GNE - Genesis Energy

[percy]

I think few if any of those are producing or any where near it. you missed ORE which is now producing ; a lowest cost /highest quality producer at that with Toyota as an off take partner financier etc.

Yes I forgot to mention ORE.Their chart showed that they may be reserving their down trend,and they could be a the start of a new uptrend.
But still the whole lithium sector does not yet have "the smell of money" about it,according to the charts.
This surprises me..

[Beagle]

Perhaps the days of Lithium batteries are numbered...
http://www.euronews.com/2015/04/09/n...ay-developers/

There's a whole lot of new battery research going on as I am sure you know mate and its inevitable that in the very long run we'll see widespread adoption of solar powered homes and the widespread adoption of electric cars which according to Meridian Energy report will basically balance each other out. While these new technologies are exciting, I think any meaningful impact on GNE, one way or the other if there is one is at least a decade away.

Far more material IMHO for GNE in the same timeframe is any possible review of the Kupe reserves.

[Joshuatree]

Yes I forgot to mention ORE.Their chart showed that they may be reserving their down trend,and they could be a the start of a new uptrend.
But still the whole lithium sector does not yet have "the smell of money" about it,according to the charts.
This surprises me..

Try finding Lithium Producers and Pricing other than want to be explorers.Only one major producer in Aus and its privately owned;Talison lithium. Charts can be so limiting but the upward diagonal curve on Lithium usage and the recent prices of $US6500 a tonne and companies like Tesla bode well for brine produces in the $2000 range e.g. ORE.
I agree Roger. And so many of these new discoveries/tech disappear without trace.Electric momentum is here as will be driverless cars.

[Snoopy]

I also have a long term view on investments and like to buy companies I will be happy with in 10 years time i.e. when the Kupe gas runs out and E3P reaches its half life of 15 years and has to find some more gas. I understand that GNE is locked into take or pay contracts until 2020, so is running E3P at a loss until then.

Not so sure that is an accurate assessment of Huntly's Unit 5 (formerly E3P). Being locked into a take or pay contract from a gas field is quite normal. A gas field needs certainty of cashflow to be able to be developed. Kupe is forecast to run out in 2017, some twelve years away. As we know from Maui, which in theory ran out years ago, field life can be extended. So it is far from clear if Unit 5 will be uneconomic even in 2027.

Further, in the shorter term there has been a significant sale of gas by Genesis to Contact Eneegy. On 24th June 2014 the board approved the sale of 27PJ of gas between 2015 and 2020.. That is an average of 5.4PJ per year. I think that largely takes care of the 'oversupply' situation that might force Genesis to run Unit 5 at a loss.

The Tekapo canal was a bit of a dog, MEL handed it over just as $160m of work needed to be done and GNE has paid for this. Maybe more work will be needed in the long term future.

There are no more major capital works planned for Tekapo A and B.

It's been a while since I looked at the balance sheet but basically the good hydro assets are covered by liabilities and what you are buying are some aging thermal stations, a gas field that is running out and the largest retail customer base - in a market that is proving competitive.

I take your point on the gas field running out (all gas fields have an economic life after all) and the competitiveness of the NZ electricity market.

However, 'the aging thermal stations' Units 1 to 4 and Unit 6, were fully written off in FY2009. So actually shareholders buying in today aren't buying those. Nevertheless, in a peculiar quirk of accounting, these stations are now deemed to have 'negative economic value'. So I guess you are buying into the projected losses of these nil value assets. By FY2011 this negative economic value was -$71.9m.

Now if we go forward to FY2012, a $394.2m increase in other assets (hydro) was offset by a $96.8m decrease in thermal plant. By a process of elimination, I am guessing that $96.8m relates to Unit 5. I am not sure how much value relating to Unit 5 stays on the books at Genesis. But I don't think investors today are overpaying for those thermal assets.

SNOOPY

[bull....]

seems to be holding up today compared to all the other gentailers, must be due to the story in nbr

[PSE]

Not so sure that is an accurate assessment of Huntly's Unit 5 (formerly E3P). Being locked into a take or pay contract from a gas field is quite normal. A gas field needs certainty of cashflow to be able to be developed. Kupe is forecast to run out in 2017, some twelve years away. As we know from Maui, which in theory ran out years ago, field life can be extended. So it is far from clear if Unit 5 will be uneconomic even in 2027.

Further, in the shorter term there has been a significant sale of gas by Genesis to Contact Eneegy. On 24th June 2014 the board approved the sale of 27PJ of gas between 2015 and 2020.. That is an average of 5.4PJ per year. I think that largely takes care of the 'oversupply' situation that might force Genesis to run Unit 5 at a loss.



There are no more major capital works planned for Tekapo A and B.



I take your point on the gas field running out (all gas fields have an economic life after all) and the competitiveness of the NZ electricity market.

