GNE - Genesis Energy

[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.

[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

[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-...le-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-...le-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-...le-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-...energy-future/

[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