Genesis Energy’s full-year profit falls by a third

Genesis Energy’s headquarters in Oakland.
photo: Source: Genesis Energy

Genesis Energy’s full-year profit fell by a third as a shortage of natural gas, low levels of hydro and wind generation and power station outages squeezed earnings.

The key figures for the 12 months to June, compared with the same period last year, are as follows:

• Net profit: $131.1 million vs. $195.7 million
• Revenue: $3.04 billion vs $2.3 billion
• Operating profit (EBITDA) $407 million vs $523.5 million
• Full-year dividend of 14 cents per share, compared to 17.6 cents per share in the same period last year

Operating income fell 22% from the previous year due to energy constraints.

The power company said reduced rainfall, a shortage of natural gas in the country and the outage of Unit 5 at Huntly Power Station led to the drop in power generation.

To make up the shortfall, it had to burn more coal, which increased fuel costs by nearly $170 million and increased emissions by 60 percent.

Chief executive Malcolm Johns said gas supply would remain an issue and in the current market the company needed to continue using coal to ensure energy security.

He said there was a strong correlation between natural gas prices and wholesale electricity prices.

“Genesis has been able to secure additional gas supplies to support Huntly’s customers and power generation through agreements with market participants. Genesis has also secured rights to develop up to 10 PJ of gas storage in the Tariki joint venture. This will enable gas to be stored for use during the winter months.”

Johns said Genesis customers have not been impacted by the wholesale price increases.

He said the company will build a large number of renewable energy power plants, including solar and wind farms.

“Genesis plans to build 500MW of new renewable electricity over the next four years and unlock 500MW of baseload generation at Huntly to support energy security. This is the quickest and cheapest way for New Zealand to consolidate short-term energy security in a renewable energy grid.

“In the current market environment, New Zealand has a capacity reserve requirement. As we add more solar and wind to the grid, the country will also need energy reserves, and all generators will need to contribute a portion of that energy reserve. Once that is in place, the market will effectively resolve the capacity and energy reserve issues.”

Johns said volatility in electricity and natural gas markets could continue to weigh on future earnings.