GNE - Genesis Energy

[bmrm]

Just saw this comment in today's announcement. It seems massively positive but the share price hasn't reacted, so i am thinking i have misinterpreted it? I've bolded the key part.

"Genesis Energy Chief Executive Albert Brantley said the five-year contract,
valued at approximately $20 million a year, would result in immediate
operating cost savings of around 10 per cent and was expected to create
longer term value for the Company through administrative and managerial
efficiencies."

I read this to mean savings of ~$2million a year, compared to total expenses of $1.7billion. Good news yes, but file under 'drop in the ocean'.

[axe]

I read this to mean savings of ~$2million a year, compared to total expenses of $1.7billion. Good news yes, but file under 'drop in the ocean'.

Not a significant amount, what is it .... 0.2 CPS?? But it is a good look that management is being proactive is keeping costs under controll.

[Beagle]

Yep, its a good look that they are looking for efficiencies. I hold. People need electricity regardless of what other problems are going on in the world and GNE are a well diversified gentailer.

[sb9]

Got the first divvy today thro' direct credit, very happy, long it may continue...

[macduffy]

Yep, its a good look that they are looking for efficiencies. I hold. People need electricity regardless of what other problems are going on in the world and GNE are a well diversified gentailer.

I hold a few, too, although articles such as this from today's Age give cause for concern about the long term profitability of the gentailers. Talking about Australia, of course, but has relevance here too.

http://www.theage.com.au/business/ne...16-1170ah.html

[Beagle]

I hold a few, too, although articles such as this from today's Age give cause for concern about the long term profitability of the gentailers. Talking about Australia, of course, but has relevance here too.

http://www.theage.com.au/business/ne...16-1170ah.html

Thanks for the article mate. Australia is a very different market. You might be interested to know I've just been through the exercise on behalf of a good mate who was looking at installing a solar powered system on his north facing roof in Auckland.
Firstly if you live in Queensland you're getting circa 300 days a year sunshine and about 65 days when the system isn't very productive. In Auckland you can just about flip those numbers around the other way.
The system my friend was looking at had an installed cost of just over $20,000, (prices in Australia are cheaper with vastly greater volumes and competition). Based on the research I did, (not off the optimistic projections the salesman provided) Peter could expect power savings of just over $900 per year at current power prices. Now on the face of it that return doesn't look all that inspiring (4.5%) and isn't but it gets a lot worse when you dig behind the numbers.
Firstly the invertors that convert DC power supplied from the photovoltaic cells to AC have a limited lifespan, how limited is anyone's guess and depends upon brand but if you're buying a great N.Z. brand that's extremely well constructed like a Mastervolt invertor you're maybe going to about 10 years, (but not warranted for that long so real lifespan is speculative) from a circa $4,500 invertor.
Amortise the invertor replacement cost and you get an annual cost of $450, halving the power savings to only circa $450 after expected maintenance costs but the real bogey man comes when you start considering how long those photovoltaic cells will last ???? If you have to think about replacing the rest of the system ($15,500), after say 20 years clearly the economics simply don't work in New Zealand at N.Z. prices for the system and power savings.
OTOH if you're paying 32 cents a kwh in Victoria and a solar system could be had for $10,000 then the numbers would look considerably better.

I hope my very recent exercise in looking at the economics of solar power in Auckland helps mitigate your concerns.

In the end I advised Peter to simply buy a good heat pump for his home, for the modest cost of $2,500 he'd save just as much power. I'd say the widespread increase in the use of heat pumps that have become more efficient both in terms of cost and operational efficiency in recent years is more of a concern than solar.

things to consider when looking at a solar power system for your home.
Is your roof facing due north or very close to due north, if not, don't bother.
How long is the warranty on the photovoltaic cells ? If they claim they last for XYZ years why don't they provide a warranty for that length of time ?
Likewise with the invertor brand they've chosen. Are they using a cheap Chineese made invertor and what's the warranty period on that ?
Will the company making the photovoltaic cells and invertor be around a long way down the track when you try and make a warranty claim ?
Are the salesman's extremely pessimistic projections of X% per annum in power price growth realistic ? In Peter's case the salesman tried to claim that power prices would increase at a compound growth rate of 8% per annum for the next 20 years, really ?????

Nice to get that juicy divvy today and offsets a few of those pretty recent grunty winter power bills, a natural hedge if you like

[bull....]

Totally agree roger did the same exercise and the economics just dont stack up at the cost you have to outlay in NZ

[macduffy]

Thanks, Roger, I readily admit that I know very little about either the physics or the economics of solar energy! I do, though, have a sneaking suspicion that the technology will evolve, in time, to make it a sufficiently attractive proposition to encourage the gentailers to reduce power prices - thereby reducing profits and dividends - particularly if the newer forms of solar which operate on lower light levels, live up to their promise. Meanwhile, Genesis, Contact etc provide that nice hedge!

[percy]

Thanks Roger,I found your post very enlightening.

[Arbroath]

Thanks Roger,I found your post very enlightening.

Yes - great post Roger. I looked at in New Plymouth where believe it or not we have about the 3/4th highest sunshine hours in NZ. Accepting all the claims made on power savings, life of products the breakeven was 12 years. Now if there were any issues with any aspect that was quickly going to become 15-20+ years and the panels had a useful claimed life of 25 years. Was an easy decision in the end not to go ahead and I started from a mental position of thinking solar was the way forward. Instead I own GNE, MELCA, MRP