GNE - Genesis Energy

[fish]

snoopy I have been pondering over your last posting and the cost of building a new CCGT and the need capital raising.
With closure of the rankine units Genesis would have spare land/site/electricity transmission in place.
They have the gas from kupe which will be cheap.
Perhaps it might not be such an additional cost.
Interest rates on borrowings would be less so a capital raising might not be necessary.
Possibly a smaller unit.
I seem to recall Todd have plans to build a gas plant and much lower cost-but that might be a peaker

[Snoopy]

snoopy I have been pondering over your last posting and the cost of building a new CCGT and the need capital raising.
With closure of the rankine units Genesis would have spare land/site/electricity transmission in place.
They have the gas from kupe which will be cheap.

Fish, the cost we know about was for the Unit 5 turbine {386MW} and associated electrics only in 2006: $525m. You are right about Genesis not neediing a new site or new resource consents. A new unit could replace one of the old Rankine ones inside the Huntly box. But that was also the case for Unit 5. So there are no extra resource consent and set up savings to be made over and above what happened when Unit 5 was installed.

I remember in the prospectus, reading about an excess of contracted gas damaging profitability which would abate with time. I think this comment was made when three Rankine units will still fully commissioned. I am unsure if that means the 'overhang' of gas will now go out further into the future than envisaged in the prospectus. I know that coming into the winter just finished, power prices did not spike up as much as expected at the Huntly node. This also points to the gas overhang extending a bit.

Furthermore since the prospectus, a contract has been concluded with Contact Energy, now doubt at low margin. This will allow Contact to run its Stratford peaker, and the Combined Cycle Station, in competition with Genesis's Huntly. All thanks to Contact being able to store 'cheap' gas in the Ahuroa storage field. That Kupe gas may be cheap. But I am picking Genesis have let some Kupe gas go to Contact Energy at an almost equally cheap rate.

I thought the flow chart on p27 of AR2015 was interesting. This shows a take or pay contract of other gas of 25PJ, greater then the output of Kupe (24PJ) which Genesis also has contracted. Of that during FY2015 21PJ was used to generate electricity over FY2015. (1PJ = 277.7 GWh)

p30 of AR2015 has gas generation outputs of 2,772GWh, =10PJ

So overall efficiency of gas generation for FY2015 was: 10PJ/21PJ = 47.6%. That is pretty good I think, considering the average will have been lowered by the operating of the relatively inefficient Rankine units. Nevertheless the amount of gas used overall in FY2015 was down 5.4% on FY2014.

So could Genesis technically put a new , perhaps slightly smaller, turbine than Unit 5 in at Huntly to replace one the the retiring Rankine units? Technically, I think yes. Could such a unit compete with the combination of Contact's combined cycle and peaker plants at Stratford, both fed by the Ahuroa gas storage reservoir? I'm not so sure.

Perhaps it might not be such an additional cost.
Interest rates on borrowings would be less so a capital raising might not be necessary.
Possibly a smaller unit.
I seem to recall Todd have plans to build a gas plant and much lower cost-but that might be a peaker

From http://www.stuff.co.nz/taranaki-dail...-power-station


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The next step in developing a multimillion dollar gas fired power station just south of New Plymouth is underway.

Nova Energy Limited, a subsidiary of the Todd Corporation, is seeking expressions of interest (EOI) from parties interested in a build, own, operate and transfer (BOOT) contract for a new 100 megawatt gas-fired power station.

The 100 MW open cycle gas turbine (OCGT) power plant is located on green fields land between SH3 and Mangorei Rd, south of New Plymouth.

Nova communications manager Mark Reynolds would not quantify the cost of the contract given the EOI process was underway but confirmed it was a multimillion dollar project.

"To give a sense of scope, Nova Energy's last plant, McKee, was a similar size and was an investment of about $100 million in the New Zealand energy sector," Reynolds said.

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100MW output for the proposed Todd Unit is quite small compared with 250MW for a Rankine unit.

Yes building a smaller unit, with the possibility of some of it being funded by borrowing could happen. The problem with that is that as Kupe runs down, Genesis will have less income with which to service such a loan, regardless of what happens to the oil price. As at 30th June 2015, Genesis has a debt ratio of:

$1,702.6 / $3,528 = 48%, before payment of our bumper upcoming final dividend of $80m. Given Genesis has a shrinking asset base going forwards, I am not sure how much borrowing headroom remains in Genesis's balance sheet.

SNOOPY

[fish]

Quality research-thanks snoopy.

