GNE - Genesis Energy

[fish]

Isn't Morningstar a contrarian indicator? Eg their buy means sell?

It seems as if it all depends on who you are and where you are coming from.
Some people do listen to what they have to say but it would be lazy not to do your own research rather than listen to what anyone has to say
They seem to have changed their definitions-we now have hold,accumulate and buy .
A wide economic moat is also defined.

[Bobdn]

I'm down a fair whack on Genesis. I'm about to do what I did with Chorus and check out for a while rather die by a thousand price cuts. I went for a full four months not looking at CNU so it can be done. BTW, I'm still predicting a one-off dividend payment of 40 to 50 cents per share for CNU in December (based on a quick and dirty back of the envelope calculation) but that's for another thread

Anyway, the big "game changer" (to use that hackneyed phrase) will be electric vehicles (EV). After about 20 minutes on Google, I predict that 2019 will be the year that EVs go completely mainstream in New Zealand, just like UFB is going nuts now. By then:

1. oil prices will have recovered pushing up fuel prices;
2. there'll be a steady stream of quality used EVs from Japan;
3. modestly priced new EVs (like the Nissan Leaf) will comfortably have a range of over 400km (perhaps as early as 2017). By 2020, the range of EVs may be over 500km. Range anxiety will be a thing of the past. See: http://cleantechnica.com/2014/10/09/...-says-vw-exec/
4. Tesla may have entered the NZ market.

Who knows if Apple is building an EV prototype (as is rumoured) but if they are, then every electricity company will be cracking open the bubbly once its confirmed.

EVs will completely change the electricity market forever. It'll be like night and day And who knows, as demand ramps up some of the those resource consents for new wind farms might need to be finally be dusted off.

[macduffy]

It seems as if it all depends on who you are and where you are coming from.
Some people do listen to what they have to say but it would be lazy not to do your own research rather than listen to what anyone has to say
They seem to have changed their definitions-we now have hold,accumulate and buy .
A wide economic moat is also defined.

I don't know what Morningstar's definition of a wide economic moat is these days , but they once used it to describe companies which, among other attributes, occupied a monopoly/duopoly position in their sector which it would make it difficult for rivals or newcomers to challenge. Examples before the arrival of Aldi on the Australian scene were Wesfarmers/Woolworths. As one of a half dozen or so electricity gentailers in NZ I wouldn't have thought that Genesis would qualify - but perhaps that wasn't claimed?

[belted galloway]

I don't know what Morningstar's definition of a wide economic moat is these days , but they once used it to describe companies which, among other attributes, occupied a monopoly/duopoly position in their sector which it would make it difficult for rivals or newcomers to challenge. Examples before the arrival of Aldi on the Australian scene were Wesfarmers/Woolworths. As one of a half dozen or so electricity gentailers in NZ I wouldn't have thought that Genesis would qualify - but perhaps that wasn't claimed?

Is a narrow moat, rather than a wide one.

From Morningstar:

"Genesis Energy is a vertically integrated electricity generator and retailer, accounting for 17% of New Zealand's total electricity output. It enjoys a strong competitive position and we rate the firm as having a narrow economic moat on the basis of efficient scale and the oligopolistic market structure which creates significant barriers for potential entrants. Accordingly, we expect Genesis Energy and other incumbent energy providers to generate returns above the cost of capital in the long term. However, the medium-term outlook for the electricity sector is not very promising because of excess supply and sluggish demand, which will temper operating income growth in the next few years."

[Beagle]

Who would have though NZ inflation would be running below 1%. Interest rates look like they could fall further, definately won't be rising. Pay rises are generally 2-4% for those who get one at all. Net population loss to Aussie is almost zero. Hard and soft commodities are trading at multi-year lows. Auckland house prices are caught in an invester frenzy that will end in tears for those who jump aboard just before the inevitable correction. We are living in a NZ (and a world) like we haven't known before. Throw in the Fed interest rate uncertainty, which is indirectly linked back to the performance of the world economy, and the picture becomes even more unclear.

In this low return environment (except for Auckland houses atm) in my opinion a 10% gross return on a passive investment with tangible asset backing sounds pretty good to me. If it falls to 8% next year, it still sounds good. At 6% I would look elsewhere.

