GNE - Genesis Energy

[bull....]

http://www.stuff.co.nz/business/mone...ers-free-power

[Beagle]

For a moment there I thought we'd finally be getting access to the Tesla cars...

[Joshuatree]

Free ones. Theres a feature on national radio soon/iminent on Tesla batteries and NZ houses

[tony64peter]

Free ones. Theres a feature on national radio soon/iminent on Tesla batteries and NZ houses

These batteries are no game changer. Just another storage option. 80% of NZ households can't afford a solar array, control and storage to go off grid or even grid tie without a subsidy. Those that can afford it are reluctant to invest because the pay back is so slow and when they have, a new battery is required. Until the power companies are forced down this road with grid tie systems, to supplement transmission, domestic solar is not going anywhere fast me thinks.

[Beagle]

These batteries are no game changer. Just another storage option. 80% of NZ households can't afford a solar array, control and storage to go off grid or even grid tie without a subsidy. Those that can afford it are reluctant to invest because the pay back is so slow and when they have, a new battery is required. Until the power companies are forced down this road with grid tie systems, to supplement transmission, domestic solar is not going anywhere fast me thinks.

90-95% can't afford one in my opinion and I see a lot about quite a range of different peoples finances, otherwise I agree with everything else you've said with the additional point that for people to believe the payback period actually is real they need to trust the manufacturers of the different expensive components that they're capable of being around for the long haul to cover the warranty. Those cheap Chinese made solar panels with a 25 year warranty...what exactly is that warranty worth, not much more than the paper its printed on ?

[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.

I would consider 40 years as the life of a gas turbine is acceptable. The Rankine Units are already 30. The problem with those is not that they are at the end of their mechanical life. The problem is that they are at the end of their technological life due to efficiency improvements of newer designs. By the time Unit 5 is 40, I would expect it to be similarly superseeded.

There isn't a real alternative to a take or pay contract to buy gas if you want your fuel supply field developed. Even if Genesis imported LPG from overseas there are still new wharf structures to pay for. The new wharf would be built on a take or pay basis too, otherwise it would not be built.

A hydro turbine would not be under the same thermal cycling stresses as the likes of Unit 5. So I would expect a turbine at Manapouri to last longer. Not sure why you bring this up as Manapouri is not for sale. It was the lack of sufficient hydro opportunities that caused the old Electricorp to develop Huntly in the first place.

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.

Pure speculation? Genesis were aware of the leaking problem and so commissioned a fix. Not too difficult a task for some of NZs civil engineering boffins surely?

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

According to Jantar's post 1440, the gas sold to Contact per year would run Unit 5 for 3 or 4 months. If he is right, given Unit 5 is the main baseload generation at Huntly, that sounds very significant.

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

I don't think anyone here is arguing that given plenty of fuel (water), hydro stations and companies that generate most of their electricity via renewables are better investments, all things being equal. But all things are not equal because Genesis has the better yield and is cheaper to buy. But is it cheap enough relative to the disadvantages of the business model? At some point it will be. The only question is, what is that price? I would argue it was worth snapping up at the IPO price. But how much more I am prepared to pay than that, well, my steam abacus is still chuffing through that calculation. As a value investor PSE, I would have thought GNE is right up your alley!

SNOOPY

[Rep]

These batteries are no game changer. Just another storage option. 80% of NZ households can't afford a solar array, control and storage to go off grid or even grid tie without a subsidy. Those that can afford it are reluctant to invest because the pay back is so slow and when they have, a new battery is required. Until the power companies are forced down this road with grid tie systems, to supplement transmission, domestic solar is not going anywhere fast me thinks.

I'd also note that the payback is too slow given the average tenure for most NZ households in a residence, the price premium for having a solar array as a capital improvement is non existent (you'd be better off redoing the kitchen or bathrooms) from a resale perspective if you do move as the market doesn't ascribe value to them and depending on the aspect and incline of your roof (and the surrounding topography and vegetation) the generating performance of the panels may not achieve the output in the marketing materials and the demand at home corresponds with the months that we would generate the fewest kWh (cloudy short winter days).

I've tried to model something up to support a system at home and I can't get it to fit as an investment - I keep looking at it and thinking it would be an expensive white elephant.

[Beagle]

^^ Very well said, couldn't agree more.

[Joshuatree]

Well I'm neither for or against atp but open to what Rod Oram is about to say.

[PSE]

I don't think anyone here is arguing that given plenty of fuel (water), hydro stations and companies that generate most of their electricity via renewables are better investments, all things being equal. But all things are not equal because Genesis has the better yield and is cheaper to buy. But is it cheap enough relative to the disadvantages of the business model? At some point it will be. The only question is, what is that price? I would argue it was worth snapping up at the IPO price. But how much more I am prepared to pay than that, well, my steam abacus is still chuffing through that calculation. As a value investor PSE, I would have thought GNE is right up your alley!

SNOOPY

Agree at the right price and GNE is cheaper to buy, but I would argue that the relative cheapness is more or less a rational valuation given the other generators have superior assets with longer life and lower cost.
Not speculating about the Tekapo canal, this is my understanding from working in the industry/talking to an engineer that used to work for GNE. I am not doubting a good job was done what I am saying is that there is an underlying problem there and the fix may need a fix again who knows when maybe ten years.

It is similar to the slip joint at Clyde; great civil engineering to make sure the dam will survive a quake and it will almost certainly work. The only way to have a dam that certainly wouldn't fail in an earthquake is to not build it on a faultline
A value investor wouldn't be particularly interested in any of the gentailers but this is to be expected right, we are looking for bargains to get our margins of safety and they are fairly or slightly overvalued. Presently it is very hard to find value in any of the major stockmarkets, with most companies reaching dangerous highs of overvaluation.

3-4 months of gas will reduce the amount of time E3P has to run at a loss but not eliminate it.