A combination of low wholesale electricity prices, low growth in demand for electricity and gas, and the impact of one-off outages to upgrade canals in the Tekapo hydro scheme saw operating earnings at Genesis Energy fall 13 per cent to $336 million in the year to June 30.
The result was achieved on a 9 per cent drop in revenue to $2.1 billion, not quite offset by an 8 per cent decline in operating expenses at $1.7 billion.
Net profit after tax improved from a restated $86 million in the previous year to $105 million, but the increase was largely attributable to lower depreciation and depletion charges, lower interest costs, a $30 million positive movement in non-cash changes in the fair value of financial instruments, and the benefits of an insurance settlement relating to Kupe oil and gas field infrastructure.
Earnings before interest, tax, depreciation, amortisation and financial instrument movements (ebitdaf) - the best guide to underlying earnings trends - was $336 million, compared with $387 million.
About $20 million to $25 million of the reduction was caused by the unavailability of the Tekapo hydro assets during an extended outage for maintenance, with the second, shorter maintenance phase scheduled in the current financial year. The Tekapo outage coincided with high hydro inflows, leading to 220 gigawatt hours of water being spilled from the Tekapo scheme.
Drought in the North Island reduced the company's ability to generate electricity from its Tongariro hydro assets, while low wholesale electricity prices made it uneconomic to generate using its Huntly coal and gas-fired power stations.
Genesis paid a full-year dividend for the first time since 2009, reflecting its purchase of the Tekapo hydro-electricity assets from Meridian Energy in electricity reforms announced in 2010. Total dividends for the year were $114 million, a 5.6 per cent return on assets valued at $2.1 billion.