nuclear units, storage capability from hydroelectric facilities, and/or batteries. Batteries of the size and scope needed for 100-percent renewables are unproven and not cost effective. Even if a 100 percent renewable future were feasible, the land requirements and costs of transitioning would be enormous and would require subsidies to ease the electricity price increases that would result.”

State legislators should not mandate the use of renewable sources in electricity generation. Such mandates raise energy costs and disproportionally harm low-income families. Instead of trying to increase renewable mandates, legislators should repeal them.

https://wattsupwiththat.com/2019/05/02/researchers-say-renewable-energy-mandates-cause-large-electricity-price-increases/

[bull....]

Intermittent wind and solar cannot stand on their own,” the brief concludes. “They must have some form of back-up power, from reliable coal, natural gas, nuclear units, storage capability from hydroelectric facilities, and/or batteries. Batteries of the size and scope needed for 100-percent renewables are unproven and not cost effective.

Researchers Say Renewable Energy Mandates Cause Large Electricity Price Increases
Anthony Watts / 1 hour ago May 2, 2019
By Tim Benson

A 1-4 Percent In Renewable Generation Raises Electricity Prices By 11-17 Percent

An April 2019 working paper from the Energy Policy Institute at the University of Chicago shows renewable energy mandates (REMs), also known as renewable portfolio standards, are dramatically increasing retail electricity prices and serve as a very expensive way to try to reduce carbon dioxide emissions.

The authors of Do Renewable Portfolio Standards Deliver? found that seven years after REMs are enacted, renewables’ share of electricity generation increases by only 1.8 percent. They also found REMs raise retail electricity prices by 11 percent. After 12 years and a 4.2 percent increase in renewables’ share of generation, these prices rise by 17 percent. Altogether, the total extra electricity costs of REMs to consumers in the states that have enacted an REM are $125.2 billion.

The study also reveals reducing carbon dioxide emissions through an REM costs between $130-$460 per ton of carbon dioxide abated. These increased costs are, at the low end, almost three times higher than the social cost of carbon estimated by the Interagency Working Group set up by the Obama administration, which is roughly $46 per ton for 2020. (It should be noted that whether there is a “social cost” to carbon dioxide emissions at all is debatable.)

Outside of these higher prices, REMs impose other costs. Since wind and solar are so intermittent (having respective capacity factors of just 34.6 and 25.7 percent) and must be backed up by conventional sources of electricity generation, most estimates “do not account for the additional costs necessary to supply electricity when they are not operating.”

The paper also notes “renewable power plants require ample physical space, are often geographically dispersed, and are frequently located away from population centers, all of which raises transmission costs above those of fossil fuel plants.” Further, “[REM-driven] increases in renewable energy penetration can also raise total energy system costs by prematurely displacing existing productive capacity, especially in a period of flat or declining electricity consumption. Adding new renewable installations, along with associated flexibly dispatchable capacity, to a mature grid infrastructure may create a glut of installed capacity that renders some existing baseload generation unnecessary. The costs of these ‘stranded assets’ do not disappear and are borne by some combination of distribution companies, generators, and ratepayers. Thus, the early retirement or decreased utilization of such plants can cause retail electricity rates to rise even while near zero marginal cost renewables are pushing down prices in the wholesale market.”

The findings of this study are not surprising and have been mirrored elsewhere. States with these mandates had electricity prices 26 percent higher than those without. The 29 states with renewable energy mandates (plus the District of Columbia) had average retail electricity prices of 11.93 cents per kilowatt hour (cents/kWh), according to the U.S. Energy Information Administration. On the other hand, the 21 states without renewable mandates had average retail electricity prices of only 9.38 cents/kWh.

In just 12 states, the total net cost of renewable mandates was $5.76 billion in 2016 and will rise to $8.8 billion in 2030, a 2016 study revealed. A 2014 study by the left-leaning Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent and replacing conventional power with solar power triples electricity costs. The American Action Forum estimates the costs of moving the entire country to 100 percent renewable sources would be around $5.7 trillion, and a 2019 brief from the Institute for Eenergy Research estimates that the idea of getting to 100 percent renewable generation is “nothing more than a myth,” and that attempting to do would be a “catastrophe” for our country.

“Intermittent wind and solar cannot stand on their own,” the brief concludes. “They must have some form of back-up power, from reliable coal, natural gas, nuclear units, storage capability from hydroelectric facilities, and/or batteries. Batteries of the size and scope needed for 100-percent renewables are unproven and not cost effective. Even if a 100 percent renewable future were feasible, the land requirements and costs of transitioning would be enormous and would require subsidies to ease the electricity price increases that would result.”

State legislators should not mandate the use of renewable sources in electricity generation. Such mandates raise energy costs and disproportionally harm low-income families. Instead of trying to increase renewable mandates, legislators should repeal them.

https://wattsupwiththat.com/2019/05/02/researchers-say-renewable-energy-mandates-cause-large-electricity-price-increases/

arh its a conspiracy then the labour govt renewable plan is nothing other than a plan for electricity companies to charge more so they can pay the govt bigger divs in the future :p

[Jantar]

Any thoughts on why the combined cycle gas powered stations lasted such short times in NZ? Sparky (15yr life) and Southdown (18yrs) are closed and Stratford (might get to 24yrs (https://www.radionz.co.nz/news/business/337304/contact-energy-keeps-power-station-switched-on)) and E3P (might get to 19yrs) are projected to close soon.....
There are two main reasons for the short life of CCGTs in NZ.

The first is simple: it is the shortage of confirmed gas. With the governments ban on further offshore exploration, the current gas reserves would not last very long if used for electricity generation. Already the cost of purchasing the gas that is available has skyrocketed making gas generation as expensive, and sometimes even more so than coal.

The second reason is a bit more complex, and is related to the way our electricity demand varies. CCGT plant are designed to run mainly as base load plant. While they can be ramped around a bit, they do not like it, and are most reliable when brought up to a steady load and left there. But here in NZ we are unable to share generation with other areas in different time zones. That means our daily demand is at a minimum at around 4:00 am, rises to a peak at 8:30 am drops off during the day to a trough at around 3:30 pm, rises again to a peak at 6:00 to 7:00 pm, then trails off till 4:00 the next morning. Both hydro and coal plant can follow this trend nicely. Geothermal just stays at full load right through, and CCGTs are forced to ramp through their operating range placing more stress on their blades and combustion chambers. If a CCGT is shutdown, it can take days to bring it back on line, and each start removes around 100 hours from its effective operating time to next overhaul. Running them in unstable modes also reduces the time left to next overhaul.

Intermittent generation like wind just exacerbates this situation. It is not uncommon to see wind generation very strong overnight when it is not needed, and non existent over the evening peaks. I have also seen swings in wind generation of 240 MW in a single hour. The way that our nodal pricing works means that when wind generation is higher than forecast the wholesale price drops to make CCGT operation completely uneconomical. Thus the uneconomic running happens at the very time that the low loads and ramping due to wind is increasing the maintenance costs.

[Jaa]

There are two main reasons for the short life of CCGTs in NZ.

The first is simple: it is the shortage of confirmed gas. With the governments ban on further offshore exploration, the current gas reserves would not last very long if used for electricity generation. Already the cost of purchasing the gas that is available has skyrocketed making gas generation as expensive, and sometimes even more so than coal.

The second reason is a bit more complex, and is related to the way our electricity demand varies. CCGT plant are designed to run mainly as base load plant. While they can be ramped around a bit, they do not like it, and are most reliable when brought up to a steady load and left there. But here in NZ we are unable to share generation with other areas in different time zones. That means our daily demand is at a minimum at around 4:00 am, rises to a peak at 8:30 am drops off during the day to a trough at around 3:30 pm, rises again to a peak at 6:00 to 7:00 pm, then trails off till 4:00 the next morning. Both hydro and coal plant can follow this trend nicely. Geothermal just stays at full load right through, and CCGTs are forced to ramp through their operating range placing more stress on their blades and combustion chambers. If a CCGT is shutdown, it can take days to bring it back on line, and each start removes around 100 hours from its effective operating time to next overhaul. Running them in unstable modes also reduces the time left to next overhaul.

Intermittent generation like wind just exacerbates this situation. It is not uncommon to see wind generation very strong overnight when it is not needed, and non existent over the evening peaks. I have also seen swings in wind generation of 240 MW in a single hour. The way that our nodal pricing works means that when wind generation is higher than forecast the wholesale price drops to make CCGT operation completely uneconomical. Thus the uneconomic running happens at the very time that the low loads and ramping due to wind is increasing the maintenance costs.

Thanks for the detailed reply.

The offshore gas exploration changes came after most of these decisions so don't think they can be blamed. It's more like, not much gas has been found in the last 10-15 years.

The preference for CCGT to be run as base load and subsequent maintenance costs when they are not, especially in the competitive NZ context seem more of an issue. That article I linked to stated new blades at Stratford cost $50m every 25,000 hours, which is less than 3yrs if run 24/7. Also explains the preference for fast starting peaker stations.


Every 25,000 hours you have to put new blades in the turbines," he said.

