GNE - Genesis Energy

[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.

[xafalcon]

Take or pay contracts are present elsewhere, just called different things. Insurance is a prime example. You pay for it regardless of whether you use it or not. Take or pay simply gives certainty of outcome. You pay and in return you have access to an agreed quantity of gas (or insurance coverage). You may or may not use it all (or any of it), but the supplying company must have developed the resources necessary to provide the goods or service that is paid for.

They do not directly lead to the development of uneconomic resources/services - they were considered economic when originally signed up, but circumstances changed. That is and always will be, the nature of life.

No business is forced into a take or pay agreement. It is completely optional. If undesirable outcomes ensue, the company did not fully understand their own business and the externalities that effect it sufficiently well. This is not the fault of the take or pay contract.

If take or pay contracts did not work well on average, there would be no support for them and they would simply fade away. That they still exist in NZ shows that they have a place in current economics.

[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

[PSE]

Take or pay contracts are present elsewhere, just called different things. Insurance is a prime example. You pay for it regardless of whether you use it or not. Take or pay simply gives certainty of outcome. You pay and in return you have access to an agreed quantity of gas (or insurance coverage). You may or may not use it all (or any of it), but the supplying company must have developed the resources necessary to provide the goods or service that is paid for.

They do not directly lead to the development of uneconomic resources/services - they were considered economic when originally signed up, but circumstances changed. That is and always will be, the nature of life.

No business is forced into a take or pay agreement. It is completely optional. If undesirable outcomes ensue, the company did not fully understand their own business and the externalities that effect it sufficiently well. This is not the fault of the take or pay contract.

If take or pay contracts did not work well on average, there would be no support for them and they would simply fade away. That they still exist in NZ shows that they have a place in current economics.

That they do exist is not proof that they should exist or have a place in economics. My contention is they are a form of monopoly, monopolies and cartels do exist but they should be restricted by regulation.
Power companies have from time to time had to sell electricity at less than the cost of production, without these contracts they would not need to. This is an inefficient outcome.
Yes they have to accept these contracts but only because of insufficient competition/alternatives.
This is basic economics, pretty hard to argue against.

[PSE]

I can't comment on other forms of insurance xrfalcon, similar to take or pay sure but I don't know if they have the same monopoly aspect.

[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

[trader_jackson]

Coal and Gas aside... I think we may have reached the turning point ($1.67 a few days ago being the low)... with interest rates set to drop next week, people will once again go 'hunting for yield' and GNE should be at the top of anyone's list. I also think that when annual results come out in just over a months time, and people realize the dividend yield is actually as amazing as it sounds, there will be a flood back into GNE (in other words I think the market is pricing in a dividend cut in the next results [cut from forecast], which I don't think is going to happen)

[tim23]

I'm with you Trader on that call I've got quite a few so maybe I have an interest to agree!

[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.