GNE - Genesis Energy

[Jantar]

On the contra El nino conditions will not be helpful for Hydro at all this coming summer, .....

Why would you think the El-Nino would not be helpful for Hydro during this coming summer? All of the published literature tells us that flows tend to increase in the hydro lakes during El-Nino summers and decrease during La-Nina summers. This research goes back to McKerchar and Pearson (1994), McKerchar et al (1998).
El-Nino means stronger westerlies which in turn means wetter in the west and drier in the east, so drought is likely for Hawkes Bay, Central Canterbury, East Otago etc, but higher flows in the Clutha, McKenzie country and Manapouri.

Latest research is showing that the Pacific Decadal Oscillation has a greater effect than El-Nino and that is also positive. There are 2 papers (in press) that will be published later this year that show this stronger relationship.

[fish]

Why would you think the El-Nino would not be helpful for Hydro during this coming summer? All of the published literature tells us that flows tend to increase in the hydro lakes during El-Nino summers and decrease during La-Nina summers. This research goes back to McKerchar and Pearson (1994), McKerchar et al (1998).
El-Nino means stronger westerlies which in turn means wetter in the west and drier in the east, so drought is likely for Hawkes Bay, Central Canterbury, East Otago etc, but higher flows in the Clutha, McKenzie country and Manapouri.

Latest research is showing that the Pacific Decadal Oscillation has a greater effect than El-Nino and that is also positive. There are 2 papers (in press) that will be published later this year that show this stronger relationship.

Thanks for that Insight Jantar.
What effect is most likey for NI hydro?

Electric Cars are starting to get decent Range .Interesting article in the Herald today -Mercedes -Benz really competing with Tesla.
We now need more overseas legislation restricting polluting VW cars and others from urban areas.
When I was flying over the Industrial midlands and nw England last September I was struck by the haze over motorways and cities from polluting trucks and cars.A major health hazard and I hope legislation will get much tougher giving clean electric vehicles the sales boost they need.
As you posted earlier legislation against fossil fires is giving aircon and electricity a boost

[Jantar]

Thanks for that Insight Jantar.
What effect is most likey for NI hydro?

Electric Cars are starting to get decent Range .Interesting article in the Herald today -Mercedes -Benz really competing with Tesla.
We now need more overseas legislation restricting polluting VW cars and others from urban areas.
When I was flying over the Industrial midlands and nw England last September I was struck by the haze over motorways and cities from polluting trucks and cars.A major health hazard and I hope legislation will get much tougher giving clean electric vehicles the sales boost they need.
As you posted earlier legislation against fossil fires is giving aircon and electricity a boost

North Island hydro lakes generally don't fare as well as they rely on easterlies for their summer top up. Two things do go in their favour though: They are starting out with above average storage, and with El-Nino there is an increased chance of tropical cyclones getting down as far as the central North Island in late summer - autumn, and if that happens it gives the North Island lakes a boost.

[Traderx]

Why would you think the El-Nino would not be helpful for Hydro during this coming summer? All of the published literature tells us that flows tend to increase in the hydro lakes during El-Nino summers and decrease during La-Nina summers. This research goes back to McKerchar and Pearson (1994), McKerchar et al (1998).
El-Nino means stronger westerlies which in turn means wetter in the west and drier in the east, so drought is likely for Hawkes Bay, Central Canterbury, East Otago etc, but higher flows in the Clutha, McKenzie country and Manapouri.

Latest research is showing that the Pacific Decadal Oscillation has a greater effect than El-Nino and that is also positive. There are 2 papers (in press) that will be published later this year that show this stronger relationship.

I stand corrected - thank you sir!

[Snoopy]

Have had a nice quiet sit down with the just posted Genesis Annual Report for FY2015. I find it fascinating how events are spun.

EBITDAF is claimed to have incresed by 12% yoy (p12). However, if you adjust for the one off effects of the float costs and the Tekapo planned maintenance outage, and the coal contract termination, I calculate that EBITDAF has actually gone from from $345.9m to $341.8m, a 1.2% decrease.

I am a little bemused at some of the language used in the chairman's address too:

"The company is committed to tangible change in order to adapt to the market and meet the future needs of its customers. We will accomplish this in the shorter term by further developing our digital capabilities and processes that improve service interactions and increase value while lowering costs. In order to provide new smart services and new energy related technology for our customers, the company is focused on creating strategic partnerships."

Pardon Dame Jenny?

I assume this is all connected to the:

"moving towards being an enabler of desirable, simple, smart energy solutions that meet the needs of our customers large and small." (p12)

Well, I am one of those small customers. I must admit I like the graph of annual power usage, split into two month blocks that appears at the top of each bill. Better for me than Genesis though, since I installed double glazing! I am slightly annoyed to see the extra charge Genesis make 'after the event' when I have paid my bill at the post office. With interest rates so low, I now tend to try and estimate my next month's bill and pay that too to minimise my 'bill paying charges'. At least Telecom (oops I mean Spark) are up front when they demand extra cash from me up front when I dare to pay my bill at the post office desk in cash. Actually the soft secret charging of Genesis may be better, because I always walk out the post office being annoyed with Genesis but really angry with Spark!