"It costs about $50 million to do that. Obviously before you do that you need to know that you will get value for that investment.

Hydro generally plays the fast start role in the NZ market and is well suited to it. CCGT plants should be able to run as baseload in winter and when other stations are unavailable. They also should be being dispatched in front of coal if the cost is the same due to the environmental benefits. Do the Rankine units not suffer the same fast start maintenance costs?

I remember Contact when it listed talking about how Sparky was the latest and greatest in the land (fuel efficient, modern tech, perfect location etc) and with an operating life of 20-25 years I think? Lasting only 15yr seems like a good illustration of the hidden risks Snoopy is talking about, Sparky must have cost Contact some serious money and be part of the reason the share price struggled until recently.

[Jantar]

Thanks for the detailed reply.

The offshore gas exploration changes came after most of these decisions so don't think they can be blamed. It's more like, not much gas has been found in the last 10-15 years.

The preference for CCGT to be run as base load and subsequent maintenance costs when they are not, especially in the competitive NZ context seem more of an issue. That article I linked to stated new blades at Stratford cost $50m every 25,000 hours, which is less than 3yrs if run 24/7. Also explains the preference for fast starting peaker stations.



Hydro generally plays the fast start role in the NZ market and is well suited to it. CCGT plants should be able to run as baseload in winter and when other stations are unavailable. They also should be being dispatched in front of coal if the cost is the same due to the environmental benefits. Do the Rankine units not suffer the same fast start maintenance costs?

I remember Contact when it listed talking about how Sparky was the latest and greatest in the land (fuel efficient, modern tech, perfect location etc) and with an operating life of 20-25 years I think? Lasting only 15yr seems like a good illustration of the hidden risks Snoopy is talking about, Sparky must have cost Contact some serious money and be part of the reason the share price struggled until recently. The two Auckland stations that were shut down were partially due to gas transfer costs, and partially due to the way NZ's nodal pricing works. The idea of nodal pricing was to encourage power stations to build where the demand is and therefore not need any new power lines. Wholesale prices in the Auckland area were high and hence encouraged the construction of new stations. But once they were built and operating the wholesale price differential disappeared, and accompanied by expensive gas take or pay contracts they were never economical.

The Rankine units do not suffer quite the same start up maintenance costs and can be operated over a load range of 40 MW to 250 MW. In comparison EP3 has an operating range (not desirable) of around 180 to 380 MW. Percentage wise this is a much smaller range. With CCGT plant it is often the GT core that causes the most issues. Rankine units do not have this component.

The Rankine units are arguably the best non hydro plant that NZ has ever seen.

[Airw0lf]

Wholesale prices in the Auckland area were high and hence encouraged the construction of new stations. But once they were built and operating the wholesale price differential disappeared, and accompanied by expensive gas take or pay contracts they were never economical.There's an additional factor at play too. Even with the operation of Otahuhu and Southdown in Auckland, there were times where relatively high pricing in Auckland occurred due to lack of transmission capacity between the Central NI and Auckland, and/or due to high losses in transmission between the CNI and Auckland. But once the North Island Grid Upgrade circuits were commissioned by Transpower in 2012, there was ample transmission capacity into Auckland (even under transmission outage situations) and the new circuits also significantly reduced transmission losses by several percentage points.

[Snoopy]

The two Auckland stations that were shut down were partially due to gas transfer costs, and partially due to the way NZ's nodal pricing works. The idea of nodal pricing was to encourage power stations to build where the demand is and therefore not need any new power lines. Wholesale prices in the Auckland area were high and hence encouraged the construction of new stations. But once they were built and operating the wholesale price differential disappeared,...


Is there a postscript to this story? By this, I mean when Southdown and Otahuhu gas fired station shut up shop, did the Auckland nodal power point price rise again?



... and accompanied by expensive gas take or pay contracts they were never economical.


Wasn't the purpose of the Ahuroa gas storage site to make the gas supply contract more 'take and pay' rather than 'pay and don't take'? IOW it was meant to drastically improve the 'take or pay' economics? Will Genesis take more advantage of this facility, now that it is independently owned?

SNOOPY

[Airw0lf]

Is there a postscript to this story? By this, I mean when Southdown and Otahuhu gas fired station shut up shop, did the Auckland nodal power point price rise again?SNOOPYThe power prices in Auckland didn't rise back up to anywhere near the pre-North Island Grid Upgrade prices or the pre-Southdown/Otahuhu prices. This is because the North Island Grid Upgrade circuits could transport loads of power from further south into Auckland. In other words, lots of cheap generation from say NI hydro, SI hydro, NI geothermal and so on could compete to meet demand in Auckland, and at relatively low transmission losses. Back in the heyday of Southdown and Otahuhu there was tighter transmission capacity into Auckland which supported their viability to a strong extent.
Wasn't the purpose of the Ahuroa gas storage site to make the gas supply contract more 'take and pay' rather than 'pay and don't take'? IOW it was meant to drastically improve the 'take or pay' economics? Will Genesis take more advantage of this facility, now that it is independently owned?SNOOPY There is also a fairly liquid spot and futures gas market finally available in NZ (http://www.emstradepoint.co.nz/), taking the gas industry out of its dated model of bilateral gas contracts. This certainly should support flexibility for gas users, but probably more so as top-ups for big users rather than providing enough depth to heavily ride on spot...

[Snoopy]

The power prices in Auckland didn't rise back up to anywhere near the pre-North Island Grid Upgrade prices or the pre-Southdown/Otahuhu prices. This is because the North Island Grid Upgrade circuits could transport loads of power from further south into Auckland. In other words, lots of cheap generation from say NI hydro, SI hydro, NI geothermal and so on could compete to meet demand in Auckland, and at relatively low transmission losses. Back in the heyday of Southdown and Otahuhu there was tighter transmission capacity into Auckland which supported their viability to a strong extent. ..

So the government mandated Transpower grid upgrade was a key factor in the demise of Southdown and Otahuhu? The 'free market' in NZ for power received a political nudge to move power generation in a certain technological direction?

SNOOPY

[Airw0lf]

So the government mandated Transpower grid upgrade was a key factor in the demise of Southdown and Otahuhu? The 'free market' in NZ for power received a political nudge to move power generation in a certain technological direction?SNOOPYNo I definitely would not draw that conclusion. The way in which Transpower is regulated is actually pretty efficient. If Transpower wants to spend money (i.e., consumers' money) to make a major capital investment like the NIGU it must justify it as beneficial for NZ electricity consumers in one or both of two ways:

1. Show an economic cost benefit analysis that is positive for approval by the Commerce Commission. I.e., the benefits outweigh the capital and expected maintenance costs. This can happen if a transmission investment allows renewable generation such as hydro, wind or geothermal to flow more readily into other regions and displace more expensive sources such as gas or coal. A transmission investment also often reduces transmission losses and therefore saves consumers and NZ more money on top of this. An example of this sort of investment was the Wairakei-Whakamaru line built circa 2013 which enabled new geothermal generation from Mercury and Contact to get to market. Yes this would come as a disadvantage to more expensive generator competitors but there's no denying that if transmission allows cheaper generation options to be exploited in NZ then that is for the benefit of the consumer and NZ Inc. overall. This sort of logic is standard in just about every developed electricity market in the world, it's not about deliberately screwing with past investment decisions made by generators, it's about getting the most efficient electricity system in the long run for the country. All players in the generation game know this anyway whenever they are contemplating investment/divestment, it's just part of being an industry player.

2. Demonstrate that the transmission investment will be required to meet legally mandated grid reliability standards. Transpower must ensure a certain reliability standard in terms of transmission redundancy so that the lights stay on in NZ, so this is essentially about security of supply. Again, any such investment application is reviewed by the Commerce Commission to ensure that the investment is warranted.

In both cases the government isn't directing anyone to do anything, it's largely a Transpower-Commerce Commission process with various industry stakeholders such as generators, retailers, Electricity Authority watching closely and commenting.The North Island Grid Upgrade investment was largely justified on criterion #2 above.

[RTM]

Some informative and interesting posts on this thread, thank you in particular Jantar & Airwolf for taking the time to share your knowledge.
Cheers,
RTM

[Jantar]

So the government mandated Transpower grid upgrade was a key factor in the demise of Southdown and Otahuhu? The 'free market' in NZ for power received a political nudge to move power generation in a certain technological direction?

SNOOPY Sorry, I have been travelling so not keeping up with this matter. Thankyou Airw0lf for keeping the information coming.

Airw0lf is quite correct with his description of how Transpower's capital investment decisions are made. The effect of the new transmission circuits into Auckland on the economics of existing generation facilities was one of the unintended consequences. If anything it does highlight the fallacy of the electricity reforms of 1995 - 96 that were supposed to make future power line upgrades unnecessary.

I would have hated to be in the position that Bob Thompson found himself in in the late 1990s, when as head of Transpower, he knew that new circuits were needed, but had to do nothing until the new electricity market had a chance to encourage generators to build new power stations instead.

[bull....]

nice posts thanks

see genesis doing some roadshows in nz with investors.

