GNE - Genesis Energy

[Snoopy]

They can sell Kupe

Yes they could. It wouldn't make much sense to own it if Huntly shuts down. But who would they sell it to and for how much? Remember when NZOG sold their stake in Kupe to Genesis, then promptly bought back a stake in Kupe from the former Japanese partner at a lower price? Do you think NZOG might buy back the Kupe stake they sold to Genesis at a higher or lower price than they sold it in the first place?

and raise more debt very cheaply with a new bond issue.

Yes they could do that too. A bond issue is what Contact Energy mooted when flying a kite on the development of Tauhara. Instead Contact went for a $400m cash issue and more borrowing.

SNOOPY

[Beagle]

I know you think Huntly is worthless but I don't see it that way. I think it will be a key part of baseload generation for many years and a key component of backup generation for many years after that. No point speculating on who any buyer might be for Kupe or whether they will or won't sell it. To be frank I would prefer they keep Kupe as I think it will be an extremely valuable asset for the next twenty years plus.

[arekaywhy]

... I think it will be a key part of baseload generation for many years and a key component of backup generation for many years after that...

Correct, as Texas is learning...the hard way

[GTM 3442]

Correct, as Texas is learning...the hard way

I thought that Texas was learning that Texas had learned nothing from the big freeze of 2011.

[Norwest]

Page 27 is really interesting. Mega new renewable energy projects "in the wind", pardon the pun. 6.5% gross yield + future growth gives just on 5% margin above 10 year Govt stock rate.
Looks like a sound hold to me.

Sorry Beagle, I disagree with your comment that it's interesting, it's totally disheartening.

Page 27 is just as bad as Page 22. They have a full page picture of a giant wind turbine in their "Strategic Outlook" that they don't even own. Will they even build and own any of these new assets?

If they are not going to be owning future strategic renewable assets, instead relying on their old polluting power assets they are going on a path to become the AGL of the NZX, turning the company into a glorified power retailer trying to arbitrage with PPA's and DSA's in an over competitive retail market where smaller more nimble players have the advantage over big companies and they are at the whim of wider market forces instead of controlling their own destiny.

[peat]

Genesis dude seems to think 'very high chance' of both Tiwai and Methanex continuing to operate beyond 2024 and 2029 respectively.

[Beagle]

I remain comfortable that GNE is going to be a very reliable high dividend payer well into the 2030's. Today's numbers were nothing short of stellar and well and truly speak for themselves !
My sense is the ESG pendulum has swung a very long way to the left and the true intrinsic value of good old fashioned energy assets is a lot higher than the trendy ESG crowd will ever acknowledge. Huntly has been keeping people like my Mum warm and toasty for many decades and will be providing very valuable and reliable generation for many, many years to come.

[Zaphod]

Sorry Beagle, I disagree with your comment that it's interesting, it's totally disheartening.

Page 27 is just as bad as Page 22. They have a full page picture of a giant wind turbine in their "Strategic Outlook" that they don't even own. Will they even build and own any of these new assets?

If they are not going to be owning future strategic renewable assets, instead relying on their old polluting power assets they are going on a path to become the AGL of the NZX, turning the company into a glorified power retailer trying to arbitrage with PPA's and DSA's in an over competitive retail market where smaller more nimble players have the advantage over big companies and they are at the whim of wider market forces instead of controlling their own destiny.

I'm waiting to see the government's stated position on the climate change report. Just what parts, in not all, do they intend to action? That will potentially have a large impact on some of the generators.

[Jerry]

Correct, as Texas is learning...the hard way

The problems Texas faced were because their base-load providers, gas and coal did not perform in cold conditions.
Gas does not flow at under 4 deg and frozen equipment prevented coal-fired stations delivering. Coal is baseload because it takes three days to fire up. It cannot be used as a quick supply in a cold snap; it is left on all the time. Their equipment was not winterised. Their problems were quickly politicised by Texas Governor. Link to a balanced assessment.

[Snoopy]

The problems Texas faced were because their base-load providers

Translating this to NZ North Island conditions. Current principal ( >~100MW) North Island 'baseload' generation is:

Contact Energy: Wairakei	145MW
Contact Energy: Te Mihi	166MW
Contact Energy: All Other Geothermal	141MW
Mercury Energy: Kawerau	100MW
Mercury Energy: Mokai	112MW
Mercury Energy: Nga Awa Purua	138MW
Total Baseload Geothermal Generation	802MW
Genesis Energy: Unit 5	403MW
Total Baseload Thermal Generation	403MW
Genesis Energy: Tongariro Hydro 'battery' (maximum power)	362MW
Genesis Energy: Waikarimoana Hydro 'battery' (maximum power)	138MW
Mercury Energy: Waikato Hydro 'battery' (maximum power)	1059MW
Trustpower: North Island Hydro 'battery' (maximum power)	298MW
Mercury Energy: Waikato Hydro 'battery' (typical power)	544MW
Genesis Energy: Tongriro Hydro 'battery' (typical power)	186MW
Genesis Energy: Waikarimoana Hydro 'battery' (typical power)	69MW
Trustpower: North Island Hydro 'battery' (typical power)	153MW
Total Typical Baseload Hydro Generation	952MW
HVDC Interisland Cable (maximum power)	840MW	(Corrected as per Jantar post 3001)

Not included in this table is Contact's new Tuahara 152MW geothermal station, set to be completed in 2023. I have also left out all wind generation because we cannot assume that will be available when it is needed. The effect of wind is to make that baseload hydro battery more reliable.

The four figures in bold can be thought of as the generation 'normally available'. Base generation in the North Island adds to

802MW + 403MW + 952MW = 2750MW.

Typical North Island summer peak baseload demand is around 3,000MW (reference https://www.transpower.co.nz/power-system-live-data).

When Tauhara (152MW) becomes operational, this should 'close the gap'. But it won't be enough on its own to make Genesis's 'Unit 5' redundant. Or will it? What the above table does not show is that the increasing wind generation will enable the hydro 'batteries' to become more useful.

By far the largest 'battery', Taupo goes through its storage capacity six times annually. This equates to an average of two month's supply being on hand. With more wind farms coming on line, the available storage capacity at Taupo of two months should remain available for longer. IOW less chance of being caught out with drought. The 'Waikato battery, fed by Taupo, has large reserves of generating capacity,

1059MW - 544MW = 515MW

With Tauhara on stream, only:

403MW - 152MW = 251MW of that total possible incremental generation is required. It looks to me as though Unit 5 would be no longer economic over the summer months. Over winter, 840MW of power from the South Island is still available to top up seasonal power demand in the north via the HVDC link. That can't be good news for Genesis Energy.

SNOOPY