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

Photo: Delivered

Genesis Energy’s full-year profit fell by a third as low supplies of gas, hydro and wind power and a power plant failure cut profits.

Key figures for the 12 months ending in June compared with the previous year:

• Net income $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 versus 17.6 cents per share

Operating profit fell 22 percent from a year earlier due to energy constraints.

The energy company said lower rainfall, a national gas shortage and a failure of Unit 5 at Huntly Power Station contributed to the reduction in energy production.

To make up the shortfall, more coal had to be burned, increasing fuel costs by nearly $170 million and emissions by 60 percent.

Chief executive Malcolm Johns said gas supplies would continue to be an issue and continued use of coal would be necessary to ensure energy security in the current market.

He added that there is a strong correlation between gas prices and wholesale electricity prices.

“Genesis has secured additional gas supplies to support customers and generation at Huntly through agreements with market participants. Genesis has also been awarded the right to develop up to 10 PJ of gas storage from the Tariki Joint Venture. This will enable gas storage for use during the winter months.”

Johns said Genesis customers have not felt the impact of higher wholesale prices.

He added that the company intends to build significant renewable power plants, including solar and wind farms.

“Genesis intends to build 500MW of new renewable energy and release 500MW of generating capacity at Huntly over the next four years to support energy security. This is New Zealand’s fastest and cheapest way to strengthen near-term energy security in a high renewable energy grid.

“New Zealand has a reserve requirement in the current market conditions. As we add more solar and wind to the grid, the country also needs a reserve requirement, and all generators need to contribute to that reserve. The market will efficiently address both the reserve requirement and the energy requirement once the requirements are in place.”

Johns said volatility in electricity and gas markets would likely weigh on future earnings.