Kupe lifts Genesis cash in tough year

Albert Brantley, CEO of Genesis Energy. Photo / Supplied

The first full year's production from the Kupe oil and gas field enabled Genesis Energy to lift its full-year operating earnings 18 per cent in the teeth of a tough year in the electricity sector.

The state-owned power company yesterday reported earnings before interest, tax, depreciation, amortisation and fair valuation (ebitdaf) of $292.6 million for the year ended June 2011, up from $248.8 million last year.

That included a net contribution of $54 million from its petroleum operations, up from $17 million the previous year as the Kupe field, 31 per cent owned by Genesis, delivered its first full year's output.

The core electricity generation and retailing business, however, had to contend with a wet year depressing wholesale prices and intense competition in the retail market.

The Genesis retail customer base grew by 3 per cent, though it is still only at about 70 per cent of its target for the South Island.

But retail electricity sales fell 11 per cent through relatively warm weather limiting demand and a strategy of reducing marginally priced commercial sales.

Generation fell 14 per cent as an abundance of water in the hydro lakes kept wholesale prices low and thermal plant, especially the coal-fired units at Huntly, uncompetitive much of the time.

"At times it was cheaper to purchase from the spot market than run thermal generation and thermal output declined 24 per cent, partially offset by an 18 per cent increase in renewable generation," said chief executive Albert Brantley.

Late in the financial year Genesis' renewable portfolio was boosted by the $821 million purchase of the Tekapo A and B power stations from its brother SOE, Meridian.

Last month the company said it had to write down the value of the Tekapo hydro scheme by $101 million soon after the deal was done to account for repairs to parts of the 25km canal linking the two power stations, which also require work.

These factors led to a bottom line loss of $16.6 million, after a profit of $69.3 million the previous year.