GNE - Genesis Energy

[winner (n)]

How to wake up beagles

https://twitter.com/_B___S/status/1591294471895126017?s=20&t=Wr6eBx4ODqZCMgbPFnxTqA

[Basil]

How to wake up beagles

https://twitter.com/_B___S/status/1591294471895126017?s=20&t=Wr6eBx4ODqZCMgbPFnxTqA

LOL that really made my day mate...too funny...I almost split my sides laughing      .
Look at the speed of him when there's a feed involved ROFL

[winner (n)]

LOL that really made my day mate...too funny...I almost split my sides laughing      .
Look at the speed of him when there's a feed involved ROFL

Wouldn't want to miss out on those dividend feeds eh

[winner (n)]

That target price in the high 300's that Craigs had seems like it really was just wishful thinking

Can't see the share price getting anywhere near 370/380 or whatever it was ....looks like I've been sucked in again

Shouldn't get carried away with excitment with things I don't really understand

[Basil]

Maybe that's Winner code speak for you've sold out ?
https://www.marketscreener.com/quote/stock/GENESIS-ENERGY-LIMITED-17595957/consensus/
Interestingly of the 5 analysts with compiled data on Market screener the highest recorded target is $3.20 so I guess go figure on Craigs target eh ?
Average is $2.86.   For what it's worth it seems there's not much dividend growth forecast for the next 3 years...18 cents for FY23, FY24 and FY25.  If they maintain 80% imputation that's 8.5% gross yield but on their history to date, you'd have to concede the chances of future dividends growing at the same rate as inflation is very slim.  Best bet here is this is a bond proxy and if we can get on top of inflation and interest rates start to come down in 2024 we could potentially see this just north of $3 again.  In the meantime, 8.5% gross yield is not too shabby for a utility company. Just remember to wake me up at dividend feed time 😉

[winner (n)]

Jeez ...what Craigs up to - early October they were saying GNE 370 and now you suggesting they say 320

Must have realised that the correltion with govt stock isn't broken after all.

Probably print a 288 target next

[Shareguy]

Latest note I can see is October. Target $3.44 

FY23 EBITDA guidance raised to c.$500m, +10% (prev. c.$455m)
 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 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, 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/C&I). We update our forecasts, with the key changes being the increased hydro generation in FY23, refresh of our market pricing, along with an uplift in realised oil price, with our earnings uplift more than offset by the shift in RFR (4.7% vs 4.2% prev.) to determine a revised Target Price of $3.44 (prev. $3.70). GNE remains our preferred gentailer, Overweight retained.
Forecast updates include increased hydro, small uplift in dividends
Our revised forecasts include a lift in FY23 hydro generation by 450GWh to c.3,150GWh (prev. 2,700GWh), with our FY23 EBITDAe +$61m to $504m. Updated market pricing that include elevated winter ASX futures and a lift in the near-term oil curve increases our FY24/25 EBITDAe by $21m/$16m. We continue to assume no swaption/MSO premium renewal for GNE post CY22. 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.
Target Price $3.44 (prev. $3.70), O/W retained
Our Target Price is based on our forward DCF valuation (WACC 8.4% (prev. 8.0%), Tg 3.0%, average RFR 4.7% (prev. 4.2%) resulting in $3.44 (prev. $3.70). We retain an Overweight recommendation. Key risks include regulatory change, wholesale and retail competition, and project development risk. Our sector preferences are unchanged, and in order of GNE, CEN, MEL (Overweight), whilst MCY (Neutral) and MNW (Underweight) are under review, given recent share price depreciation.
Key Changes
TP
3.70 to 3.44
-7.0%
 Source: Craigs Investment Partners
  Forecasts And Ratios
Source: Craigs Investment Partners
355 440 504 451 438 11.6 9.5 8.0 8.9 9.3 17.4 17.6 18.1 18.4 18.7 6.5 6.6 6.8 6.9 7.0
            Year End
2021A
2022A
2023F
2024F
2025F

[Shareguy]

Fbar $2.85. Still a great divi stock. I have noticed with analysts, they generally follow the price up or down. More and more often they seem very similar to each other. One broker I spoke to said that there is great rivalry between the analysts at different firms. They put out these research notes so there's a lot of pressure to be right. The broker said that he has noticed that few stick their necks out these days.

Craig's analyst was ex GNE so you would think he would have a good handle on this.

