GNE - Genesis Energy

[Plata]

The MSCI deletion was announced before trading on the 11th of August. GNE is down nearly 8% since that announcement. I expect price to be suppressed for next month or two, it is likely unit 5 outage will stain the FY24 guidance. Not sure exactly what type of equipment they are trying to bring in to fix unit 5, but what I've been told is the backlogs in a lot of industrial/manufacturing equipment are expected to be cleared by the end of this year. You'd hope that their ETA for return to service is conservative and it is back a lot sooner. A bit beyond belief how spineless the share price has been, we could be getting to 10% gross yield depending on imputation imminently.

[Onemootpoint]

Morningstar which I consider relatively conservative, valued them a hold at $2.60 in April stating 'Strong Momentum Continues'. That was before Unit 5 issues I believe and before the MSCI deletion though.

Yield is starting to look a lot more attractive at these levels.

[Hectorplains]

The MSCI deletion was announced before trading on the 11th of August. GNE is down nearly 8% since that announcement. I expect price to be suppressed for next month or two, it is likely unit 5 outage will stain the FY24 guidance. Not sure exactly what type of equipment they are trying to bring in to fix unit 5, but what I've been told is the backlogs in a lot of industrial/manufacturing equipment are expected to be cleared by the end of this year. You'd hope that their ETA for return to service is conservative and it is back a lot sooner. A bit beyond belief how spineless the share price has been, we could be getting to 10% gross yield depending on imputation imminently.

Sitting just above 2 year lows now.  Unit 5 has spooked the market horses.  They're saying that they've covered the loss of generation with the three Rankine units they've drafted into service, utilising the gas that Unit 5 would've burnt.  How much more expensive is this option?

[Plata]

I would say most of that 30 million dollar expected loss comes from the reduction in efficiency. The rankine units are 1980s models compared to unit 5 from the 2000s. The other thing to remember is the third rankine unit is not maintained to the same standard as the other two, and is much more likely to fail. I would hope that failure risk is part of that 30 million too. There might be a little bit of missed opportunity $$ built into the 30 million as well (from reduced possible max output), but I think that amount is probably quite limited given how little I have seen them run unit 5 + rankines 1 and 2 at full power recently.

[Shareguy]

Here is NZ energy policy review from international Energy Agency.


https://iea.blob.core.windows.net/assets/124ce0b0-b74e-4156-960b-bba1693ba13f/NewZealand2023.pdf

Here is the National Party current energy policy

https://assets.nationbuilder.com/nationalparty/pages/17710/attachments/original/1680204411/Electrify_NZ.pdf?1680204411


Here is the Labour Party's current policy

https://d3n8a8pro7vhmx.cloudfront.net/nzlabour/pages/18628/attachments/original/1599690526/Clean_Energy_-_Factsheet.pdf?1599690526

[Basil]

Interesting article on GNE's solar plans in the print edition of the Herald today.  Sorry, couldn't readily see it on the online platform.
Answers my questions on solar.  Plans are afoot for 500MW of solar capacity.  It would seem they now have 4 sites and plans and consenting is progressing.
Average renewables production in the last 5 years from their assets has been 44%, last year due to extreme hydrology was 65%.
Plans are for 68% renewables generation by 2025, and 81% by 2030.  The 2025 target looks quite ambitious. to me, nonetheless they are heading in the right direction and on track to replace Kupe outputs with cleaner generation as Kupe declines.  Allays a lot of my concerns about Kupe running down and the effect that has on their capability to pay strong dividends over the long term.

Interestingly they noted Solar is cheapest and quickest to generation of any of the other types of renewable generation available.  Biomass was mentioned again for Huntly but not in any detail.

