GNE - Genesis Energy

[Snoopy]

Because if they used it to generate power, they would have incurred a bigger loss. I assume they know at what spot rate it becomes more economical to just shut down rather than incur all the other costs as well.

A gas turbine is relatively cheap to start up and shut down, and I imagine even cheaper to run a bit harder when it is normally a baseload unit (like Unit 5) in a state of contant readiness and use. Of course you must be right Harvey. No other explanation makes sense.

But don't you think it odd that you would sign a take or pay contract for natural gas for many years into the future when the margin between making a loss or a profit, by implication, so fine? What does that say about Genesis's management?

SNOOPY

[Snoopy]

Because if they used it to generate power, they would have incurred a bigger loss. I assume they know at what spot rate it becomes more economical to just shut down rather than incur all the other costs as well.

Looking at the FY2013 annual report, p35, "gas revenue" has fallen from $235.8m in FY2012 to $212.5m in FY2013.

Stack those figures up against 'gas purchases and transmission' on the same page and you can get the net loss from gas in each year:

FY2013: $212.5m - $217.2m = -$4.7m
FY2012: $235.8m -$249.4m = -$13.6m

Back on page 17 are the Gas generation outputs for the same years:

FY2013: 2,732GWh
FY2012: 3,041GWh

Of course those outputs do not consider, the amount of gas sold as gas for burning by the customer.

LPG sales in kilotonnes were as follows (from p15):

FY2013: 2,445 kT
FY2012: 2,002 kT

SNOOPY

[brentk]

We can therefore infer that Genesis takes at least 31% + 12% = 53% of Kupe natural gas output.

31% + 12% = 43%

[Snow Leopard]

I am interested in finding out the details of the Genesis take or pay contract with 31% owned Kupe, but I am finding the information difficult to pin down.

...
My grand objective is to find out how much gas Genesis have contracted so that I can estimate the total electric power that Genesis's unit 5 at Huntly generates annually effectively 'for free' (at no incremental cost to GNE). I am still some way from my goal as I write this

SNOOPY

Genesis takes 100% of the Kupe Gas

and

Genesis also has agreements to buy a similar amount of gas from other sources.

Happy Hunting
Paper Tiger

[Snoopy]

31% + 12% = 43%

So someone was paying attention and spotted my deliberate mistake , eh ;-). Thanks for the correction. Although it seems the result has been corrected again by PT to 100%!

I even found a reference to back PT up:

http://www.hydrocarbons-technology.com/projects/kupe/

"Genesis Energy is a major electricity supplier and receives all the produced gas because it needs long-term supplies for its new e3p power-generation project in New Zealand."

e3p is unit 5 at Huntly.

SNOOPY

[Snoopy]

But don't you think it odd that you would sign a take or pay contract for natural gas for many years into the future when the margin between making a loss or a profit, by implication, so fine? What does that say about Genesis's management?

More information from the link below:

http://www.hydrocarbons-technology.com/projects/kupe/

"The development budget for the Kupe project was estimated at NZ$980m (US$594m). NZOG's share is NZ$147m and Genesis Energy is NZ$20m. The total investment, however, reached $1.3bn."

"In October 2005 participants in the Kupe project announced that the development budget would be higher than anticipated. The higher costs were offset by a renegotiated gas supply contract with Genesis Energy and higher worldwide prices for condensate and LPG."

Of course Genesis Energy was government owned in 2005. Could that explain their eagerness to get behind Kupe?

SNOOPY

[Snoopy]

Looking at the FY2013 annual report, p35, "gas revenue" has fallen from $235.8m in FY2012 to $212.5m in FY2013.

Stack those figures up against 'gas purchases and transmission' on the same page and you can get the net loss from gas in each year:

FY2013: $212.5m - $217.2m = -$4.7m
FY2012: $235.8m -$249.4m = -$13.6m

Although the above ties in with Genesis making losses on its gas division, I am not sure it is quite fair. Some of those gas purchases have gone into producing electricity. Electricity produced won't figure in 'gas revenue', but will be in 'electricity revenue'.

SNOOPY

[Snow Leopard]

Although the above ties in with Genesis making losses on its gas division, I am not sure it is quite fair. Some of those gas purchases have gone into producing electricity. Electricity produced won't figure in 'gas revenue', but will be in 'electricity revenue'.

SNOOPY

Unless of course the gas bought to generate electricity is in another category - Fuels consumed possibly?

Best Wishes
Paper Tiger

[Snoopy]

Genesis takes 100% of the Kupe Gas

and

Genesis also has agreements to buy a similar amount of gas from other sources.

I am surprised that Genesis takes all of Kupe's gas, given that Origin Energy is one of the Kupe partners, Origin is the majority shareholder in Contact Energy, and Contact Energy operates gas fired power stations.

In the Contact Energy offer document relating to the 1:9 renouncable share issue dated 28th April 2011, on page 36 the following quote appears:

"Rockgas (Contact subsidiary) has entered into an LPG Sales and Logistics agreement with Origin Energy Resources (Kupe) Limited and Kupe Mining (No.1) Limited for the supply of LPG from the Kupe Production Station Transactions for six months ended 31st December 2010 totalled $21.0m (year ended 30 June 2010 $19.1m). As at 31st December 2010, $3.9m remained outstanding (30th June 2010 $4.4m)"

So it seems even if Genesis takes all of Kupes output now, it wasn't always so.

SNOOPY

[Snoopy]

Unless of course the gas bought to generate electricity is in another category - Fuels consumed possibly?

Best Wishes
Paper Tiger

Have been looking at the Contact Energy report for the same period that expresses things differently, which has thrown me off the scent. Yes PT, fuels consumed does sound likely although that will include coal bought in too. In which case my original calculation, about Genesis making a loss on their gas business stands.

SNOOPY