Huntly Power Station. Photo / Genesis
Genesis Energy says first-half operating earnings will be down about 15 per cent on the previous year's record result due to a combination of low hydro storage and high fuel costs.
The country's biggest energy retailer today reported stronger volumes and lower costs at its electricity and gas retailing business in the six months ended December 31, but posted reduced hydro production and higher gas and coal costs for its generation arm than the year before.
"The continued momentum from our retail segment is pleasing, however, the ongoing fuel constraints and elevated fuel costs in wholesale will act to reduce our first-half wholesale segment result relative to the prior comparable period," chief financial officer Chris Jewell said in a statement to NZX.
But the company has maintained its June-year forecast at $360 million to $380m of earnings before interest, tax, depreciation, amortisation and changes in financial instruments.
It used less coal in the December quarter than the year before and is starting 2020 with more water in its dams than last January.
"Genesis expects a less constrained second half of FY20 with lower fuel costs and a starting hydro storage level 150 GWh above the previous corresponding period."
The firm's shares fell 0.2 per cent to $3.235, reducing its 12-month gain to about 21.8 per cent.
Genesis and its major rivals spent much of 2019 carefully managing hydro supplies as a series of maintenance shuts – including at the Kupe gas field Genesis part-owns – kept fuel supplies tight. Storms on both islands in November and December then pushed national hydro storage to a decade-high, prompting firms to hold back water for additional insurance during major transmission work currently underway and ongoing gas disruptions.
Mercury NZ today noted that its December-quarter generation from dams on the Waikato River was almost 8 per cent lower than the year before as it held back water given the "increased likelihood of high spot prices" in the current quarter. The March quarter is also usually the lowest for inflows in the Waikato.
Genesis, which operates the Tekapo, Tongariro and Waikaremoana hydro schemes, is also the country's biggest thermal generator and has been running its gas- and coal-fired units at Huntly hard during the past two weeks.
Spot power prices jumped to an average $192 a megawatt-hour on Tuesday, as low wind production compounded the impact of reduced transmission from the South Island and tight gas supplies. OMV has reduced production from the offshore Pohokura field during the past two weeks while it carries out well maintenance.
Genesis noted that a workover project the Kupe partners plan will also cause "intermittent" supply reductions next month but could free up additional gas ahead of work to install additional compression due for completion mid-2021.
Genesis owns 46 per cent of the Beach Energy-operated field which delivered about 25 petajoules of gas in the year ended June 30.
It said work to make additional perforations in the field's three offshore wells could deliver an extra 5 PJ of gas before mid-2021.
"The production uplift will depend on the number of wells perforated, which will be determined by results from wireline wellbore logging," it said.