Genesis Energy profit takes a dive

The Genesis Energy owned Huntly Power Station.

State-owned electricity generator Genesis Energy posted a 73 per cent fall in first-half profit to $17 million on increased depreciation and borrowing costs related to its stake in the Kupe gas field, eroded wholesale electricity margins, and accounting adjustments.

The company also derived less income than expected from Kupe, which came on-stream last year and in which Genesis has a 31 per cent stake.

Chairwoman Jenny Shipley said "while there are a range of operating and financial scenarios that might eventuate during 2010/2011", Genesis is on track "at this stage" to meet its projected net profit for the financial year of around $40 million, compared with $87.7 million as year earlier.

Earnings before interest, tax, depreciation and amortisation basis rose 4 per cent to $139.3 million.

"The result benefited from lower operating costs and Kupe oil and gas field operations," said Shipley in a statement, which contained no financial tables.

"Revenue was largely unchanged at $948.6 million, down just 1.3 per cent."

After adding back unfavourable fair value changes, adjusted return on equity was 2 per cent, slightly ahead of the 1.9 per cent target in the company's Statement of Corporate of Intent.

Genesis is among SOE's being targeted for part-privatisation if a National-led government is re-elected in November this year.

"NPAT was lower due to a range of factors including lower wholesale electricity margins, increased depreciation, depletion and amortisation charges related to the company's interest in the Kupe oil and gas field, unfavourable fair value changes in derivatives and higher borrowing expenses as less interest was capitalised following the commissioning of Kupe," Shipley said.

Because the company is still in the throes of taking over the Tekapo A and B hydro-power stations from Meridian Energy under government electricity reforms, no interim dividend will be declared, consistent with the non-declaration at the last full financial year.

While wholesale electricity prices rose strongly in November and December, as low inflows dried out hydro lakes, "sudden high inflows late in December resulted in high lake levels and low spot prices by the end of December," said chief executive Albert Brantley.

As a result, total generation was down more than 10 per cent at 3,535 Gigawatt hours for the six months, reflecting much lower output from Genesis's coal and gas-fired Huntly power station, which it now only runs when wholesale prices are high.

Thermal generation at 2,415 GWh was down 14 per cent for the period, compared to the same time a year earlier, while renewable generation was up 1% on the same basis.

The company said it had met customer acquisition targets in the South Island, where the reforms are intended to promote competition, with 30,089 Mainlanders now on the books.

Total electricity numbers fell slightly to 543,800, although natural gas customers grew by 3 per cent to 110,900, compared to Dec. 31, 2009.

LPG customers grew by 2700 to 3400 in the second quarter, reflecting Genesis's recommitment to LPG sales thanks to production from Kupe.