[bull....]

the potential of castle hill is huge this is how i see the potentially developing it , instead of explaining it this is how they did it in germany

This Unique Combo Of Wind And Hydro Power Could Revolutionize Renewable Energyhttps://www.ge.com/reports/unique-combo-wind-hydro-power-revolutionize-renewable-energy/

[Snoopy]

the potential of castle hill is huge this is how i see the potentially developing it , instead of explaining it this is how they did it in germany

This Unique Combo Of Wind And Hydro Power Could Revolutionize Renewable Energyhttps://www.ge.com/reports/unique-combo-wind-hydro-power-revolutionize-renewable-energy/


Interesting article bull. The idea of 'pumped hydro' being the cheapest kind of 'battery' currently available by dint of it being able to replenish a 'lake battery' is something that has been discussed on this forum before. And IIRC, those 'in the know' thought it was 'the way to go'. I can see merit in the idea, but I did find the article a little odd, notwithstanding the fact that it is a promotional release for use of GE branded windmills.

The first point is, you don't need windmills at all to have a pumped hydro system. You can use the hydro power itself in times of low load to pump the downstream water back above the dam so that it can be used in peak times.

The article said that 'wind' and 'hydro' will work 'in parallel with each other.' I take that to mean that they operate on separate energy producing pathways. The plant owner can produce wind power or hydro power or both at the same time. But why do the windmills have to sit above the hydro station? Would it not be cheaper to just build the elevated water storage tanks and forget about putting windmills on top of them? You could then build the windmills somewhere else where the daily wind loadings, and the associated electricity production, was the most important consideration.

Next there seems to be a mismatch of hydro and wind farm power:

"Built into the hills will be a hydroelectric plant capable of producing 16 megawatts of power, while the wind farm on its own will produce 13.6 megawatts."

Superficially, you might look at the above figures and see they are close. But in New Zealand conditions at least, I would expect the hydro unit would be able to operate at near peak capacity a lot longer than the wind farm. So why wasn't more wind generation capacity put into the overall design?

SNOOPY

[bull....]

England confirms there is "no commitment on the closure of any units at Huntly

https://www.stuff.co.nz/business/112551375/moving-to-100pc-renewable-generation-could-wait-to-the-2040s-genesis-boss-suggests#comments

[bull....]

i see yesterday announcement on emissions bill has no legal requirement for companies to meet it , only targets. that good for genesis as gives them much longer to keep running coal if they so decide

[Airw0lf]

i see yesterday announcement on emissions bill has no legal requirement for companies to meet it , only targets. that good for genesis as gives them much longer to keep running coal if they so decideGenesis already fall under and will continue to fall under the NZ Emissions Trading Scheme which essentially forces them to be carbon neutral already by either purchasing carbon offsets to match every tonne of carbon emitted out of Huntly, or paying the government a fixed amount to do so. The only question is how much these costs of compliance will rise - at the moment the carbon price is too low in NZ because of the government's $25 fixed price option.

[Beagle]

It worries me when companies come up with new key performance indicators as though being carbon neutral is just as important as any other KPI. I worry that in the process or creating this new yardstick by which they measure their performance they lose focus on what's really important in their business and most importantly of all what the shareholders really want them to laser focus on, the most relevant KPI of all, earnings per share. I think in this incredibly politically correct world its far to easy for company directors and senior management to think that by achieving some self contrived new yardstick they are somehow achieving the key objectives that shareholders really want.

I suspect if you took a poll the vast majority of shareholders for any given company would simply tell management to stick to their knitting and focus on more important issues. All their efforts (as one shareholder of Summerset put it to me at the annual meeting), won't save one single polar bear.

[macduffy]

I agree with that, Beagle. Set a KPI that can be achieved without too much sweat?

[blackcap]

It worries me when companies come up with new key performance indicators as though being carbon neutral is just as important as any other KPI. I worry that in the process or creating this new yardstick by which they measure their performance they lose focus on what's really important in their business and most importantly of all what the shareholders really want them to laser focus on, the most relevant KPI of all, earnings per share. I think in this incredibly politically correct world its far to easy for company directors and senior management to think that by achieving some self contrived new yardstick they are somehow achieving the key objectives that shareholders really want.

I suspect if you took a poll the vast majority of shareholders for any given company would simply tell management to stick to their knitting and focus on more important issues. All their efforts (as one shareholder of Summerset put it to me at the annual meeting), won't save one single polar bear.

The reason they are doing all this though is all about perception. They are worried that if they are not seen to be doing the correct thing then customers and consumers are going to leave/agitate in droves and that will hinder the bottom line. A bit of a catch 22. My partner is around the board room and she thinks this Global Warming/Climate Change is a crock of ****. However she cannot utter those words and has to be careful not to fall too far out of line with the new PC speak otherwise its that very board position that is compromised.

[winner69]

It worries me when companies come up with new key performance indicators as though being carbon neutral is just as important as any other KPI. I worry that in the process or creating this new yardstick by which they measure their performance they lose focus on what's really important in their business and most importantly of all what the shareholders really want them to laser focus on, the most relevant KPI of all, earnings per share. I think in this incredibly politically correct world its far to easy for company directors and senior management to think that by achieving some self contrived new yardstick they are somehow achieving the key objectives that shareholders really want.

I suspect if you took a poll the vast majority of shareholders for any given company would simply tell management to stick to their knitting and focus on more important issues. All their efforts (as one shareholder of Summerset put it to me at the annual meeting), won't save one single polar bear.

Such a cynical view of that Summerset shareholder

Shareholders aren’t the only stakeholder in a company

[Baa_Baa]

Doesn’t GNE have the whole carbon credits/offsets thing to deal with, as carbon producer they pay the offset, so getting to carbon neutral would be a good thing for the bottom line and therefore the shareholders eps? I’m no expert in this so could be completely wrong.

[Beagle]

The reason they are doing all this though is all about perception. They are worried that if they are not seen to be doing the correct thing then customers and consumers are going to leave/agitate in droves and that will hinder the bottom line. A bit of a catch 22. My partner is around the board room and she thinks this Global Warming/Climate Change is a crock of ****. However she cannot utter those words and has to be careful not to fall too far out of line with the new PC speak otherwise its that very board position that is compromised.

Isn't the purpose of having a board so that members can express their individual varying opinions so the board can come to a consensus view ? If board members who think this whole thing is bull**** are too worried about their own position to express a diverging view then God help us, political correctness will overtake the world.


Doesn’t GNE have the whole carbon credits/offsets thing to deal with, as carbon producer they pay the offset, so getting to carbon neutral would be a good thing for the bottom line and therefore the shareholders eps? I’m no expert in this so could be completely wrong.
Yes it does in GNE's case which probably explains their joint venture with massive forestry plantations eluded too earlier in this thread. What we have here is a legitimate case of a major emitter but contrast that with SUM other company that's really invented being carbon neutral out of thin air without in any way being a major explicit emitter, which strikes me as somewhat contrived.


Such a cynical view of that Summerset shareholder

Shareholders aren’t the only stakeholder in a company

One I share. SUM are just going about their business like any other company that's not a major emitter. Its not like they burn one billion liters of jet fuel per annum like AIR is it ! No single polar bear will notice even the most microscopic difference to the environment unless the world's big emitters like China and the US take the appropriate actions. You could argue that with SUM not being a specific major emitter of CO2 their endeavours are SUMthing of a contrived whitewash to do nothing more than make an attempt to look politically correct. Hopefully this is not something they are pinning their hopes on to look good to the public to sell more units as its so contrived to be somewhat farcical in my opinion. One would hope they don't start wasting millions of dollars on electric vehicles like AIR did, long before they make a case for themselves on a realistic cost benefit analysis like AIR did. They need to laser focus on selling the units they build and looking after their residents needs...any major distraction from that is unwelcome as far as I am concerned.

[Baa_Baa]

Yes it does in GNE's case which probably explains their joint venture with massive forestry plantations eluded too earlier in this thread. What we have here is a legitimate case of a major emitter but contrast that with SUM other company that's really invented being carbon neutral out of thin air without in any way being a major explicit emitter, which strikes me as somewhat contrived.

Sorry, I thought you were talking about GNE contriving their carbon situation and its effect on eps.

[Beagle]

Sorry, I thought you were talking about GNE contriving their carbon situation and its effect on eps.

I probably picked the wrong thread but at least in my view there is a genuine difference between a company like GNE needing to offset their emissions from the big Huntly smokestacks and other sources and AIR from the jet engine exhaust with one billion litres of jet fuel burned per annum...this is genuine stuff but the SUMwhat apparently contrived need to appear to be politically correct by SUM other companies rubs my fur up the wrong way.
Maybe I don't see the big picture though and all companies are big emitters in one way or the other...I'm probably just being a silly dog this weekend and should find something more interesting to bark about...

[Jantar]

She certainly can utter those words. Yes, it will upset the greenies, and some labour voters, but they are not likely to form the majority of the larger customers of any business.

