GNE - Genesis Energy

[Snoopy]

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

My own homework (post 1455 reply to Jantar) leads me to believe that contrary to what you think PSE, the oversupply of gas no longer exists. So the burning of uncontracted gas in E3P is over as from FY2015

As for running Unit 5/E3P at a loss, the evidence is that it does not, at least given the long term view and never has done. The capital cost of E3P was $533m. AR2009 shows generation assets on the books have a life of between 10 and 50 years. If we assume a 40 year life (less than the hydro turbines if these are rated at 50 years), then straight line depreciation will see E3P decrease in value by:

$533m / 40 = $13.3m per year

After 8 years of 'normal' depreciation 8 x $13.3m = $106m of value will have been written off.

In FY2012 there was a further $96.8m written off thermal plant. If this was all taken against Unit 5 (remember Units's 1-4 and 6 were previously written off) then the book value of Unit 5 currently sits at:

$533m -$106m -$97m = $330m

If Unit 5 is indeed on the Genesis books at any positive value, and this has been audited, then we have proof positive that E3P is profitable. If at any annual review since commissioning Unit 5 was loss making Genesis would have been obliged to write it off, just as they have done for Units 1-4 and Unit 6.

SNOOPY

[Markymarknz]

Genius. I wonder if they have some sort of fair use policy. I also wonder how programmable the powerwall will be - dont think I have seen any details on the IT/user interface.[/QUOTE]

You're onto it Harvey, they have a fair use policy https://www.electrickiwi.co.nz/fair-use-policy

Oh well, that scuttles that idea. I wonder if they would let me set my 4kw spa pool element to turn on everyday during the free hour or would they consider that not to be "fair use"...

Regardless, I hope things like the Powerwall have the ability to start changing the market. I for one can't wait until an up front capital expense makes more economic sense then paying a hefty price every month for energy. Its a dinosaur industry thats never (really) had to compete and needs a good shake-up.

[MAC]

The design life for e3p was 25 years, considered to be lowish by some of the engineers involved at the time.

The M701F GT can be re-bladed, however at the 25 year point, or thereabouts, dependent on cycle chemistry, the HRSG, condenser and P91 HP steam set will probably require replacement or significant overhaul.

Depreciation to a refurbishment point at 15 years is common for CCGT plant of this type. Perhaps a bit longer for e3p given it is amongst the few that has a condensate polisher and reasonable chem management.

[PSE]

My own homework (post 1455 reply to Jantar) leads me to believe that contrary to what you think PSE, the oversupply of gas no longer exists. So the burning of uncontracted gas in E3P is over as from FY2015

As for running Unit 5/E3P at a loss, the evidence is that it does not, at least given the long term view and never has done. The capital cost of E3P was $533m. AR2009 shows generation assets on the books have a life of between 10 and 50 years. If we assume a 40 year life (less than the hydro turbines if these are rated at 50 years), then straight line depreciation will see E3P decrease in value by:

$533m / 40 = $13.3m per year

After 8 years of 'normal' depreciation 8 x $13.3m = $106m of value will have been written off.

In FY2012 there was a further $96.8m written off thermal plant. If this was all taken against Unit 5 (remember Units's 1-4 and 6 were previously written off) then the book value of Unit 5 currently sits at:

$533m -$106m -$97m = $330m

If Unit 5 is indeed on the Genesis books at any positive value, and this has been audited, then we have proof positive that E3P is profitable. If at any annual review since commissioning Unit 5 was loss making Genesis would have been obliged to write it off, just as they have done for Units 1-4 and Unit 6.

SNOOPY

Assuming 200MW minimum load and 50% efficiency 4 months is 4PJ, or 12PJ per Annum.
On the other hand if the plant can do 400MW and this is base load then the plant could use 24PJ per Annum, not familiar with the actual details of E3P but ballpark at least the plant could use half of Kupe output using your figures or more than Kupe if you really wanted to crank it.
With 15.7 PJ left over GNE has enough gas to run all of the time but would presumably shut down for a few months so as to burn more gas in the dry months.
I understand that GEN sells its gas on the wholesale market as well, but this is often more of a loss than burning it.
The gas sale has certainly improved the gas supply issue, there are hedges and things behind the scenes so that other companies are supporting GNE's thermal plant for a price they consider reasonable. I wouldn't assume one party has created a scorcher deal at the expense of another but that there are ebbs and flows.
I am not writing off the company as worthless, just not as valuable as the others - that a discount should be in the price for this reason.
MAC sounds like he knows his turbines in more detail than my broad generalisation, 20 years and work on the HRSG which will be a big ticket item. A half life overhaul as has been discussed for the GT26 at Stratford, no doubt aging control systems also on the agenda.