[xafalcon]

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?

1040MW of wind capacity does not equal 1040MW of generation. Actual wind generation ranges from <100MW to approx 650MW. Wind has the most uncertainty of generation output of all the renewables. Hydro water can be held in storage, the sun always rises and sets at known times (clouds add some uncertainty), but the wind only blows over turbines at somewhat random times, maximised around the equinoxes

Bottom line. To cover this uncertainty of especially wind generation, significant overcapacity must be built with geographic separation. OR, storage is added (in which case Lake Onslow is a no-brainer)

[Basil]

Fbar $2.85. Still a great divi stock. I have noticed with analysts, they generally follow the price up or down. More and more often they seem very similar to each other. One broker I spoke to said that there is great rivalry between the analysts at different firms. They put out these research notes so there's a lot of pressure to be right. The broker said that he has noticed that few stick their necks out these days.

Craig's analyst was ex GNE so you would think he would have a good handle on this.

Thanks for sharing the analysts views.
Maybe with Craigs analyst its a case of familiarity bias...which I guess is a form of confirmation bias ?
https://www.valuewalk.com/familiarity-bias-investing#:~:text=Familiarity%20bias%20is%20the%20preference%20of%20the%20individuals,not%20want%20to%20take%20the%20path%20never%20taken.
I agree it's a great yield for a utility company but we need to keep in mind the run down in the Kupe reserves over time and the lifespan of Huntly.

[Plata]

1040MW of wind capacity does not equal 1040MW of generation. Actual wind generation ranges from <100MW to approx 650MW. Wind has the most uncertainty of generation output of all the renewables. Hydro water can be held in storage, the sun always rises and sets at known times (clouds add some uncertainty), but the wind only blows over turbines at somewhat random times, maximised around the equinoxes

Bottom line. To cover this uncertainty of especially wind generation, significant overcapacity must be built with geographic separation. OR, storage is added (in which case Lake Onslow is a no-brainer)

From memory wind energy tends to have a capacity factor of 40-50%, so while output may range from 0 to 1040 MW the average generation output will end up closer to 500 MW at best. That is equivalent to 2 Huntley Rankine units running 24/7 in energy production terms, or equivalent to the capacity of all large scale wind farms currently in operation (https://www.transpower.co.nz/system-operator/live-system-and-market-data/consolidated-live-data). I think that makes it a pretty significant development if they actually build it. Throw in 200 MW of geothermal under construction from CEN and something like another GW of solar/wind projects underway as well, I still reckon there could be an oversupply situation in the near future if electricity demand does not grow much.

Your right that Onslow would be a good solution in terms of firming/backing up this form of generation, but I am not convinced that it makes financial sense to spend 4 billion+ on such a large battery. A cheaper, smaller Onslow that can be upgraded overtime as needed would be more ideal. Would you still support Onslow if the cost was 10 billion? Megaproject cost overruns can get pretty bad...

I think that smaller storage projects make more sense, in combination with distributed storage and managed demand using peoples electric vehicles to manipulate demand and supply. This method will also mitigate the need for the massive transmission line upgrades that the media has been yapping about of late.

In terms of where GNE fits into all of this, I have been considering whether or not they have spare capacity on their balance sheet to do a project on top of the 500 MW solar JV. Debt went up in the last report, but to my understanding the majority of that was due to a one off and the coal buying spree they went on. Payout ratio last year was ~75% and guidance for this year is higher, if we assume the incremental dividend increases continue this year payout ratio could fall under 70%. It won't take long at this level of retention to save up enough for a small project or larger JV. Assuming Onslow gets rejected, I would not be surprised if GNE adds mention of a battery storage project in their next report. There is also the castle hill windfarm consent (expires 2023), it is for ~1000 MW of capacity so a bit too big to do alone. Maybe a JV?

[xafalcon]

From memory wind energy tends to have a capacity factor of 40-50%, so while output may range from 0 to 1040 MW the average generation output will end up closer to 500 MW at best. That is equivalent to 2 Huntley Rankine units running 24/7 in energy production terms, or equivalent to the capacity of all large scale wind farms currently in operation (https://www.transpower.co.nz/system-operator/live-system-and-market-data/consolidated-live-data). I think that makes it a pretty significant development if they actually build it. Throw in 200 MW of geothermal under construction from CEN and something like another GW of solar/wind projects underway as well, I still reckon there could be an oversupply situation in the near future if electricity demand does not grow much.

