Genesis Energy is heading for a record annual profit, thanks in no small part to the heavy rain that has been filing its hydro lakes over the last few months.
The power generator, retailer and gas supplier reported a 42 per cent lift in its operating earnings (ebitdaf) for thefirst half to $298 million, and raised its full-year forecast to $515m.
It is Genesis Enegy’s third upward earnings upgrade for the 2023 financial year, having started first with $455m in August, followed by $500m in October. Ebitdaf came to $440m in 2022.
Jarden said in a research note that it was a strong first-half result from Genesis and a “healthy” full-year earnings upgrade.
In the six months, Genesis generated a record 2034 gigawatt hours of electricity from its three hydro schemes, 43 per cent more than for the first half of 2022.
Conversely, this reduced thermal generation at its coal-powered Huntly Power Station to record lows, significantly lowering fuel costs and reducing carbon emissions from generation by 470,000 tonnes - a 52 per cent reduction.
Interim chief executive Tracey Hickman said the result reflected the diverse nature of the company’s generating assets.
“We can’t predict the weather but it [the result] shows the benefit of having assets that are able to respond to quite different hydrological conditions,” Hickman told the Herald.
“So if there were to be was a dry spell, we have the ability to ramp up our assets and to support the market through the dry times,” she said.
Hickman will hand over the company’s reins to former Christchurch Airport CEO Malcolm Johns on March 6.
Chief financial officer James Spence said Genesis had been able to give three earnings upgrades because the hydrology had been “exceptionally strong”.
“That has enabled us to turn down our thermal assets and increase the amount of generation that we have been able to source from hydro,” Spence said.
“That’s meant we have been able to reduce our thermal costs, and so we have seen some high margins.”
Genesis Energy interim CEO Tracey Hickman.
Earlier this month, Genesis and its solar joint venture partner, FRV Australia, announced it had secured a fully consented, 90-hectare site near Lauriston on the Canterbury Plains to generate solar power.
The site is expected to start generating electricity - enough to power 10,000 homes - in late 2024.
Genesis says Lauriston is poised to be one of the first large-scale solar farms to reach operational stage in New Zealand.
Hickman said plans for three other solar sites in the North Island were also well-advanced, the details of which would be announced this calendar year.
“There are others in our pipeline that are progressing as well,” she said.
“We are continuing to invest in that pipeline and that’s in line with our ambition to reduce our baseload running of thermal assets as quickly as we can,” she said.
While there had been further interest from third parties in acquiring Genesis’ 47 per cent take in the Kupe gas field, valuations had not been up to scratch.
Genesis confirmed its investment in a well development programme at the Kupe gas field (KS-9), pending Environment Protection Authority approval of consent applications lodged by the field’s operator, Beach Energy.
Spence said gas is expected to continue to play a role through the energy transition in providing both back-up generation for dry periods and support for intermittent wind and solar generation.
“We see gas as a key transitional fuel, as the overall system becomes more intermittent with solar and wind generation that can’t be relied on 100 per cent of the time,” he said.
“For the near and medium term, we see gas as being the best back-up for that increasingly intermittent environment.”
Gas remains an important fuel for Genesis - it powers its grunty Unit 5 turbine at Huntly, and it has residential and wholesale gas customers.
“We don’t have to be owners [of the Kupe stake] but at the same time we are not going to give it away at less than the value that we see it at,” he said.
Hickman said Genesis had progressed its strategic priorities, which included a successful trial of biomass burn at Huntly.
She said Huntly would continue to be critical to the country’s electricity system looking ahead, and that the company was committed to exploring more renewable fuel options to replace coal.
Genesis raised its interim dividend to 8.8 cents from 8.7c.
Shares in Genesis were little changed after the result, trading at $2.83.
