Originally Posted by
Snoopy
One point that doesn't seem to be sufficiently highlighted in the investment statement is what happens to the balance between customers and generation should Tiwai point reduce its consumption even further? Genesis has a take or pay gas contract with Kupe, the gas field they partly own. The need to buy gas when cheaper sources of generation were available has blighted the company in recent years, as it will in FY2014 and FY2015. Genesis make much of the fact that should they choose to, they can ramp up production at Huntly and service all their own customers for which they currently buy energy on the wholesale market.
But if Huntly has to close, and of all the power stations in NZ it is the most likely candidate for closure IMO that would throw the generation customer balance at Genesis completely out of whack. The Genesis customer base for electricity could then collapse overnight as rival energy customers control their own generation to force up wholesale prices to bring Genesis to its knees. I am thinking back here to what happened to Transalta in NZ when they ended up as a pure retailer against the Gentailers and got destroyed. I don't think things would get that bad at Genesis, but the company could be forced to suddenly have in size, which would do shareholders no good at all...
SNOOPY
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