Your right that Onslow would be a good solution in terms of firming/backing up this form of generation, but I am not convinced that it makes financial sense to spend 4 billion+ on such a large battery. A cheaper, smaller Onslow that can be upgraded overtime as needed would be more ideal. Would you still support Onslow if the cost was 10 billion? Megaproject cost overruns can get pretty bad...

I think that smaller storage projects make more sense, in combination with distributed storage and managed demand using peoples electric vehicles to manipulate demand and supply. This method will also mitigate the need for the massive transmission line upgrades that the media has been yapping about of late.

In terms of where GNE fits into all of this, I have been considering whether or not they have spare capacity on their balance sheet to do a project on top of the 500 MW solar JV. Debt went up in the last report, but to my understanding the majority of that was due to a one off and the coal buying spree they went on. Payout ratio last year was ~75% and guidance for this year is higher, if we assume the incremental dividend increases continue this year payout ratio could fall under 70%. It won't take long at this level of retention to save up enough for a small project or larger JV. Assuming Onslow gets rejected, I would not be surprised if GNE adds mention of a battery storage project in their next report. There is also the castle hill windfarm consent (expires 2023), it is for ~1000 MW of capacity so a bit too big to do alone. Maybe a JV?

You are missing the point. Wind generation is intermittent and uncontrollable. Wind generation peaks in spring and autumn vs the winter demand peak. Of all the renewables, wind is the most reliant on other generation sources to "fill in the generation gaps"

I have never seen more than 700MW of wind generation reported on WITS. Eye balling 12 months of data, indicates about 400MW average = 30%

Green electricity is quickly becoming the new black gold, compounded by the Ukrainian war and Russian trade sanctions. NZ is perfectly located to leverage this by becoming a massive green energy source. Our economy will boom if we as a nation embrace this golden opportunity.

The size of Lake Onslow is the key to this. Lake Onslow is the absolute cheapest storage option (1000 times cheaper than battery storage), and suitable for longer term storage  (batteries = days, pumped hydro = months-years)

[Plata]

I have never seen more than 700MW of wind generation reported on WITS. Eye balling 12 months of data, indicates about 400MW average = 30%

Green electricity is quickly becoming the new black gold, compounded by the Ukrainian war and Russian trade sanctions. NZ is perfectly located to leverage this by becoming a massive green energy source. Our economy will boom if we as a nation embrace this golden opportunity.

The size of Lake Onslow is the key to this. Lake Onslow is the absolute cheapest storage option (1000 times cheaper than battery storage), and suitable for longer term storage  (batteries = days, pumped hydro = months-years)

It makes sense that the live viewer never shows wind at max output since these farms are all over the country, pretty unlikely they would all get perfect conditions simultaneously. Individual windfarms can and do get quite close to max output every now and again depending on how spread out they are.

The great thing about Onslow is its low price per unit of storage, I'm just concerned about the expense. The interest payments alone on the debt required to finance the project would be hundreds of millions annually.
It would be a great solution to the intermittency of wind and solar. I'm not convinced it is the best solution, or the most deserving of the money out of all the places the government could spend it. Getting maximum value from Onslow is reliant on the interisland cable and transmission grid throughout the country, both of which are expected to need billions of dollars of upgrades if power consumption grows as forecast. I think a smaller, cheaper, ideally expandable Onslow combined with a scaled down Huntley and use of vehicle-to-grid (EV charges when excess power, EV sells back to grid when insufficient power) could have a better cost benefit ratio and make progress on solving more aspects of the energy problem we face.

A lot of this stuff should be evaluated in the upcoming Onslow study and might indicate that it is a great idea, but based on the details I have read so far I am not convinced that building it is a "no-brainer".

[Basil]

Has GNE worked its way back, (with recent share price declines), into contention as a safe defensive BUY ?
Craigs reckon 18.1 cps in dividends and if they maintain their long term track record of 80% imputation that works out to 18.1 / 0.776 = 23.32 cps gross / $2.61 = 8.94% gross yield.  Almost 9% for a safe utility company that's recession proof.  Pretty attractive yield.  Safe harbour for a modest portion of one's funds in a choppy market ?

[Crackity]

Jantar understands the market best but he is not on this site as far as I know.

The spot electricity market is not a real market - it's a cartel - wind is often priced at 0.01 - WITS trading website has live data