[Arthur]

The reason they are doing all this though is all about perception. They are worried that if they are not seen to be doing the correct thing then customers and consumers are going to leave/agitate in droves and that will hinder the bottom line. A bit of a catch 22. My partner is around the board room and she thinks this Global Warming/Climate Change is a crock of ****. However she cannot utter those words and has to be careful not to fall too far out of line with the new PC speak otherwise its that very board position that is compromised.
Wow!. Is your partner an antivaxer and flat earther as well? The rest of the board is probably aware of the risks.
ASIC encourages listed companies and their directors and advisors to:

adopt a probative and proactive approach to emerging risks, including climate risk;
develop and maintain strong and effective corporate goverance which helps in identifying, assessing and managing risk;
consider how best to comply with the law where it requires disclosure of material risks; and
disclose meaningful and useful climate risk related information to investors – the voluntary framework developed by the Taskforce on Climate-related Financial Disclosures can assist in this regard.

ASIC commissioner John Price said:

‘Climate change is a foreseeable risk facing many listed companies in the Australian market in a range of different industries. Directors and officers of listed companies need to understand and continually reassess existing and emerging risks (including climate risk) that may affect the company’s business – for better or for worse

[blackcap]

Wow!. Is your partner an antivaxer and flat earther as well? The rest of the board is probably aware of the risks.
ASIC encourages listed companies and their directors and advisors to:

adopt a probative and proactive approach to emerging risks, including climate risk;
develop and maintain strong and effective corporate goverance which helps in identifying, assessing and managing risk;
consider how best to comply with the law where it requires disclosure of material risks; and
disclose meaningful and useful climate risk related information to investors – the voluntary framework developed by the Taskforce on Climate-related Financial Disclosures can assist in this regard.

ASIC commissioner John Price said:

‘Climate change is a foreseeable risk facing many listed companies in the Australian market in a range of different industries. Directors and officers of listed companies need to understand and continually reassess existing and emerging risks (including climate risk) that may affect the company’s business – for better or for worse

You put it quite nicely. ASIC spells it out don't they. The IOD here in NZ take a similar position.
As for my partner she understands the risks posed by potential climate change/global warming etc. But those risks have been overstated by the IPCC (a political not scientific panel) for many years now. It's just unfortunate that a diversity of opinion around this issue is not looked on favourably.

[Jaa]

You put it quite nicely. ASIC spells it out don't they. The IOD here in NZ take a similar position.
As for my partner she understands the risks posed by potential climate change/global warming etc. But those risks have been overstated by the IPCC (a political not scientific panel) for many years now. It's just unfortunate that a diversity of opinion around this issue is not looked on favourably.

Wow from me too!

You and your partner are living (https://www.theguardian.com/environment/2019/may/06/human-society-under-urgent-threat-loss-earth-natural-life-un-report) in a dream (https://www.bloomberg.com/graphics/hottest-year-on-record/) world (https://www.cbsnews.com/news/report-1-million-animals-plant-species-face-extinction-due-climate-change-human-activity-population/).

A good director can process expert advice, research and analysis to make good and timely decisions for all stakeholders, not just shareholders. If you can't do this about climate change with the overwhelming evidence available from science and scientists (not armchair experts or bought and paid for researchers) you wouldn't get my vote at an AGM based on reading comprehension and cognition alone.

[Jantar]

Wow from me too!

.... If you can't do this about climate change with the overwhelming evidence available from science and scientists (not armchair experts or bought and paid for researchers) you wouldn't get my vote at an AGM based on reading comprehension and cognition alone. And here is the issue. The public, and that includes company directors, seldom hear from the actual scientists. instead they see reports from the IPCC, or politicians, or government agencies, but never from the actual scientists. The scientific evidence is that climate change is good for NZ, and that includes Genesis.

Where directors do read the actual science, they are torn between towing the PC line and doing what is best for the company.

[bull....]

And here is the issue. The public, and that includes company directors, seldom hear from the actual scientists. instead they see reports from the IPCC, or politicians, or government agencies, but never from the actual scientists. The scientific evidence is that climate change is good for NZ, and that includes Genesis.

Where directors do read the actual science, they are torn between towing the PC line and doing what is best for the company.

and we as shareholders should ensure directors do what is best for the company

[Snoopy]

And here is the issue. The public, and that includes company directors, seldom hear from the actual scientists. instead they see reports from the IPCC, or politicians, or government agencies, but never from the actual scientists. The scientific evidence is that climate change is good for NZ, and that includes Genesis.

Where directors do read the actual science, they are torn between towing the PC line and doing what is best for the company.


What advantages are there for climate change in NZ, and for Genesis? And how do we arrange things so that we in NZ get climate change, and other parts of the world that do not benefit do not get it?

SNOOPY

[Jantar]

The first part of your question is easy. A paper currently under publication (Taylor & Bardsley, 2019) shows that as NZ has warmed that droughts in the South Island are fewer and less extreme. This was presented at the Hydrosoc conference 18 months ago. This becomes obvious if you consider that a warmer atmosphere can contain 8% more precipital moisture with each 1 deg increase in atmospheric moisture.

Another paper (Purdie & Bardsley, 2010) on seasonal forecasting showed that summer floods appear to be less likely, and McKerchar and Henderson examined the past shifts in NZ river flows with the IPO, showing less variability in more recent times compared with earlier records.

This is reflected in many other parts of the world as well. Desserts are greener in a warmer climate with a lot of research showing this effect in the Sahara. So as for warming NZ while not warming the rest of the world? I have no idea, perhaps you should ask the politicians.

[Snoopy]

The first part of your question is easy. A paper currently under publication (Taylor & Bardsley, 2019) shows that as NZ has warmed that droughts in the South Island are fewer and less extreme. This was presented at the Hydrosoc conference 18 months ago. This becomes obvious if you consider that a warmer atmosphere can contain 8% more precipital moisture with each 1 deg increase in atmospheric moisture.

Another paper (Purdie & Bardsley, 2010) on seasonal forecasting showed that summer floods appear to be less likely, and McKerchar and Henderson examined the past shifts in NZ river flows with the IPO, showing less variability in more recent times compared with earlier records.


Bardsley a bit of a pin up boy for the cause? Isn't that latest paper the one getting its public launch at the South Dunedin Town Hall?



This is reflected in many other parts of the world as well. Desserts are greener in a warmer climate with a lot of research showing this effect in the Sahara.


I admit my ice cream consumption goes up in the summer, but personally I prefer the brown liquid chocolate sauce that goes hard when it hits the ice cream. You can keep your kale sauce to yourself, even if Saharan tribesmen have unusual taste. It must be the greater population in Africa that has produced this unusual (to western eyes) worldwide trend?

Apart from the greater freezer power consumption needed to store ice cream in warmer climes, what was the benefit of climate change to Genesis Energy again?

SNOOPY

[Jaa]

The first part of your question is easy. A paper currently under publication (Taylor & Bardsley, 2019) shows that as NZ has warmed that droughts in the South Island are fewer and less extreme. This was presented at the Hydrosoc conference 18 months ago. This becomes obvious if you consider that a warmer atmosphere can contain 8% more precipital moisture with each 1 deg increase in atmospheric moisture.

Another paper (Purdie & Bardsley, 2010) on seasonal forecasting showed that summer floods appear to be less likely, and McKerchar and Henderson examined the past shifts in NZ river flows with the IPO, showing less variability in more recent times compared with earlier records.

This is reflected in many other parts of the world as well. Desserts are greener in a warmer climate with a lot of research showing this effect in the Sahara. So as for warming NZ while not warming the rest of the world? I have no idea, perhaps you should ask the politicians.

NZ's grass may grow faster with warmer temperatures IF the rain continues and IF there is no increase in pests but this is a big assumption and only one part of our economy. Trees help produce rain and there is a lot less of them in the world every year.

The impacts of climate change are uneven and disruptive/costly. A couple of examples, NZ already has climate refugees (https://www.loc.gov/law/help/climate-change-refugee/new-zealand.php) from the Pacific, it is also not great for glacier tourism (https://www.sciencealert.com/nz-glacier-will-melt) or ski field operators. For a NZX example, look at Seeka's latest results (https://www.nzx.com/announcements/334328), the warm dry summer led to less fruit production in NZ and Australia and a profit downgrade. Maybe NZ will be able to grow more Kiwifruit in the south island but that imposes a major cost in moving orchards and post-harvest operations.

As for Genesis, the best thing for them, the country (I like the sound of coal free NZ) and the world is to run those Rankine units on gas instead of coal. Longer term Snoopy is right, they need a lot of investment to replace their thermal generation with renewable energy. Though Tiwai Point could close instead.

[Jantar]

Bardsley a bit of a pin up boy for the cause? Isn't that latest paper the one getting its public launch at the South Dunedin Town Hall?...No, Bardsley is an Assoc Prof at Waikato University, and as such is co-author on quite a few NZ papers. That latest paper was launched in Napier in Dec 2017.

[IAK]

[QUOTE=Beagle;758763]Isn't the purpose of having a board so that members can express their individual varying opinions so the board can come to a consensus view ? If board members who think this whole thing is bull**** are too worried about their own position to express a diverging view then God help us, political correctness will overtake the world.