Not necessarily would they shut down if they are making a loss, especially if the loss was bigger if they had to sell the gas wholesale.
They may still be making a cash profit just not covering depreciation and maintenance - in fact this is the most likely scenario.
Include the inspections, and the cost of the half life extension for the plant to live 40 years and your calculation may be realistic.
Just because I haven't provided the numbers doesn't mean I am talking rubbish, it just makes the discussion much longer if I do.

[PSE]

330M for E3P and 330M of Kupe Gas, so the 1.8 billion of shareholders equity includes 1.2 billion of hydro assets give or take.
Not bad, I wouldn't dispute the value on the books - there is no skulduggery going on in such a large listed company I reckon.
Incidently 50 years for hydro plant Snoopy, LOLz.
Tuai was built in 1929, probably not the original generators and transformers or turbines (at least I hope not). Hydro Stations tend to end up like grandad's axe.

[PSE]

If you really want to know how much it costs to run a CCGT you can go through this Snoopy.

http://www.med.govt.nz/sectors-indus...te%20v006a.pdf

I am not asking you to though we can leave it be
I won't be drilling into this level of detail unless GNE gets to a price that forces me to sit up and take notice.

[PSE]

I like this one as well.
http://www.med.govt.nz/sectors-indus...ion-cost-model

[MAC]

e3p has done up to 420MW when new with nice tight GT blade clearances on a rare cold frosty Waikato morning. Typically though max 385MW is about all one should expect, minimum load is determined by RMA conditions on NOx, typically circa 230MW.

The Alstom GT26 unit at Stratford was the first of its type, second in the world commissioned, practically a prototype, and has undergone modifications over the years because of that, HP steam plant is not in top condition but the good folk at Contact keep it going, two shifting and thermal cycling hasn't helped, nor did poor chemistry in its early life. At some point increasing maintenance costs will justify a major rebuild, probably not far away.

Otahuhu B, well it's practically shagged.

Complex things CCGT units, each seems to have a personality and an associated maintenance regime and asset life expectation, one can't really generalise too much.

Internationally, HRSG's are generally considered to be good for around 15 years, but that can depend on gas prices, lower the gas price and efficiency becomes less of a priority as does it seems good maintenance.

Optimally, the new intercooled LMS100 units at Stratford offer a more optimal life cycle, generally less problematic plant to maintain, no steam plant, interchangeable "canned" turbines and still quite good efficiency at circa 48%. With associated underground gas storage, Contact have done well here, still has its problems, but a better thermal model to replicate IMO.

Genesis operated e3p at base load at a loss for the first couple of years because the then CEO wanted to demonstrate lower net corporate greenhouse emissions, odd the behaviours of SOE's, suspect those days are now gone for good. Was good for plant longevity though, less thermal cycling.

20 to 24PJ is a fair expectation PSE on a flat out basis.

[PSE]

e3p has done up to 420MW when new with nice tight GT blade clearances on a rare cold frosty Waikato morning. Typically though max 385MW is about all one should expect, minimum load is determined by RMA conditions on NOx, typically circa 230MW.

The Alstom GT26 unit at Stratford was the first of its type, second in the world commissioned, practically a prototype, and has undergone modifications over the years because of that, HP steam plant is not in top condition but the good folk at Contact keep it going, two shifting and thermal cycling hasn't helped, nor did poor chemistry in its early life. At some point increasing maintenance costs will justify a major rebuild, probably not far away.

Otahuhu B, well it's practically shagged.

Complex things CCGT units, each seems to have a personality and an associated maintenance regime and asset life expectation, one can't really generalise too much.

Internationally, HRSG's are generally considered to be good for around 15 years, but that can depend on gas prices, lower the gas price and efficiency becomes less of a priority as does it seems good maintenance.

Optimally, the new intercooled LMS100 units at Stratford offer a more optimal life cycle, generally less problematic plant to maintain, no steam plant, interchangeable "canned" turbines and still quite good efficiency at circa 48%. With associated underground gas storage, Contact have done well here, still has its problems, but a better thermal model to replicate IMO.

Genesis operated e3p at base load at a loss for the first couple of years because the then CEO wanted to demonstrate lower net corporate greenhouse emissions, odd the behaviours of SOE's, suspect those days are now gone for good. Was good for plant longevity though, less thermal cycling.

20 to 24PJ is a fair expectation PSE on a flat out basis.

Thanks MAC, agree CEN has done well with the flexibility - I just don't like ORI imposing it's losses on that company (i.e. Rockgas, SAP and now Geothermal). I reckon GEN has to play the hand it has been dealt on the thermal front now.

[MAC]

Yes, I think so, GNE was born of the left overs to be hocked off when ECNZ was split, never happened, and aside from what's proved to be a wise investment in HLY Unit 5 and Kupe they have more recently, unlike others, resisted the urge to invest heavily into a market increasing one of over capacity. They pretty much sacked their entire development team a few years ago.

Just a well diversified steady as they go operating utility co now. Wouldn't be too worried about customer retention either, I suspect they optimally allow that to ebb and flow when it suits to match forward gas pricing and prospective contracts.