Genesis Energy said it planned to use profits from the Kupe gas field to support a $1.1 billion programme to build new renewable generation and grid-scale battery storage between now and 2030.
As part of a strategic reset, dubbed “Gen35″, investment will be made into solar, grid scale battery storage and wind that will help grow Genesis’ renewable portfolio to around 8300 gigawatt hours (GWh), the company - 51 per cent owned by the Government - said.
This is a 160 per cent increase on Genesis’ current 3200 GWh of renewable generation. Genesis’ proportion of renewable generation is targeted to rise to 95 per cent by 2035, the same level as New Zealand’s overall generation.
The company has a 46 per cent interest in the Kupe field, the gas from which is piped to its power station at Huntly.
Details on the development pipeline, the new lower-cost retail operating model and a 10-year financial plan will be outlined at an investor presentation today to capital market participants by chief executive Malcolm Johns and the executive team.
“Electrifying the economy is the pathway to achieving net-zero 2050. New Zealand needs to move from 40 per cent of energy drawn from electricity today to more than 70 per cent by 2050. That means electrifying our homes and businesses much faster than we are currently.”
The Huntly Power Station, by virtue of its location, firming capability and connection to critical national infrastructure, would continue to be a centrepiece of the company’s supply side plans together with hydro assets and more solar and wind, Johns said.
Progress is being made toward biomass replacing coal and this may open up some interesting regional economic development opportunities and jobs, he said.
“Huntly Power Station is a generation site of national value that will ensure electricity flows uninterrupted as demand increases and the sector builds new renewables.
“The size and scale of the transition is known; the demand growth is less clear but there is no market segment or political constituency for cold showers by candlelight.”
Genesis is forecasting its Gen35 strategy to drive growth in earnings.
In the Gen35 base case plan, ebitdaf (earnings before interest, tax, depreciation, amortisation and financial instruments) is expected to be around $500m in FY25 and in the mid-high $500m between 2026 and 2028.
The board has updated the dividend policy, to direct free cash flow from Kupe to renewables development.
As a consequence, total 2024 dividends have been guided at 14.0 cents per share, down from last year’s total of 17.6c.
The company will aim to maintain dividends in real terms and grow where appropriate, it said.
The company’s 2024 ebitdaf guidance remained unchanged at $430 million, which compares with its June 2023 year ebitdaf of $523.5m - a number boosted by favourable hydro conditions.
The financial impact of the Huntly Unit 5 turbine outage, based on current market conditions, plant and fuel availability, and mitigating factors was estimated to be $25 million, net of insurance proceeds.
At Genesis Energy’s annual meeting in October, chair Barbara Chapman and Johns were questioned about the company’s underperforming share price.
‘We are very cognisant of how we get our share price into a position that we would want it to be,” Chapman said then.
“There are macro factors weighing on the Genesis share price that our competitors do not have, and they are largely around the appetite of some investors for fossil fuel and upstream oil and gas, and that’s impacted on the share price.”
The company’s shares last traded at $2.37, having dropped by 6.5 per cent over the past 12 months.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.