Certainly got me thinking

Genesis will have a number of options in the event of demand exceeding supply.
In this event the price of electricity would be much higher so more profit and less need -if any for bank borrowing
They could just refurbish and convert the rankine unit to gas only-especially if they had surplus gas and efficiency wasnt a priority.
Then I started speculating on other possibilities-eg can a gas turbine be added to provide waste steam for extra power to the rankine unit?-ie it would become a ccgt
No need to store gas just burn it and turn the hydro up or down to meet demand
Really need some engineering input here before I get lost.

[Snoopy]

Quality research-thanks snoopy.

Certainly got me thinking

Genesis will have a number of options in the event of demand exceeding supply.
In this event the price of electricity would be much higher so more profit and less need -if any for bank borrowing
They could just refurbish and convert the rankine unit to gas only-especially if they had surplus gas and efficiency wasnt a priority.

I think the Rankine units run on coal or gas now. So no refurbishment to 'convert' 100% to gas would be needed.

Then I started speculating on other possibilities-eg can a gas turbine be added to provide waste steam for extra power to the rankine unit?-ie it would become a ccgt

The best way to increase thermal efficiency is to increase the temperature your tubine operates at. A modern CCGT operates at such high temperatures that the 'waste' steam from stage 1 is in itself useful as a power source. I think it is doubtful that an older gas turbine would have a suitable material construction to allow very high temperature combustion to happen.

No need to store gas just burn it and turn the hydro up or down to meet demand
Really need some engineering input here before I get lost.

This is what MRP are doing now with their geothermal plant being used as their base load and hydro being spilled to fill the gaps. OK, there is quite a lot of regular hydro spilling at MRP going on! But the principle still stands.

The problem with GNE doing that is that their largest power station provides in flow to Taupo. So local Maori, let alone MRP might have something to say if GNE deliberately turned off the Taupo tap!

SNOOPY

[fish]

The Rankine units if kept in operation beyond 2018 would probably need major refurbishment-the EA did a review of thermal power stations in 2009 and suggested that at 20 to 40% cost of new they could be refurbished with engineering improvements.
Clearly coal is out and the processing unit for coal could be removed.
What I am thinking is if it would be a possibility for the latest gas turbine to be acquired and built in so that the heat from the exhast could be used to generate steam for the rankine unit to generate electricity thus converting a dated rankine unit to combined cycle?
from wikipaedia-
Combining two or more thermodynamic cycles results in improved overall efficiency, reducing fuel costs. In stationary power plants, a widely used combination is a gas turbine (operating by the Brayton cycle) burning natural gas or synthesis gas from coal, whose hot exhaust powers a steam power plant (operating by the Rankine cycle). This is called a Combined Cycle Gas Turbine (CCGT) plant, and can achieve a best-of-class real (HHV - see below) thermal efficiency of around 54% in base-load operation, in contrast to a single cycle steam power plant which is limited to efficiencies of around 35-42%. Many new gas power plants in North America and Europe are of this type. Such an arrangement is also used for marine propulsion, and is called a combined gas and steam (COGAS) plant. Multiple stage turbine or steam cycles are also common.

[Jantar]

The Rankine units if kept in operation beyond 2018 would probably need major refurbishment-the EA did a review of thermal power stations in 2009 and suggested that at 20 to 40% cost of new they could be refurbished with engineering improvements......

The main issue with the Rankine units, and what the EA failed to understand, is that the turbo generators can be refurbished quite easily, even at a cost of 20 - 40% of new. It is the boilers, that bit that uses the heat to turn water into steam, that can not be easily refurbished, and that is the part that is at the end of its life. At Huntly, the boilers are part of the building. They are suspended from the top so that thermal expansion would not be an issue, and the boiler housing is in a water bath to get an airproof seal. Removing the old boilers will mean dismantling part of the building and that is what makes extending their life uneconomic.

[trader_jackson]

https://www.nzx.com/files/attachments/221708.pdf

Good to see GNE manager increasing/creating a holding...

[Sideshow Bob]

Got my voting papers yesterday, with Dame Jenny retiring by rotation.

Hardly ever bother voting with companies, but this year I did! Not that it will make a material difference! But made me feel better!

[Zaphod]

Got my voting papers yesterday, with Dame Jenny retiring by rotation.

Hardly ever bother voting with companies, but this year I did! Not that it will make a material difference! But made me feel better!

I'd certainly encourage you to vote. There's always a block of people who vote (directly or by omission) for the status quo and this needs to be counteracted. Overall we need to keep the board on their toes!

[kiwichick]

I've just recently purchased Genesis shares, so I'm only just finding out more about this company. Is Jenny Shipley a poor chair?