There is a write up on the GEN traders, beavering away in their office 24 hours a day worrying about half hour period purchases of power. Very little detail of what they actually do. But the fact this Genesis is the only power company which has highlighted the role of traders in operations is both interesting and worrying. For every trading strategy there is always an alternative counter strategy available to competitors. Perhaps Genesis's traders really are smarter than 'the others'? But will they stay that way?

My mind spins to the recent NBR article by Tim Hunter on the enginerering of future power price rises that will be caused by shutting down existing capacity, in which Genesis, with the Huntly Rankine units, is complicit.

One point that did pique my interest was the 'Schoolgen' program (solar photvoltaic panels on school roofs, now totalling 247kW) (p15) being expanded into something more commercial. This is the kind of thing that horus has talked about as being disruptive for the gentailers. Will Genesis be the first Gentailer to fully embrace it?

"Takapuna and Milford schools is part of a pilot commercial scheme to increase our understanding of customer's needs and to test a variety of business models in the solar arena" (p15)

Over on p19 we learn:

"Genesis Energy is currently New Zealand's only energy provider with a team dedicated to supporting building and construction companies and tradespeople with their new electricity and gas connection needs. Currently we are achieving 10% year on year growth in the trade and construction sectors in the Auckand, Canterbury and Waikato regions."

Then we have a revolution in gas marketing on p20

"The gas value packages gives our customers the certainty of paying the same amount for gas every month even if they use a little extra."

All good, interesting niche stuff. Genesis is looking more of a marketing company that their competitors! But with the signalled wind down of their actual power generation capacity, will they be able to maintain margins in a tightening supply markey? Cannot all this 'niche stuff' they are doing easily be duplicated by competitors?

SNOOPY

discl: Slightly uneasy shareholder

[horus1]

I went to flickelectric as a supplier and reduced my bill by at least 15%.

[Snoopy]

Its a great result-EBITA significantly increased.
Full imputation a bonus but this obsession with imputation from some posters is a mere trifle compared to above.

Actually, if you take out the one off effects of the float, the loss of profit from the scheduled maintenance to the Tekapo canal and the costs associated with the cancellation of the Solid Energy coal contract, then EBITDA went down just over 1% yoy.

But my real concern with Genesis, unlike say MRP, is that they do not have assets overall that can be valued upwards as a scarcity of generation capacity lifts wholesale power prices. The table below of historic asset revaluations/devaluations illustrates what I mean:

Year	Extraordinary Revaluation	Extraordinary Devaluation
2008	0	0
2009	$232.8 (hydro)	-$261.4 (thermal)
2010	0	0
2011	$394.162 (hydro)	-$96.816 (Tekapo acquisition)
2012	0	0
2013	$155.6 (hydro)	0
2014	0	0
2015	0	0
Total	$782.6	$358.2m

Thus the net increase in value of power stations since 2008 has been:

$782.6m -$358.2m = $424.4m

The overall company position is not as good as that, because I haven't included any share of Kupe writedowns.

The problem here is it is doubtful IMO that in the future Genesis can build a new power station of any size without raising new capital (cost of the Unit 5 turbine {386MW} and associated electrics only in 2006 was $525m). The other funding alternative is stopping dividends. This is exactly what happened in FY2011 and FY2012 with the last big acquisition (Tekapo). What I am saying here is that Genesis may not be the steady high dividend payer that more recent public shareholders some think it is!

SNOOPY

[horus1]

All generator /retailers should move down on Monday as a result of the decision by the EA to expose customer loads to all . It will show haw domestic customers re being ripped off.

[Jantar]

All generator /retailers should move down on Monday as a result of the decision by the EA to expose customer loads to all . It will show haw domestic customers re being ripped off.

I would suspect that the long term effect would be more profit for gentailers. The new rules won't lower the cost of generation, or transmission, or frequency keeping, or spinning reserve etc. It will just allow customers more certainty over which supplier is the cheapest. As more customers switch to the cheapest supplier, that supplier will be short on generation and will have to buy off the market, either at wholesale, or via hedges.
That will in turn mean more profit for those that are long and hence net pivotal in the market.

The overall effect will be that no supplier can afford to be substantially cheaper than any of the others.

[fish]

Snoopy stop being a slightly worried shareholder.Be happy with all the promised dividends too come.
I too re-read the annual report ,checked out other reports such as those in nbr-and chose to buy more gne as the dividend is expected to be maintained
The company will pay an 8c per share final dividend on October 6, an increase from last year's 6.6c, taking total distributions in the current financial year to 16c, compared with 13c in the previous financial year.
The dividend is easily paid out from free cash flow-
That equates to 80.9% of free cashflow, compared with 80.4% the previous year. Free cashflow, at $197.7 million, was 22% higher than the previous year