Agree, unfortunately (in my experience) a lot of directors are scared of "upsetting the apple cart" for fear of risking their directorship careers. "Groupthink" is a dangerous situation for any board. https://www.leadinggovernance.com/blog/perils-groupthink-boardroom

[Baa_Baa]

[QUOTE=Beagle;758763]Isn't the purpose of having a board so that members can express their individual varying opinions so the board can come to a consensus view ? If board members who think this whole thing is bull**** are too worried about their own position to express a diverging view then God help us, political correctness will overtake the world.

Agree, unfortunately (in my experience) a lot of directors are scared of "upsetting the apple cart" for fear of risking their directorship careers. "Groupthink" is a dangerous situation for any board. https://www.leadinggovernance.com/blog/perils-groupthink-boardroom

You may be right, but you're both generalising, as is the anecdote that started this discussion and have no reason to suspect these undesirable characteristics are features of the GNE Board. Remember what thread you're posting on. If you've got some beef with Director behaviours in a general sense, maybe start a thread on Off-market Discussion rather than risking attribution to GNE.

[bull....]

3.12 resistance might be giving way , been held back recently compared to others.

this interesting

In October last year Genesis and Tilt Renewables announced a strategic relationship between the parties for the development of more renewable energy for the New Zealand market

https://www.nzx.com/announcements/334675

castle hill partnership?

[Snoopy]

3.12 resistance might be giving way , been held back recently compared to others.

this interesting

In October last year Genesis and Tilt Renewables announced a strategic relationship between the parties for the development of more renewable energy for the New Zealand market

https://www.nzx.com/announcements/334675

castle hill partnership?

"The Waverley Wind Farm comes at a price that is competitive with other forms of baseload electricity, which is particularly important as we meet demand from the transport and industrial heating sectors looking to electrify in the coming years,”

Genesis running a wind farm as a base load station??!? The press release goes on to say that the wind farm will actually be owned by Tilt Renewables, with Genesis contracted to take all the power output.

Waverley Capacity is forecast to be 130MW. If these run 24/7 then the power generated over a year would be:

0.130GW x 365day x 24hours/day = 1138GWh

However, we know this is not going to happen. Expected generation over the year is 450-460GWh. So 'capacity utilisation' over a year is expected to be:

450-460 GWh / 1138 GWh = 40%

How can a wind power station which is expected to operate to capacity only 40% of the time be a 'base load' power generation station?

SNOOPY

P.S. Bull, I think you might be right about the Castle Hill scheme being the next wind farm project for Tilt.

[Jantar]

......

How can a wind power station which is expected to operate to capacity only 40% of the time be a 'base load' power generation station? ...... To put it simply, it can't.

I suspect that what they mean is that it will be priced in the base at $0.01 per MWh. This ensures that it gets dispatched ahead of other forms of generation. Right now the national wind generation total is 447 MW out of an installed capacity of 690 MW. All of it except for 35 MW at NWF is offered into the market at $0.01 per MWh.

[Beagle]

Term deposit, call account and bond yields getting cut back over the last wee while since the OCR cut and now some people are predicting another cut or even two to the OCR.
Even REIT yields which have become something of a quassi bond proxy are falling heavily and popular REIT's like GMT and VHP and similar now paying only about 3.6% (PIE yield).

Gentailier GNE with its ~ 5.5% yield 80% imputed = 5.5 / 0.776 = 7.1% gross is looking mighty attractive as a bond proxy. Yes there may be very gradual tailing off issues in the very long run, or maybe there won't be but 7.1%, my goodness that's pretty compelling so I think I might get some more.

[Snoopy]

EP3 has an operating range (not desirable) of around 180 to 380 MW. Percentage wise this is a much smaller range. With CCGT plant it is often the GT core that causes the most issues.



To put it simply, it can't.

I suspect that what they mean is that it will be priced in the base at $0.01 per MWh. This ensures that it gets dispatched ahead of other forms of generation. Right now the national wind generation total is 447 MW out of an installed capacity of 690 MW. All of it except for 35 MW at NWF is offered into the market at $0.01 per MWh.

There is one other way that the Waverley Wind Farm could be seen as 'baseload generation'. Could it be that Genesis are planning to operate it in tandem with 'Unit 5' aka EP3 (designed as a baseload generation unit from what I can gather). IOW when the wind is blowing 'Unit 5' is throttled back. Not sure how practical this would be given a not completely flexible operating range for EP3 as Jantar has indicated above.

SNOOPY

[Snoopy]

Gentailier GNE with its ~ 5.5% yield 80% imputed = 5.5 / 0.776 = 7.1% gross is looking mighty attractive as a bond proxy. Yes there may be very gradual tailing off issues in the very long run, or maybe there won't be but 7.1%, my goodness that's pretty compelling so I think I might get some more.

My 'Headwind' post 2614 was looking at the construction of the 'Castle Hill Wind Farm', not 'Waverley'. However, exactly the same logic applies to Waverley, including the 33% reduction in cashflow (and hence dividend) to build the whole of Waverley should it get the green light.

The term's 'long term' and 'short term' are always subject to personal interpretation. But with hints from Genesis that an announcement on Waverley may be made within a couple of weeks, I wouldn't count this issue as something to be considered 'in the very long run'.

Having said this, Genesis appear have 'pulled a rabbit out of the hat' by not having to front up any capital to build Waverley: Tilt will do that. I can't decide whether management are being incredibly clever in expanding their generation capacity this way, or incredibly naive. It seems an almost master stroke to palm all the capital cost of development of Waverley to someone else, while maintaining the benefit of having the total output of that power station set aside for the exclusive use of Genesis Energy. Yet I feel this project is very unlikely to be a 'free lunch' for Genesis. There must be a hook in this deal that allows the party that will build and own the Waverley Windmill Power Station -'Tilt'- to take the construction risk. It is hard to believe the Genesis Board would be so naïve that they cannot see the counterparty risk. Anyone care to speculate as to what that counterparty risk might be?

SNOOPY

[Jantar]

There is one other way that the Waverley Wind Farm could be seen as 'baseload generation'. Could it be that Genesis are planning to operate it in tandem with 'Unit 5' aka EP3 (designed as a baseload generation unit from what I can gather). IOW when the wind is blowing 'Unit 5' is throttled back. Not sure how practical this would be given a not completely flexible operating range for EP3 as Jantar has indicated above.

SNOOPY This would be an ideal way of operating any wind farm. Unfortunately the way our electricity market operates this is not possible. it would require a totally different market and dispatch system which, in my opinion, would be a big improvement over what we currently have.

The Waverly wind farm is small enough that it could be matched with E3P. although using E3P in that manner would put more stress on the plant.

[Snoopy]

This would be an ideal way of operating any wind farm. Unfortunately the way our electricity market operates this is not possible. it would require a totally different market and dispatch system which, in my opinion, would be a big improvement over what we currently have.

The Waverly wind farm is small enough that it could be matched with E3P. although using E3P in that manner would put more stress on the plant.

a/ I see an electricity system in NZ with a largely updated Transpower grid. That allows much more flexibility in what stations can 'compete' to satisfy any instantaneous load.
b/ I see gentailers (in particular Contact and Mercury) able to store energy in their 'battery lakes' at time of modest power requirements, while geothermal stations do the heavy lifting of the baseload requirements.
c/ I see wind power stations able to feed all their generation into the grid while they are sufficiently blown to do so.
d/ I see very little if any new capital is required to build new power stations needed to meet future growth.

It looks like a near ideal set up to me. What could be better?

SNOOPY

[Jantar]

a/ I see an electricity system in NZ with a largely updated Transpower grid. That allows much more flexibility in what stations can 'compete' to satisfy any instantaneous load.
b/ I see gentailers (in particular Contact and Mercury) able to store energy in their 'battery lakes' at time of modest power requirements, while geothermal stations do the heavy lifting of the baseload requirements.
c/ I see wind power stations able to feed all their generation into the grid while they are sufficiently blown to do so.
d/ I see very little if any new capital is required to build new power stations needed to meet future growth.

It looks like a near ideal set up to me. What could be better?

SNOOPY
a/ An updated grid? yes please. The whole industry would like to see that happen. Particular attention is needed in the lower south island, and east coast of the north island.
b/ At present it is only Meridian that has that full flexibility of storage, with a small amount of flexibility available to Mercury. Contact has little flexibility in using Hawea for storage, and its Clutha stations are more run of river type stations.
c/ That is the way it works at present.
d/ That depends on the type of stations needed. Future intermittent generation does require storage, either battery or pumped storage hydro power.