[Shareguy]

Interesting article on GNE's solar plans in the print edition of the Herald today.  Sorry, couldn't readily see it on the online platform.
Answers my questions on solar.  Plans are afoot for 500MW of solar capacity.  It would seem they now have 4 sites and plans and consenting is progressing.
Average renewables production in the last 5 years from their assets has been 44%, last year due to extreme hydrology was 65%.
Plans are for 68% renewables generation by 2025, and 81% by 2030.  The 2025 target looks quite ambitious. to me, nonetheless they are heading in the right direction and on track to replace Kupe outputs with cleaner generation as Kupe declines.  Allays a lot of my concerns about Kupe running down and the effect that has on their capability to pay strong dividends over the long term.

Interestingly they noted Solar is cheapest and quickest to generation of any of the other types of renewable generation available.  Biomass was mentioned again for Huntly but not in any detail.

Yes interesting article. Why have they not updated shareholders directly I wonder. There was new information. As you say they have a plan which looks good and makes sense.

Solar has been coming down in cost dramatically the only curve ball in NZ is the "sun"

[snapiti]

Yes interesting article. Why have they not updated shareholders directly I wonder. There was new information. As you say they have a plan which looks good and makes sense.

Solar has been coming down in cost dramatically the only curve ball in NZ is the "sun"

why is sun an issue in NZ, last time I checked the sun came up every day and has done for a while, solar power is generated from solar radiation(different to sunlight) which means even on a white cloudy day you still get plenty of generation.
It is  heavy grey cloud that is problematic for solar power generation.

[Shareguy]

why is sun an issue in NZ, last time I checked the sun came up every day and has done for a while, solar power is generated from solar radiation(different to sunlight) which means even on a white cloudy day you still get plenty of generation.
It is  heavy grey cloud that is problematic for solar power generation.

Yes agree. My point is they don't call us the "land of the long white cloud"for nothing.

[Basil]

Online version of the article I talked about on the weekend.  Paywalled
https://www.nzherald.co.nz/business/power-play-genesis-to-spend-600m-on-becoming-nzs-biggest-solar-provider/QOMIEJWVRFGX3JKL3XFYZLLK74/

[THESTG]

Link
https://uksnackattack.co.uk/genesis-forms-600m-joint-venture-to-become-largest-solar-provider-in-new-zealand

[Left Field]

Link
https://uksnackattack.co.uk/genesis-forms-600m-joint-venture-to-become-largest-solar-provider-in-new-zealand

In terms of perspective. World wide IFT is a larger renewable energy provider with 2.0 gigawatt present capacity and a pipeline of 40 gigawatts v GNE with .05 GW in the Lauriston development.

[Shareguy]

Looks like a result as expected except for holding divi same as FY22. Payout ratio 56 percent of free cash flow.

A case of higher costs, less thermal generation so a hit to revenue but the rain has saved the day with generation costs considerably lower.

Actual EBITDAF $523m Compared to own forecast $515m. Against FB $532m. Craig's $522m

Actual Dividend 17.6 cps against FB 17.8 cps  And Craig's 18.5 cps. Great it's fully imputed

However higher own forecast than consensus for FY24. EBITDAF is expected to be around $430 million subject to hydrological conditions, gas availability, and any material adverse events or unforeseeable circumstances.

Good to see progress with big plans for solar and

Huntly battery opportunities

• An engineering feasibility study has been completed for a large
grid-scale battery at Huntly. Genesis is considering investment
7,100 opportunities, with a decision likely in 2024.
7,000
• A battery would support wider market flexibility but is also important
6,900 for Genesis' portfolio optimisation as we transition from baseload
thermal to more intermittent renewables.
6,800 6,700
• Huntly Power Station currently has grid connection capability of
Daily Peak MW
1200MW.

Good to see lower debt against FY22

Overall steady as expected.

[Basil]

It'll be interesting to see what the analysts make of this print and outlook.
I'm a little underwhelmed with it to be honest.
Might share a few thoughts later when I have some more time.

[xafalcon]

Huge decrease in dividend/FCF

This won't please investors as the dividend is the only return they get. SP has decreased markedly in the last 12M, meaning dividend only replaces loss of capital = no real return on investment, for some it will be another loss

In a year with inflation running at 7% and bank deposits running at 6%, I would have expected a decent lift in dividend