GNE - Genesis Energy

[Plata]

Well, clearly GNE didn't think 900 kilotons of coal was enough. They now have 975 kilotons.
The upgrade was nice, I don't have a full understanding of how Ebitda translates to FCF but I imagine that unexpected ~50 million from the upgrade will translate mostly into FCF. Will really help GNE to pivot away from Huntley (assuming they don't continue the coal buying spree), they need every dollar they can get to fund this solar development.

In other news, remember a while ago I was wondering how long it takes the big guns at Huntley to starting firing? Well I found all that info and more.
https://www.genesisenergy.co.nz/about/generation/huntly-power-station

[Shareguy]

Craig's have upped the dividend forecast accordingly. Still  number one power pick.

Previously we have assumed dividend distributions increase at c.1.5% pa, maintaining a payout at the bottom end of GNE's 70-90% of free cash flow range. Provided GNE can deliver on FY23 expectations we lift our FY23 dividend from 17.9cps to 18.1cps (a 3% lift on FY22). Headline Net debt/EBITDA also benefits from the lift in FY23 earnings with GNE's forecast gearing metric fitting comfortably within its 2.4-3.0x target range through to FY25.


FY23 guidance update
FY23 EBITDA updated to c.$500m, +10% on prev. c.$455m, due to favourable market conditions
GNE has released its 1Q23 Performance Report accompanied by an upgrade to its FY23 EBITDA guidance to c.$500m, from the c.$455m set at its full year result in August.
The primary driver of the upgrade has been much higher inflows into hydro catchments, resulting in renewable generation up 37% to 1,063GWh and enabling GNE to dial back its flexible yet high-cost thermal plant. Lower levels of thermal generation and carbon emissions (emissions down 51% on the pcp) have reduced GNE's portfolio generation costs to $34/MWh, down 47% or $29/MWh, providing a $60m positive impact to gross margin.
In addition to backing away its high-cost thermal plant, GNE has been able to purchase what electricity it needs for resale at a much lower wholesale price, $75/MWh vs $157/MWh in the pcp, with its total retail electricity sales pricing also increasing $10/MWh (most of this increase coming from SME and C&I), notwithstanding slightly lower residential and C&I

[xafalcon]

Craig's have upped the dividend forecast accordingly. Still  number one power pick.

Previously we have assumed dividend distributions increase at c.1.5% pa, maintaining a payout at the bottom end of GNE's 70-90% of free cash flow range. Provided GNE can deliver on FY23 expectations we lift our FY23 dividend from 17.9cps to 18.1cps (a 3% lift on FY22). Headline Net debt/EBITDA also benefits from the lift in FY23 earnings with GNE's forecast gearing metric fitting comfortably within its 2.4-3.0x target range through to FY25.


FY23 guidance update
FY23 EBITDA updated to c.$500m, +10% on prev. c.$455m, due to favourable market conditions
GNE has released its 1Q23 Performance Report accompanied by an upgrade to its FY23 EBITDA guidance to c.$500m, from the c.$455m set at its full year result in August.
The primary driver of the upgrade has been much higher inflows into hydro catchments, resulting in renewable generation up 37% to 1,063GWh and enabling GNE to dial back its flexible yet high-cost thermal plant. Lower levels of thermal generation and carbon emissions (emissions down 51% on the pcp) have reduced GNE's portfolio generation costs to $34/MWh, down 47% or $29/MWh, providing a $60m positive impact to gross margin.
In addition to backing away its high-cost thermal plant, GNE has been able to purchase what electricity it needs for resale at a much lower wholesale price, $75/MWh vs $157/MWh in the pcp, with its total retail electricity sales pricing also increasing $10/MWh (most of this increase coming from SME and C&I), notwithstanding slightly lower residential and C&I

Thanks. What is Craigs latest SP guidance? I realise they are very bullish on GNE. Looking at recent gentailers SP movements, MEL is looking very attractive

[Shareguy]

Our current sector preferences in order are:
GNE – [Overweight, TP $3.44]. Offers an attractive cash dividend yield and will play an important role in New Zealand's electrification and decarbonisation. Expected to be the markets dry-year reserve through to the late 2020's or an alternative solution is developed. Its 46% ownership in the Kupe gas field asset has been retained, following a strategic review in FY21, helping to underpin dividends at current levels through to the late-2020's. Carbon exposure remains a headwind for GNE however the cost of carbon is hedged below market (at c.$25-35/NZU) through to FY29 and its PPA strategy (Future-gen) is aimed at displacing baseload thermal.
CEN – [Overweight, TP $8.30]. Expected to benefit from the execution of its 168MW Tauhara geothermal generation development (plus recently added 51MW Te Huka project) and displacement of its high-cost thermal plant which is currently under strategic review. Its balance sheet is strong and distribution policy flexible enough to maintain sustained dividend distribution growth. Some earnings constraint is associated with the 100MW support contract to keep Tiwai in market until Dec-24.
MEL – [Overweight, TP $5.25]. Has demonstrated an ability to capture near-term earnings growth despite value transfer to prevent a Tiwai exit. Balance Sheet in good shape to support future generation projects whilst future earnings are likely to support dividend distributions returning to historic levels - at this stage we hold MEL's dividend at c.80-90% of FCF. MEL has been working towards deleveraging Tiwai's negotiating power in 2024 through execution of demand side replacement initiatives. Post-2024 Tiwai operation negotiations