[Beagle]

Not going to get into the whole technical side of things Snoopy...requires to much effort on my part and I will leave that to you and Jantar and anyone else interested, I simply can't be bothered. They have a road map to achieve EBITDA of $400m - $430m by FY21 as detailed in their presentation and the current yield is 7.1% gross on just a 78% payout of free cash flow and forecast of ~ $360m EBITA. There is clearly substantial headroom with that modest FCF payout ratio and EBITDA is forecast to increase ~ 10%-20% over the next two years. Those numbers are good enough for me to say in this extremely low interest rate environment its a good hold. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GNE/332460/297344.pdf

[Snoopy]

I can't decide whether management are being incredibly clever in expanding their generation capacity this way, or incredibly naive. It seems an almost master stroke to palm all the capital cost of development of Waverley to someone else, while maintaining the benefit of having the total output of that power station set aside for the exclusive use of Genesis Energy. Yet I feel this project is very unlikely to be a 'free lunch' for Genesis. There must be a hook in this deal that allows the party that will build and own the Waverley Windmill Power Station -'Tilt'- to take the construction risk. It is hard to believe the Genesis Board would be so naïve that they cannot see the counterparty risk. Anyone care to speculate as to what that counterparty risk might be?


Here is what the counterparty 'Tilt' says about building windfarms in their FY2018 Annual Report:

---------

Flexible strategy on offtake

Wind and solar farms sell electricity into markets where there is inherent price uncertainty over the life of the asset. This price uncertainty can be swapped to offtake buyers via a long term fixed price power purchase agreement (PPA) but the appetite of buyers for PPAs in terms of pricing and term varies with market conditions and with the influence of emissions and renewable energy policy evolution.

Our strategy is to take a portfolio approach that allows some flexibility in the timing of PPA contracting as well as some merchant and medium term power sales contracts. This strategy is evident with the Salt Creek Wind Farm where PPA off-take arrangements were implemented after the investment decision for this smaller scale development. This flexibility allows us to choose the best outcome for each project and removes one area of constraint in getting a project to investment decision

--------------

The Tararua Tilt Windfarm assets are 100% contracted until the end of their asset life, and I think the Genesis consented Waverley is likely to fit into that business model.

Under Note 6, plant and equipment are forecast to have a depreciation rate of 5 to 33%. If Wind Turbines are the most long lived of property plant and equipment, full depreciation equates to 20 years from when each particular turbine is commissioned.

Under note 4 the accumulated depreciation for the year at Tilt was $78.635m. Under Note 6 Generation production costs were $20.088m If this is spread between Australia and New Zealand in proportion to book asset value in each country, then the proportion of depreciation relating to NZ operations was:

$219.740m / ($944.103m + $219.740m) = 0.19, or 19%.

So annual depreciation of the NZ Wind farm operations are likely to be:

0.19 x ($78.635m + $20.088m) = $18.8m

This relates to 196MW of Tararua Wind Farm Generation in New Zealand. Waverley wind generation is forecast at 130MW. So annual depreciation and operational running costs for the new wind farm could be around:

$18.8m x (130MW/196MW) = $12.5m

This a base cost and includes turbine running expenses that weirdly seem to be contacted out to the turbine supplier Veritas. But it doesn't include any profit margin Tilt will have to cover off to make the business case stack up.

I am guessing that Tilt will need to charge Genesis somewhere around $25m per year to make this deal stack up. That will be a big hole in Genesis's so called 'free cashflow' going forwards, before any borrowing costs incurred by Tilt. Those will also have top be passed on by Tilt to Genesis as well. Yet whatever the total, it will all be tax deductible for Genesis Energy. At least that is how I expect the deal to be spun - let's see!

SNOOPY

[stealthmaster]

undervalued compared to other gentailers? has not increased as much as other gentailers

[bull....]

undervalued compared to other gentailers? has not increased as much as other gentailers

definately under performing last mth 1.3% up compared to mel and cen up like 6%. i think some fund is capping the price from rising at the moment so once they have finished selling should play catchup. it has the highest div yield by far now of the gentailers

[bull....]

MCY went over $4 yesterday , it was only mcy and gne which were not performing , yesterday mcy joined cen and mel in new all time highs so only leaves gne lagging the others and not having reached new all time highs. As was saying a fund has either been accumulating a big position ( they do this by suppressing the price why they accumulate) or a fund has been selling.

mthly performance

mel 7%
mcy 4.5%
cen 4.3%
tpw 2.45%
vct 2%
gne 1.3%

div yield

mel 3%
mcy 3.78%
gne 5.43%

[RTM]

MCY went over $4 yesterday , it was only mcy and gne which were not performing , yesterday mcy joined cen and mel in new all time highs so only leaves gne lagging the others and not having reached new all time highs. As was saying a fund has either been accumulating a big position ( they do this by suppressing the price why they accumulate) or a fund has been selling.

mthly performance

mel 7%
mcy 4.5%
cen 4.3%
tpw 2.45%
vct 2%
gne 1.3%

div yield

mel 3%
mcy 3.78%
gne 5.43%

I saw something on yields the other day. They payout ration for Genesis was 202% for FY 19 and 159% for FY20.
So maybe the 5.43 is not sustainable long term.

[bull....]

I saw something on yields the other day. They payout ration for Genesis was 202% for FY 19 and 159% for FY20.
So maybe the 5.43 is not sustainable long term.

cash flow is how power companies measure div payout ratio. genesis is between 70 -80 % of free cash flow. i have debated with snoopy over div sustainability both with differing views , only time will tell who is right.
although i would say any power company that invest in a major new power station may affect there divs. but they are investing for the future cash flow which would mean higher divs in the future again

[Snoopy]

although i would say any power company that invest in a major new power station may affect there divs. but they are investing for the future cash flow which would mean higher divs in the future again


Yes except that Genesis have outsourced their next consented windfarm at Waverly to Tilt. Genesis have agreed to buy all the power from the new windfarm but they won't own it. They will be renters. And that will reduce cashflow for Genesis, so lower dividends going forwards are to be expected.

I haven't even mentioned a relatively weak petrol price of late. The current years production is all hedged, but what will happen with the new hedging contract for next year? Yet more reduced cashflow going forwards?

SNOOPY

[bull....]

Yes except that Genesis have outsourced their next consented windfarm at Waverly to Tilt. Genesis have agreed to buy all the power from the new windfarm but they won't own it. They will be renters. And that will reduce cashflow for Genesis, so lower dividends going forwards are to be expected.

I haven't even mentioned a relatively weak petrol price of late. The current years production is all hedged, but what will happen with the new hedging contract for next year? Yet more reduced cashflow going forwards?

SNOOPY

depends. will genesis be paying for power from waverley but then selling it for more to customers? this would mean no capital outlay and better cash flows.
also lower oil price does not necessary mean lower cashflow as you can pump more to acheive the same result.

[stealthmaster]

definately under performing last mth 1.3% up compared to mel and cen up like 6%. i think some fund is capping the price from rising at the moment so once they have finished selling should play catchup. it has the highest div yield by far now of the gentailers

looks like catchup has started? up to 3.170

[Snoopy]

depends. will genesis be paying for power from Waverley but then selling it for more to customers? this would mean no capital outlay and better cash flows.


There has to be something in it for Tilt to have done the deal. Tilt could have bought the development rights from Genesis and gone it alone. Under that scenario The 'Waverley Windfarm' would have fed into the energy wholesale market. But no, Tilt have instead elected to sell all of their output to Genesis, I am guessing at a fixed price that will cover the development and running costs of the project. It could even be a take or pay deal which might prove expensive if the wind doesn't blow.



also lower oil price does not necessary mean lower cashflow as you can pump more to acheive the same result.


The Kupe field is in decline and I think they are pumping out as much oil as they can already. The NZOG plan in the day certainly showed declining production each year into the future.

SNOOPY

[bull....]

There has to be something in it for Tilt to have done the deal.


SNOOPY

must have been something in it for genesis too ... surely?

[bull....]

The Kupe field is in decline and I think they are pumping out as much oil as they can already. The NZOG plan in the day certainly showed declining production each year into the future.

SNOOPY

The venture is considering installing onshore compression, which Adelaide-based Beach describes as a “low-risk, high-value” project to extend Kupe’s production plateau and field life.

http://www.scoop.co.nz/stories/BU1810/S00256/beach-says-kupe-may-not-need-further-drilling.htm

[Snoopy]

Snoopy wrote "There has to be something in it for Tilt to have done the deal."

must have been something in it for genesis too ... surely?


The 'thing in it' for Genesis is not having to come up with a whole lot of new capital to build a new wind farm (rather obviously)! The downside for Genesis that as wholesale power prices rise in the future, then the increase in capital value of the Waverley Wind Farm will strengthen the balance sheet of the Waverley windfarm owner Tilt, not Genesis. That adds to the short medium and long term downside for Genesis of paying more for the energy generated from Waverley in perpetuity.

SNOOPY

[bull....]

The 'thing in it' for Genesis is not having to come up with a whole lot of new capital to build a new wind farm (rather obviously)! The downside for Genesis that as wholesale power prices rise in the future, then the increase in capital value of the Waverley Wind Farm will strengthen the balance sheet of the Waverley windfarm owner Tilt, not Genesis. That adds to the short medium and long term downside for Genesis of paying more for the energy generated from Waverley in perpetuity.