This is just how I assess an investment, by comparing it to other investments. I'm not saying this approach is right and others are wrong. But I believe current SP and dividend yield is tough to beat elsewhere. Maybe futures are worth a look???

Good quality post which adds useful perspective. I maintain with the Tiwai point ongoing uncertainly a 10% gross divvy is my required rate of return to account for the substantial impact if they shuttered the smelter operation.
I'd be buying now if I thought the dividend was sustainable...I guess everyone is hoping oil recovers and in some respects this stock provides something of a hedge for an AIR N.Z. shareholding, a point not lost on me.

Master98 - I have posted a considerable number of times carefully explaining the imputation matter...may I suggest you re-read the last six weeks or so of this thread for my posts on that matter.

Overall I think the momentum for now is still down as favourable oil hedging gradually unwinds.

[horus1]

EV 's bring batteries, batteries mean storage and believe me that is the end of Genesis making excessive profits out of domestic customers. It makes solar compete with the cost of transporting the energy leaving nothing for the generators. Drive on SH2 thru lower Hutt to see the solar starting to come in.

[fish]

EV 's bring batteries, batteries mean storage and believe me that is the end of Genesis making excessive profits out of domestic customers. It makes solar compete with the cost of transporting the energy leaving nothing for the generators. Drive on SH2 thru lower Hutt to see the solar starting to come in.

I see your point about batteries and I have no doubt they will have an impact.
The question is what impact?
Electricity is largely clean and green in NZ.
Demand is showing signs of taking off.
Habits are changing-my heatpump is switched on-easier than lighting a fire ,more controllable and possibly cheaper.
Cities are passing by-laws that will phase out wood/coal fires.
I will be getting an electric car-but not for a few years yet.
There will be no solar generated today-its dark and raining-days are short.
Wind power is not so cheap or controllable.
Our population is growing.
My belief is that Genesis will make good profits and battery power will take out the highs and lows of electricity pricing but not on balance reduce power consumption-in fact I believe they will increase power use and foster further development of the electricity Industry.
This morning I feel really cosy (helped by the heat pump!)

[Jantar]

EV 's bring batteries, batteries mean storage and believe me that is the end of Genesis making excessive profits out of domestic customers. It makes solar compete with the cost of transporting the energy leaving nothing for the generators. Drive on SH2 thru lower Hutt to see the solar starting to come in.

Have you looked at the amount of energy required to change those batteries in an EV? (Hint: 15A for 8 hrs at 230V)
Have you looked at the time of day that EV batteries would be charged? (Hint: While the vehicle is least likely to be driven)
Have you looked at how much energy solar generation produces while EVs are charging? (Hint: look at the earlier question)

The effect of charging EVs is to increase the size of the evening peak load from conventional power stations, like those operated by the big 5 gentailers.

[workingdad]

I'm no expert but looking at the volumes from Friday there was some heavy buying on both MRP and GNE. Big sell off on CEN so may be taking the recent gains and shifting the funds to the other gentailers that are oversold?

Be interested in others thoughts on this.

Either way, I think demand for electricity will continue to rise and with a bullmarket that is somewhat overpriced and international instability happen to think they are a relatively ‘safe’ bet with reasonably good returns.

Regardless of long term technology changes with regard to solar and battery storage the outlay for this cost wise is well beyond the majority of many consumers ability to fund. Even if there is a sudden rush to adopt this kind of technology that may reduce demand there will always be additional technology to power that will offset it such as charging hybrid cars ect.

[Zaphod]

Regardless of long term technology changes with regard to solar and battery storage the outlay for this cost wise is well beyond the majority of many consumers ability to fund. Even if there is a sudden rush to adopt this kind of technology that may reduce demand there will always be additional technology to power that will offset it such as charging hybrid cars ect.[/SIZE][/FONT][/COLOR]

You're right; the costs to consumers are very large. Presently, high levels of Government subsidies in the US are helping stimulate market demand for consumer-side renewable energy generation infrastructure as well as the purchase of electric vehicles. This can't go on forever, so the cost of production (and consequently the price charged to the consumer) must drop substantially before the music stops.