[Shareguy]

Forbar say today that Genesis is on a forward 2023 PE of 10.6


Must be a mistake

2022 actual EPS 21.24 divi 17.6 PE 12.4
2023 fcast  EPS 25.5 divi 17.9  PE 10.6

[xafalcon]

Forbar say today that Genesis is on a forward 2023 PE of 10.6


Must be a mistake

2022 actual EPS 21.24 divi 17.6 PE 12.4
2023 fcast  EPS 25.5 divi 17.9  PE 10.6

Do you mean forbar made a fubar......

[Plata]

Huntley is almost completely offline, only outputting 3 MW as of 11:30 am. If this continues I think there could be opportunity for a further upgrade, or at least a result at the top of the guidance range.

[Plata]

https://www.1news.co.nz/2022/11/06/wind-farm-powering-half-million-homes-to-be-built-off-taranaki-coast/

For reference, there is currently ~1040 MW of wind capacity connected to the grid. It is hard to see how all of these renewables projects being proposed/constructed at the moment make sense without quite strong power demand growth. Power demand has been pretty flat over the last few years, are they expecting an EV boom?

[BlackPeter]

https://www.1news.co.nz/2022/11/06/wind-farm-powering-half-million-homes-to-be-built-off-taranaki-coast/

For reference, there is currently ~1040 MW of wind capacity connected to the grid. It is hard to see how all of these renewables projects being proposed/constructed at the moment make sense without quite strong power demand growth. Power demand has been pretty flat over the last few years, are they expecting an EV boom?

Would make sense, wouldn't it?

Add to that Tiwai point likely will stay and that the business case for this green hydro project gets better by the day.

Never good to assess investments just with a firm view into the rear mirror.

[Plata]

Would make sense, wouldn't it?

Add to that Tiwai point likely will stay and that the business case for this green hydro project gets better by the day.

Never good to assess investments just with a firm view into the rear mirror.

For sure, I just wonder if there is a risk of overbuild if Onslow does not go ahead (my expectation) and EV demand growth is weaker than expected. Worth remembering that contact has ~200 MW of geothermal baseload coming online in the next few years as well, which will more than offset the loss of their co-gen plant at Fonterra. It will certainly be interesting to see if GNE green lights the solar and on what basis (hopefully they share that).

[winner (n)]

Feeling guilty are we?

They overlook GNE shareholders haven't had a decent payrise for many years

https://www.rnz.co.nz/news/business/478672/household-power-bills-driven-up-by-retailers-paying-excessive-dividends-union

[arekaywhy]

just a bunch of socialists looking around for the next "excessive" profit easy target since Cindy deflected personal criticism with that perennial story

[Basil]

Feeling guilty are we?

They overlook GNE shareholders haven't had a decent payrise for many years

https://www.rnz.co.nz/news/business/478672/household-power-bills-driven-up-by-retailers-paying-excessive-dividends-union

I am sure I recall when they listed, they stated their dividend policy was to increase it each year "in line with inflation" or words very similar to that effect.  In a recent governance presentation, they made quite a meal of the fact that dividends have gone up every year but very "conveniently" overlooked the fact that they have fallen well below the rate of inflation especially in recent times.

[winner (n)]

I am sure I recall when they listed, they stated their dividend policy was to increase it each year "in line with inflation" or words very similar to that effect.  In a recent governance presentation, they made quite a meal of the fact that dividends have gone up every year but very "conveniently" overlooked the fact that they have fallen well below the rate of inflation especially in recent times.

Yep basil - dividend has increased at 1.2% pa since 2016 .....maybe better check the trusty inflation calculator to see how much they haven't kept that promise.

But then 2023 is going to be our year eh.

Looked at Mornngstars TSR data just now - since late 2019 Total Shareholder Return (inc reinvested divies) has been -11% - pathetic investement last 3 years

[Basil]

Yep basil - dividend has increased at 1.2% pa since 2016 .....maybe better check the trusty inflation calculator to see how much they haven't kept that promise.

But then 2023 is going to be our year eh.

Looked at Mornngstars TSR data just now - since late 2019 Total Shareholder Return (inc reinvested divies) has been -11% - pathetic investement last 3 years

Grinds my gears a bit when Julie Anne Genter and her "rocket scientist" "all things ESG is all that matters", colleagues say we're making excess profits.
Things are definitely looking up for FY23 mate, ~ $500m EBITDA for one thing and then there's the new Beagle advertisement.  It's a sign eh....This must be the "purrfect" dividend hounds' stock      https://www.youtube.com/watch?v=GxJfh9Y8PIU