SNOOPY

the contract is a fixed price for 10yrs and the last 10yrs of the 20yr contract allow for updates to what gne pay. so within the first 10yrs as i alluded to allows for gne to on sell the generation at higher prices for better cash flows.

as for the balance sheet hopefully they will develop castle hill them selves , thats why they did this arrangement.

[bull....]

undervalued compared to other gentailers? has not increased as much as other gentailers

playing catch up slowly still lagging the others though

last mth

mcy 6%
mel 4.17%
cen 5.8%
gne 3.83%

as of yest

obviously these stocks are of great interest to overseas investors at the moment there yields are very high compared to negative yields else where. why im expecting gne to out perform the others in time due to its higher yield still available.

[bull....]

really under performing the other gentailers this mth

mcy 12%
mel 8.5%
cen 4.45%
gen 2.86%

[bull....]

might be finally moving , really lagging the likes of mcy up prob 14% now this mth alone. makes the laggard look value like i guess for a catchup

[bull....]

might be finally moving , really lagging the likes of mcy up prob 14% now this mth alone. makes the laggard look value like i guess for a catchup

is it playing catchup? yield still over 5% isnt it

[bull....]

“It will pave the way for technologies such as price-responsive demand systems, battery storage and electric vehicles.”The authority says the change should also help the transition to a low-emissions economy by improving system flexibility to handle more variable types of supply, such as wind and solar.

http://www.sharechat.co.nz/article/059c865e/real-time-pricing-to-mark-biggest-electricity-market-change-since-birth-in-1996.html

[SilverBack]

Fundamentals have to mean something still. Morning Star gives a 2019 PE of 50 compared to CEN at 30.7. An attractive yield is one thing but I cannot see growth that justifies this PE. Even MEL is on 41.6 and MCY at 36.3.

[bull....]

Fundamentals have to mean something still. Morning Star gives a 2019 PE of 50 compared to CEN at 30.7. An attractive yield is one thing but I cannot see growth that justifies this PE. Even MEL is on 41.6 and MCY at 36.3.

if interest rates move lower and stay low for lets use 10yrs as a guess what is more important div yield from reliable div payers eg gentailers or pe? thats why all gentailers have high pe income is more important. bye the way gne pe should fall again after next results


should put in there all stocks like gentailers etc ( bond proxies) will re rate down one day when interest rates start to move back up. but when is the million dollar question dont see it on my horizon


returns for the mth

mcy 20%
mel 12%
gne 11%
cen 9%

clearly investors want income over pe

[SilverBack]

if interest rates move lower and stay low for lets use 10yrs as a guess what is more important div yield from reliable div payers eg gentailers or pe? thats why all gentailers have high pe income is more important. bye the way gne pe should fall again after next results


should put in there all stocks like gentailers etc ( bond proxies) will re rate down one day when interest rates start to move back up. but when is the million dollar question dont see it on my horizon


returns for the mth

mcy 20%
mel 12%
gne 11%
cen 9%

clearly investors want income over pe

The quoted PEs were already estimates and not based on historical. Historical PE for GNE is over 84.

[horus1]

That means that it will be 84 years before the earnings recoverthe price . I always worked in the most being about 30 and the average being about 12-14.
These and all like them are way overpriced. I have a lot in the market and are not buying .

[bull....]

That means that it will be 84 years before the earnings recoverthe price . I always worked in the most being about 30 and the average being about 12-14.
These and all like them are way overpriced. I have a lot in the market and are not buying .

never mind overseas people appreciate anyone who sells and are happy to buy up reliable dividends from our gentailers pe is irrelevant when you cant get income anywhere

[SilverBack]

Yes and those overseas people are quick to sell and let the price slump when they face a scare in their home country. Much more than year's dividend can be lost that way.

[bull....]

Yes and those overseas people are quick to sell and let the price slump when they face a scare in their home country. Much more than year's dividend can be lost that way.

if overseas people are investing in gentailers for income they are more likely to bail when interest rates go up dont you think?

[SilverBack]

if overseas people are investing in gentailers for income they are more likely to bail when interest rates go up dont you think?

You are thinking rationally and there are times when markets are not rational. I have often observed US investors in particular selling overseas shares for no other reason than that they want to bring money back to the US which they see as a safer haven. Don't forget that what to us is significant, to those institutions is a peanut diversification.

[bull....]

You are thinking rationally and there are times when markets are not rational. I have often observed US investors in particular selling overseas shares for no other reason than that they want to bring money back to the US which they see as a safer haven. Don't forget that what to us is significant, to those institutions is a peanut diversification.

I hate to say it but maybe this time is different? look how many scares there have been over the yrs esp end of last yr when markets were tanking but the gentailers barely blinked. With the US just about to start another easing cycle im thinking people wont be so easy to scare out of there income streams cause at the end of the day where else you goona go for income. it wont be the bank like the old days?

[bull....]

What 0% interest rates mean for the ASXin todays fool

Those rubbing their hands in glee at the thought of the official cash rate falling to 1% tomorrow will soon have sore hands. It turns out the Reserve Bank of Australia (RBA) could be cutting interest rates deeper and longer than what most are expecting

https://www.fool.com.au/2019/07/01/are-you-ready-for-0-interest-rates/

[bull....]

genesis energy doing roadshow in UK

https://www.nzx.com/announcements/336976

HIGHLIGHTS

Our investment proposition is a strong yield underpinned by growth
Pay-out ratio as a percentage of free cash flow2was 78% for HY19.
Consistent earnings growth enables a stable growing dividend

[bull....]

most of them doing a consolidation at the highs at the moment, usually when consolidating at highs implies a move still higher when finished but verification needed by the group to confirm. anyway gentailers on fire. Dow utilities at record highs , interest rates cuts coming get your income why you can i reckon.

[bull....]

similar update to MCY about lower inflows into catchment , guess these are probably temporary issues for both companies. good churns down and lpg seems to be going well. most of all no downgrade so must be tracking to there forecast result. once the inflows return to normal both mcy and gne should have a bounce in earnings i reckon

https://www.nzx.com/announcements/338083

[bull....]

Westpac says OCR could fall below 1 per cent this year, as export prices slide
A slowing labour market and falling export prices have prompted Westpac to warn the official cash rate (OCR) could be slashed to below 1 per cent this year

https://www.stuff.co.nz/business/114492645/westpac-says-ocr-could-fall-below-1-per-cent-this-year-as-export-prices-slide

WOW downgrading there forecasts again already. Makes the gentailers look very attractive for the immediate future

[bull....]

some info on genesis

Although it had "no immediate plans" to begin construction of the Castle Hill wind farm, which first received consent in 2012, that provided an opportunity for large-scale wind capacity to be added, he said.
"The technology onsite would need to be designed and the existing consents varied to take advantage of improvements in wind generation in the past five years."

https://www.stuff.co.nz/business/114579733/government-model-points-to-1000-more-wind-turbines-by-2050


I see the markets are pricing in a rate cut by RBNZ for August , probably need it pretty soon economic data probably slowing down rapidly now

[winner69]

Full year result pretty good

The bit - A strong retail performance with value defended in the wholesale market might be an invitation for Jacinda to get involved .....reads like they are keeping on fleecing consumers and making excessive profits.

But shareholders should be happy

[percy]

Full year result pretty good

The bit - A strong retail performance with value defended in the wholesale market might be an invitation for Jacinda to get involved .....reads like they are keeping on fleecing consumers and making excessive profits.

But shareholders should be happy

Jacinda as the largest shareholder should be happiness filled.
Well as one of the smallest shareholders I am.

[bull....]

pretty solid performance and next yrs guidance looks good for an uplift ( didnt mcy have a lower forecast for next yr). See there joining the ride sharing sector think tra joined it to recently so we got to big players joining the space although i would say genesis is probably in a better position than tra financially wise to support growth in these businesses.

[Beagle]

Yes a good solid result and strong outlook for FY20.
Gross yield accounting for 80% imputation =6.54%
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GNE/339885/306381.pdf

http://www.sharechat.co.nz/article/c3a0ca7e/genesis-underlying-profit-up-16-on-improved-retail-earnings.html?utm_medium=email&utm_campaign=Genesis%20underlying%20profit%20up%20 16%20on%20improved%20retail%20earnings&utm_content=Genesis%20underlying%20profit%20up%201 6%20on%20improved%20retail%20earnings+CID_509e98ef c4df1d0fdb132c44d41bcf1a&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlec3a0ca7egenesi s-underlying-profit-up-16-on-improved-retail-earningshtml

[bull....]

As part of that deal, Genesis acquired another 10 petajoules of Kupe gas over five years. Chief financial officer Chris Jewell said it is paying “well-below” current gas prices for the supply and less than existing base-load contract prices

http://www.scoop.co.nz/stories/BU1908/S00820/genesis-sees-another-year-of-volatile-gas-supply.htm

[bull....]

the real laggard of the gentailer rally lately , wonder if its going to play catchup?

the spread that historically existed between gne and the others is at a historic high.

[macduffy]

the real laggard of the gentailer rally lately , wonder if its going to play catchup?

the spread that historically existed between gne and the others is at a historic high.

