GNE - Genesis Energy

[Shareguy]

Fbar latest


We have increased our FY23 EBITDAF forecast +NZ$2m to NZ$522m, +NZ$7m ahead of GNE's guidance. The main positive (and driver of the near-term earnings upgrade) were strong months (3Q23 and April 2023) from a hydro perspective and we have lifted our hydro generation assumption +90GWh (+3%). FY23 will be a record hydro generation year, we estimate ~+800GWh (+29%) higher than average and +420GWh higher than the previous record set in FY17.

Thoughts what will be the consequences of entering the NZX20 if it happens. How many funds will be buying. As bond yields decrease will we see the share price back over $3

[Basil]

Not sure what impact possible NZX20 inclusion might have ?
Not sure if they are any major index tracking funds required to buy in or not ?
Possibly some effect,

I hold for safe yield and am more interested in them building out their renewable energy pipeline over the medium to long term of solar and wind and I think as they do this and gradually look to replace Kupe and Huntly over the next decade or two they will attract more attention from ESG funds.


 

[Plata]

The only indexed ETF following the NZX20 is https://kernelwealth.co.nz/funds/nz-20 with a fund size of 37 million according to https://www.morningstar.com.au/investments/security/fund/24492 . So I would think the inclusion will be largely irrelevant in terms of passive buying, might encourage more buyers/liquidity though?

[mcdongle]

Hydrogen seems to be the next go to energy, But it too has its problems if we start burning too much.

 "while hydrogen doesn't emit fossil gas when it burns, it does cause higher emissions of nitrogen oxides, a pollutant tied to the formation of smog and to negative health impacts. Utility regulators should think through the implications of increasing emissions of nitrogen oxides in disadvantaged communities, where many power plants are located, as part of utility proposals to convert power plants to run on hydrogen,

Elevated levels of nitrogen dioxide can cause damage to the human respiratory tract and increase a person's vulnerability to, and the severity of, respiratory infections and asthma. Long-term exposure to high levels of nitrogen dioxide can cause chronic lung disease."

I wonder if there is anything that we can use / burn that will not cause us problems in some way? If wind and solar are intermittent.

From the UK

https://www.theguardian.com/environment/2023/jul/13/uk-poised-to-drop-plans-for-hydrogen-to-replace-natural-gas-in-homes#:~:text=Controversial%20UK%20government%20aspirations%20to,the%20energy%20minister%2C

[Shareguy]

GNE posted this today

Continued strong hydro conditions in FY23 Q4 drove lower carbon emissions and reduced portfolio generation costs. Customer numbers continued to grow, with 3,779 customers gained in the quarter.

Malcolm Johns, Chief Executive said, "Genesis continued to perform well through the final quarter of the year. We know that the current hydro conditions will eventually change but it was pleasing to see that Genesis can respond to market conditions to reduce carbon emissions and generation costs."

Huntly Unit 5 Outage
Genesis' Huntly Unit 5 combined cycle gas turbine remains unavailable, following a forced outage on 30 June. An investigation has revealed a failure of one of the unit's three circuit breakers. Specialist parts, including some from overseas, are required for repair. The unit is currently expected to be returned to service by 31 August 2023.

High hydro storage, alternative plant availability and wholesale electricity market conditions have combined to mitigate the financial impact of the outage to date.

Updates on the return to service of the unit will be provided through the Transpower Planned Outage Coordination Process (POCP).

With high hydro storage was thinking we might get another upgrade. Thinking the outage has stoped that.

So the tax payer is helping NZ Steel and now Fonterra getting a helping hand with reducing coal usage.

Is GNE next....

https://www.rnz.co.nz/news/country/494089/government-partners-with-fonterra-to-cut-coal-use-and-halve-manufacturing-emissions

[Plata]

I expect GNE will report ~$502 million in EBITDA before the impact of derivatives. Derivatives added ~$30 million last half. Key assumptions are ~10% opex cost increase, kupe costs and emissions revenue remain the same as the first half.

We shall see how things went this half... I wonder if insurance will cover the unit 5 outage.

[Shareguy]

I expect GNE will report ~$502 million in EBITDA before the impact of derivatives. Derivatives added ~$30 million last half. Key assumptions are ~10% opex cost increase, kupe costs and emissions revenue remain the same as the first half.

We shall see how things went this half... I wonder if insurance will cover the unit 5 outage.

Yes it's going to be a great result I think. Forbar are at $522m.  Share price has been going backwards yet inflation, interest rates and bond yields are showing signs that they're on the way down.    This is normally positive for the share price.
However plenty of  hydro storage keeps the lid on gas prices
The price of gas fell in June 2023, averaging NZ$8.4/GJ, down -7% mom and -55% on June 2022.

Don't think outage will be a insurance claim taking into account the age of the plant.

Watching with interest.

[Onemootpoint]

Carbon capture an option for Huntly power station owner Genesis?

https://www.stuff.co.nz/business/132616380/carbon-capture-an-option-for-huntly-power-station-owner-genesis

A bit of speculation going on. Interesting.

[Plata]

Looks like they brought a Rankine out of storage, 677 out of 750 MW capacity right now. Good to see it still works.

[Onemootpoint]

Kupe could have a billion barrels more oil, says geologist

https://www.nbr.co.nz/investment/kupe-could-have-a-billion-barrels-more-oil-says-geologist/?utm_source=ActiveCampaign&utm_medium=email&utm_content=NBR+HEADS+UP%3A+ABC%2C+it+s+easy+as+deliverable+policy%3A+ECEs+want+to+see+results&utm_campaign=NBR+Newsletter%3A

The geologist is Mark Webster of exploration consultancy Kauri Oil & Gas.

"Oil industry consultant concerned Genesis could sell its 46% stake without understanding its value."

Is this a consensus view? Kauri Oil & Gas tend to have a 'positive' outlook on NZ oil but one would think/ hope Genesis would know what they are doing.

[Shareguy]

Interesting. Thanks for posting. Seems like speculation. There might be more, but could be less.

Even Forbar have changed their view on Genesis and say good buying at moment.

I see the gas side being very valuable for some time.

Interest rates declining should also be a positive here. Then there's the rain......

[Onemootpoint]

Likewise; I'm positive (for now).

[LoungeLizard]

NZX Update:

Further investigation into Genesis' Huntly Unit 5 combined cycle gas plant outage has indicated that return to service is now expected in late May 2024, as circuit breaker components are manufactured internationally.

High hydro storage, alternative plant availability and wholesale electricity market conditions have combined to mitigate the financial impact of the outage to date. Genesis is actively pursuing options to return the unit to service earlier and has material damage and business interruption insurance cover in place.

The financial impact of this event, based on current market conditions, plant and fuel availability, and mitigating factors is estimated to be in the range of $20 million to $30 million.

[Shareguy]

Craig's Cam Parker thinks it might be worse

•   GNE – Genesis continues to hover around the $2.70 level despite news on Friday that a prolonged unplanned outage of its 400MW combined cycle gas turbine at Huntley ("e3p") will extend until May 2024 due to a problematic parts replacement exercise (via Japan)....hydrology over the next 12 months will ultimately determine the extent of the financial impact of the outage but GNE's initial modelling suggests FY24 EBITDA will be impacted by c$20-30m net of insurance. Cam Parker notes that if hydrology and financial contracts (to cover lost volume) are unfavourable the impact could rise to c$50m.

[LoungeLizard]

SP getting a battering today. Is this the market absorbing the impact of Huntley being offline or something else. I'm tempted to buy in at these levels though - currently $2.56.