However, 'the aging thermal stations' Units 1 to 4 and Unit 6, were fully written off in FY2009. So actually shareholders buying in today aren't buying those. Nevertheless, in a peculiar quirk of accounting, these stations are now deemed to have 'negative economic value'. So I guess you are buying into the projected losses of these nil value assets. By FY2011 this negative economic value was -$71.9m.

Now if we go forward to FY2012, a $394.2m increase in other assets (hydro) was offset by a $96.8m decrease in thermal plant. By a process of elimination, I am guessing that $96.8m relates to Unit 5. I am not sure how much value relating to Unit 5 stays on the books at Genesis. But I don't think investors today are overpaying for those thermal assets.

SNOOPY

Take or pay gives certainty to the producer but does mean the Huntly CCGT runs at a loss as the gas has 0 value I was aware of the sale to CEN who now have more flexible gas but it isn't much in terms of overall production. If I recall there is 1.8b of shareholders equity, something like 300m of Kupe assets but I can't tell how much they value the thermal stations???
The 1.8b is in hard assets no doubt a DCF value underpins it.
I admit I overstate the case but the point remains that renewable assets are longer life than thermal and better things to own. I will be interested in GNE when it is back to $1.5 per share, probably will not happen though.
It can pay a big dividend by being a wasting asset and I really don't like the idea. The sharemarket is placing a premium on MEL and other renewables, the whole sector is overvalued from my perspective of having a margin of safety by buying cheap.
Incidentally I understand the world has Enron to thank for take or pay, a thermal station needs it to get certainty of supply but better to have flexible gas as CEN or better still to own a hydro or wind turbine that doesn't use gas at all.

[PSE]

CEN, MRP and GEN have done the right thing with taking thermal plant out and I think this will be enough to correct the oversupply.
CCGTs have high maintenance costs and high operating costs, the reserve capacity that they provide to the market is not rewarded.
With them you are dammed if you do and dammed if you don't really.

[Beagle]

The market is being driven by yield and little else IMHO. In post #1371 I suggested if they can maintain 16 cps in dividends then taking into account medium term available imputation credits I put forward the theory that GEN may be worth $1.90 such that investors would get a 10% gross divvy yield and at that time my price was well below the market and I suggest few people thought it would get down to around $1.90.

Now it is close I have been spending time considering if 16 cps dividends are sustainable in the medium term. I think not, unless there is a return to circa $100 barrel oil so my current theory is we'll see the $1.80 SP baseline (established shortly after IPO listing), tested in due course. I don't see any reason in the current weak market to move quickly to re-establish a meaningful position as all the risk and momentum appears to be to the downside.

I'd be very surprised if it got down to $1.50 but that said when there's momentum and probably analyst downgrades to come the SP often undershoots on the downside.

There will be a few buyers ahead of you in the queue

[PSE]

There are no more major capital works planned for Tekapo A and B.
SNOOPY

My point is that the canal was recently fixed and they put some fancy liner in there, the answer will not be found in a financial report but it has always leaked like a siv so there may be unplanned expensive remediation at some point in future.

Further, in the shorter term there has been a significant sale of gas by Genesis to Contact Eneegy. On 24th June 2014 the board approved the sale of 27PJ of gas between 2015 and 2020.. That is an average of 5.4PJ per year. I think that largely takes care of the 'oversupply' situation that might force Genesis to run Unit 5 at a loss.
SNOOPY

If you look at how much gas a CCGT uses running all the time you will see this is a drop in the bucket.

Not so sure that is an accurate assessment of Huntly's Unit 5 (formerly E3P). Being locked into a take or pay contract from a gas field is quite normal. A gas field needs certainty of cashflow to be able to be developed. Kupe is forecast to run out in 2017, some twelve years away. As we know from Maui, which in theory ran out years ago, field life can be extended. So it is far from clear if Unit 5 will be uneconomic even in 2027.
.......

However, 'the aging thermal stations' Units 1 to 4 and Unit 6, were fully written off in FY2009.
SNOOPY

My point is that in 2027 the aging CCGT unit 5 will reach its half life and need expensive maintenance upgrades, probably it only has 40 years of life if well looked after. It will have to negotiate for gas and may have to sign another ugly take or pay to give the developer certainty. After all the years of maintenance when Huntly reaches end of life from extreme age Manapouri will be coming on to it's first century of 70% capacity factor and just hitting it's power band - still costing $10/MWh vs $70/MWh to run.

Maybe it will get to my price if the market overshoots on the downside, as you say Roger. If not no big loss.

[Jantar]

...... That is an average of 5.4PJ per year. I think that largely takes care of the 'oversupply' situation that might force Genesis to run Unit 5 at a loss......

.....
If you look at how much gas a CCGT uses running all the time you will see this is a drop in the bucket.......

Its around 3 - 4 months suply for something like E3P, Otahuhu or Stratford CCGTs.