GNE - Genesis Energy

[fish]

Oh yeah, who cares about analysis when you have optimism anyway? Any view on the take or pat gas situation and the future of E3p.
Flare the gas I say, a gigantic monument to human stupidity.

PSE -I know you have a lot of experience in the electricity industry and are probably frustrated by my posts-I have no such experience and am just getting my head around how it works.
Clearly you don't like gas but when I research the present and future -eg look at wikipaedia and levelised cost to generate it is clear gas is the cheapest way to build new generation-and that is using old gas prices!

[PSE]

PSE -I know you have a lot of experience in the electricity industry and are probably frustrated by my posts-I have no such experience and am just getting my head around how it works.
Clearly you don't like gas but when I research the present and future -eg look at wikipaedia and levelised cost to generate it is clear gas is the cheapest way to build new generation-and that is using old gas prices!

At $1.7 genesis is not too bad, just not cheap enough for me to buy.
Wind and geothermal are the cheapest new build in NZ because we have exceptional resources, the days of the ccgt in NZ are numbered. There may be more aeroderivative 'peakers' built in time.
GNE's free cashflow and dividend is based on wasting assets, gas fields and turbines that need to be replaced.
I think the market at the moment is undervaluing MEL relative to GNE, perhaps not recognising this advantage.

[PSE]

PSE -I know you have a lot of experience in the electricity industry and are probably frustrated by my posts-I have no such experience and am just getting my head around how it works.
Clearly you don't like gas but when I research the present and future -eg look at wikipaedia and levelised cost to generate it is clear gas is the cheapest way to build new generation-and that is using old gas prices!

At $1.7 genesis is not too bad, just not cheap enough for me to buy.
Wind and geothermal are the cheapest new build in NZ because we have exceptional resources, the days of the ccgt in NZ are numbered. There may be more aeroderivative 'peakers' built in time.
GNE's free cashflow and dividend is based on wasting assets, gas fields and turbines that need to be replaced.
I think the market at the moment is undervaluing MEL relative to GNE, perhaps not recognising this advantage.

[Snoopy]

It makes no sense to burn coal as your post implies-gas down a pipeline when you produce if from an unmanned rig must be very cheap-and kupe has lots more gas and heaps more gas yet to be quantified.

Burning coal over gas does make sense if by not doing so you breach the contract signed with your coal supplier.

SNOOPY

[PSE]

Re the coal snoopy I think Huntly has storage.
Re the gas as previously mentioned burning it in E3P is better than wholesale sales but this helps support their gas book.

[fish]

Burning coal over gas does make sense if by not doing so you breach the contract signed with your coal supplier.

SNOOPY

snoops GNE don't have a contract to burn coal.
They have a contract with solid energy to supply coal-with the intention of storing it and burning it when prices are high-eg a dry year..
They stopped importing coal last year.
They are in a great position to generate more when demand is high

[PSE]

Hey snoop, it's the take or pay gas I am against not the decision for kupe. There is no take or pay electricity or anything else, take or pay gas contracts should be banned as they cause development of uneconomic resources.
Everyone else takes the risks associated with the market, so should gas companies.
I could be wrong on GNE sure but I would encourage people to consider take or pay and how the company needs to run E3P regardless of electricity prices.
I am thinking CEN doesn't need to carry the 172MW of Tiwai but GNE probably does. Maybe a writedown of E3P is in the works if this scenario plays out.

[fish]

GNE is the biggest retailer and doesn't generate as much as it sells.
Hence E3P is needed and I cant see why in this situation where it generates electricity at a lower price than genesis sells it for that anyone should consider writing it down .A company in this position has a great asset and wont need to write it down whatever happens to TIWAI

[Snoopy]

Hey snoop, it's the take or pay gas I am against. <snip>
Everyone else takes the risks associated with the market, so should gas companies. <snip>
I could be wrong on GNE sure but I would encourage people to consider take or pay and how the company needs to run E3P regardless of electricity prices.

After much cross website surfing I feel I now have a good estimate as to how much GNE are losing/making on their share of the gas output from their shareholding in Kupe. There are quite a few assumptions in the results table I present here. I will go over those later. I will be prepared to rerun my spreadsheet model using different assumptions if others are interested. Below is my assessment of the present value of Genesis's 31% holding in the Kupe gas field.

Year	Kupe Gas	Value	Resource Depreciation	Net
	(GJ)	Received	and Amortization	Proceeds
2015	6.5E06	$48,360,000	$23,018,794	$25,341,206
2016	5.3E06	$36,671,760	$21,407,478	$15,264,282
2017	6.1E06	$39,252,622	$19,908,955	$19,343,667
2018	6.1E06	$36,504,938	$18,515,328	$17,989,610
2019	5.3E06	$29,497,187	$17,219,255	$12,277,932
2020	5.3E06	$27,432,384	$16,013,907	$11,418,477
2021	5.3E06	$25,512,117	$0	$25,512,117
2022	5.3E06	$23,720,269	$0	$23,726,269
2023	5.3E06	$22,065,430	$0	$22,065,430
2024	5.3E06	$20,520,850	$0	$20,520,850
2025	5.3E06	$19,084,390	$0	$19,084,390
2026	5.3E06	$17,748,483	$0	$17,748,483
2027	5.3E06	$16,506,089	$0	$16,506,089
Total	7.17E07	$362,882,518	$116,083,717	$246,798,801
PV per share				$0.25
PV per share (tax paid)				$0.18

That last figure on the right is the important one. Genesis's 31% share of Kupe means that every Genesis share today contains 18c of 'value' directly attributable to the equity holding that Genesis has in Kupe. Because that value is positive, we can conclude that Genesis is making money (not losing money) from the natural gas attributable to their shareholding in Kupe. 18c is the wholesale market value to Genesis. This wholesale gas can be resold, and Genesis can clip the ticket again on this.

Kupe also has rights to all the other partner's gas production from of Kupe. But this gas will have to be bought at a market price from those joint venture partners. How well Genesis utilises this gas is a separate question that I may address later.

SNOOPY

[Snoopy]

After much cross website surfing I feel I now have a good estimate as to how much GNE are losing/making on their share of the gas output from their shareholding in Kupe. There are quite a few assumptions in the results table I present here. I will go over those later.

Q/ What figure have you used in attributing a dollar value per Petajoule of energy?

A/ I have taken my wholesale gas price from the spreadsheet below from the Ministry of Business, Innovation & Employment website.

http://www.med.govt.nz/sectors-indus...term=gas+price (old web link)

http://www.mbie.govt.nz/info-service...tistics/prices (new web link)

Go to the worksheet titled 'Annual NZD per GJ', then scrool across to 2014 (the latest data available). The wholesale figure is not yet available. But I have substituted the industrial figure of $7.44 which should not be too far away.

SNOOPY