Has the market been seduced by the "green claims" of the others while GNE provides the backstop via its nasty gas/coal burning Huntly station?

[bull....]

Has the market been seduced by the "green claims" of the others while GNE provides the backstop via its nasty gas/coal burning Huntly station?

funny thing is if castle hill which gne own is developed it will be the biggest wind farm in nz and one of the bigger power sites supplying green power to nz , so maybe in context of your thoughts maybe people dont realise this.

est cost to build 1.6 billion , with int rates falling all the time they may soon have the banks paying them too build it lol

[bull....]

genesis turn to play catch up lagging 8% on the others for the rally? with a better yield

oh i forgot to mention 3.50 - 3.55 was big resistance so if we hold above should rally hard ... cross fingers

[bull....]

historical spread has been between gne and mcy/mel around $1 - 1.30 so im guessing gne needs to be around $4 - 4.2 to keep the spread similar. opportunity?

[Snoopy]

historical spread has been between gne and mcy/mel around $1 - 1.30 so im guessing gne needs to be around $4 - 4.2 to keep the spread similar. opportunity?


Oil price has fallen from somewhere north of $US80/barrel to $US58/barrel over the last twelve months. Not quite as bad a fall in NZD terms, but the fall is still substantial. Not a good outlook for the next round of Genesis oil production hedging?

SNOOPY

[bull....]

Oil price has fallen from somewhere north of $US80/barrel to $US58/barrel over the last twelve months. Not quite as bad a fall in NZD terms, but the fall is still substantial. Not a good outlook for the next round of Genesis oil production hedging?

SNOOPY

depends on the time frame of the derivative . doesnt it? oil revenue is such a small % of total revenue and even there sensitivity analysis suggests a move of +10%/- 10% is hardly material in the price of oil.

They have even said in there outlook for 2020 that kupe production will be less next yr and wont ramp up again until mid 2021 when the inlet compression project is finished and yet they still had a small uplift in guidance for 2020. so I think reduced kupe production and profit impact has been well telegraphed for next year.

I see tlt has updated on the waverly project going ahead based on there numbers to build the 133mw wind farm suggests the castle hill wind project could be built for around 1.6 billion at borrowing costs less than 3% possible. think if the demand is there.

[Beagle]

historical spread has been between gne and mcy/mel around $1 - 1.30 so im guessing gne needs to be around $4 - 4.2 to keep the spread similar. opportunity?

Probably is. GNE definitely lagged the others in recent times.

[bull....]

Probably is. GNE definitely lagged the others in recent times.

looks like the mel,mcy,cen are falling more now to close the spread

[sb9]

looks like the mel,mcy,cen are falling more now to close the spread

Think market in pause mode until RBNZ decision which is last week of this month.

[Beagle]

looks like the mel,mcy,cen are falling more now to close the spread

All a good hold in this environment of the lowest interest rates in 100 years...just blowing off a little bit of steam at present.

[Beagle]

Quick back of the envelope calculation at $3.15 shows 7% Gross yield.

[Grimy]

DRP strike price announced - $3.26 . Closing price today $3.06. Doesn't always work in the holders favour.

[Sideshow Bob]

Letter in the mail yesterday announcing our bottled gas was going up in price - around 7%.

They blamed imported gas, not mentioning Kupe. There was a subtle dig about reducing NZ production/supplies, without mentioning govt policies.

[MauroNZ]

It seems not very encouraging, any thoughts?

* EBITDAF $167 million, down $30 million on HY19 of $197.5 million
* Net Profit $9 million, down $40 million on HY19 of $49 million
* Underlying Earnings $16 million, down $26 million on HY19 of $42 million
* Earnings Per Share 0.90 cents, down 4.01 cps from 4.91 cps
* Underlying Earnings Per Share 1.53 cents, down 2.61 cps from 4.14 cps
* Final Dividend Per Share 8.525 cents, up 0.9% from HY19 of 8.45 cents
* Free Cash Flow $94 million, down 17% on HY19 of $113 million

[bull....]

It seems not very encouraging, any thoughts?

* EBITDAF $167 million, down $30 million on HY19 of $197.5 million
* Net Profit $9 million, down $40 million on HY19 of $49 million
* Underlying Earnings $16 million, down $26 million on HY19 of $42 million
* Earnings Per Share 0.90 cents, down 4.01 cps from 4.91 cps
* Underlying Earnings Per Share 1.53 cents, down 2.61 cps from 4.14 cps
* Final Dividend Per Share 8.525 cents, up 0.9% from HY19 of 8.45 cents
* Free Cash Flow $94 million, down 17% on HY19 of $113 million

it was fine , most gentailers lost money due to hydro levels etc in the last year. they have only lowered guidance by 10m for 2020 yr and raised div so nothing to worry about. enjoy the divs

[trader_jackson]

it was fine , most gentailers lost money due to hydro levels etc in the last year. they have only lowered guidance by 10m for 2020 yr and raised div so nothing to worry about. enjoy the divs

Yup, enjoy the dividends, because it doesn't look like they will be going up much from now on...

I'm trying to figure out how this is worth $3.3b... before it was all due to the FCF, now even this is showing signs of flattening off so not sure how they will keep increasing dividends (ideally, above the rate of inflation)

[bull....]

Yup, enjoy the dividends, because it doesn't look like they will be going up much from now on...

I'm trying to figure out how this is worth $3.3b... before it was all due to the FCF, now even this is showing signs of flattening off so not sure how they will keep increasing dividends (ideally, above the rate of inflation)

dont think your find any of the gentailers increasing divs by much going forward.

[King1212]

Best yield stock at the current market ... reliable n not exposed to coronavirus impact...

[Davexl]

Best yield stock at the current market ... reliable n not exposed to coronavirus impact...

Fully agree with that observation, one of the very few shares I have left alone - with the rest in cash.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GNE/348738/317140.pdf

Not a great result it has to be said and the record (driest ever since records began), conditions continue in the upper north island.
Rio Tinto not done with their smelter review either.
On the other hand on the look through to more normal conditions nothing wrong with a 6.9% gross yield for a pretty safe utility. Disc: Very small holding.

[macduffy]

The market's certainly not fazed by the result. SP up 4.5c today, going against the trend of other gentailers.

[iceman]

Maybe the market liked their announcement that they are in advanced discussions to build a huge 300 megawatt solar farm in northern Waikato ! https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12310700

[King1212]

Maybe the market liked their announcement that they are in advanced discussions to build a huge 300 megawatt solar farm in northern Waikato ! https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12310700


That is a great investment! Hopefully next Monday will see people coming to power companies n property stocks as corona virus fear arise again

[Beagle]

The market's certainly not fazed by the result. SP up 4.5c today, going against the trend of other gentailers.

Outlook for the full year was sound, (but note the caveat about normal hydrology).

[Davexl]

Outlook for the full year was sound, (but note the caveat about normal hydrology).

One of the key aspects i like about Genesis, is their ability to generate base-load power from gas or coal when hydrology is poor, or wind and sun hours low.
And they are already about to implement their first big windfarm, Waipipi, plus a second one on the way. (Hedging the carbon cost).
We will need guaranteed base-load power generation for decades until grid scale batteries are more widely available and better grid stability controls are in place.
eg what AGL are doing now in Aust https://www.smh.com.au/business/companies/game-changer-agl-s-big-battery-deal-set-to-help-rise-of-renewables-20200129-p53vs7.html

[King1212]

Yup, enjoy the dividends, because it doesn't look like they will be going up much from now on...

I'm trying to figure out how this is worth $3.3b... before it was all due to the FCF, now even this is showing signs of flattening off so not sure how they will keep increasing dividends (ideally, above the rate of inflation)

Electricity is always going to be expensive nowadays. U see most of us will struggle without power. Whether recession or not or virus epidemic.... people still need power. Not to mention the dependant of electricity with our normal living activities....

So power bill will still need to be paid....

[value_investor]

Electricity is always going to be expensive nowadays. U see most of us will struggle without power. Whether recession or not or virus epidemic.... people still need power. Not to mention the dependant of electricity with our normal living activities....

So power bill will still need to be paid....

A good defensive stock to have for sure for a all weather portfolio. Although, I don't see how it will return any meaningful compound growth at the current valuation. I'm surprised this went up after a poor result, not sure how a stock maintains a price after seeing its FCF go down 17%, but the market is a kettle on the boil right now..

[King1212]

Happy with the yield..compare with the banks and other stocks which exposed to china slow down due to epidemic.

Reliable dividend stocks....with the current byield..only unlisted property stock which return more than 6%

[turnip]

Will Genesis own the proposed 300MW Waikato solar farm, or will it be like the Waipipi jwind farm where another company (Tilt Renewables in that case) owns it and Genesis buys the output? It doesn't seem to be clear in the announcement.

[King1212]

I think ....100% owned by Genesis. Happy to be corrected if I am wrong...as the announcement did not say any other parties...
That why the market likes it

[turnip]

Going by the cost of Tilt Renewables' solar farm projects in Australia, a 300MW solar farm would cost something like $600 million. Would Genesis need to raise more capital to fund that?