GNE - Genesis Energy

[Ricky Bobby]

Thanks fellas! Yeh I have a small position, but thinking of adding a few more, if the price is right!

[winner (n)]

Thanks fellas! Yeh I have a small position, but thinking of adding a few more, if the price is right!

Some say long term you can't go wrong at these levels .....they say interest rates go lower some time ......equals greater share price.... One day might be $5/$6 ..or even higher

Good day today for share price eh

[Plata]

The 10 year relationship is interesting and makes sense. It is interesting that this relationship exists yet the share price and 10 year yields don't seem to move in lock step with each other day to day. I wonder, is the correlation stronger between the NZ 10 year yield and GNE, or the US 10 year yield and GNE. I suspect it is the latter. Regardless, both NZ and US have steadily become more indebted since GNE listed back in the day. Could this shrinking risk premium simply indicate that compared to 2014, the riskiness of GNE has increased slower than the riskiness of NZ/US govt bonds?

I always thought valuation best practice was to use govt bonds as the risk free rate, surely if GNE was being valued on its cash generation, changes in the risk free rate day by day as govt bond yields fluctuate would be shown in the share price day by day. Why isn't this the case?

[Basil]

Maybe oil prices cranking up again and the value of their LPG and Gas in Kupe also has something to do with it.  Massive reserve coal stockpile too.

[Cod]

The last time it hit 2.20 ish was WB 23rd March 2020 and it was all over the place that week, the 10year was 1.120%.

Open 2.21
High 2.58
Low 1.99
Close 2.32

The last time it wicked this low intraday was Fri 17th June 22 when it hit 2.40 the 10year was 4.268%.

Today it wicked to 2.385 the 10Year was 5.240%

So, the relationship between 10year and price is not fixed linear, perhaps more just a drag on price.

[Shareguy]

I see National is going to stop any further spending on Onslow in first 100 days

https://www.national.org.nz/100dayplan?utm_campaign=20231001_100dayplan2&utm_medium=email&utm_source=nationalparty

Disc:  Now my second largest holding

[Basil]

Watching CNBC this morning I was really surprised to see a huge move down in the Utilities index, down 5.3% in a single day at one point, think it closed about 4.7% down for the day (11% in the last week).
Higher 10 year treasuries that we've been talking about are spooking the market.  I think it's the speed of the increase that's really worrying investors.  US ten year rate started Sept at 4.07% and closed today up another 12 bps at a 16 year high of ~ 4.7%, the highest yield since the GFC.
That said the yield on their Utilities index as a whole is only 3.8% so you can understand why it's under pressure with their 10 year rate nearly a full 1% higher.

GNE's yield gives it the most defensive attributes in this sector however we have their new strategy to be announced in an investor day late next month and the new CEO might take a whole new approach to using earnings considering the long-term prognosis for Huntly and Kupe.  In the medium term GNE also carries a LOT of debt and when that gets repriced that's going to hurt.

Overall, I am remaining cautious with GNE and await further details of the new CEO's strategy.

[Ferg]

Overall, I am remaining cautious with GNE and await further details of the new CEO's strategy.

I'm curious what strategic initiatives such an organisation can implement that will make a meaningful difference.  Options including either a local or overseas acquisition which would require a CR and/or extra debt, or some new technology that may require a lot of time to be financially meaningful.  Turning around an organisation of this size could be like trying to turn around the QE2.

[Plata]

I'm curious what strategic initiatives such an organisation can implement that will make a meaningful difference.  Options including either a local or overseas acquisition which would require a CR and/or extra debt, or some new technology that may require a lot of time to be financially meaningful.  Turning around an organisation of this size could be like trying to turn around the QE2.

There is no way they will do any acquisitions. Why bother? They have a capital partner for solar dev, and even doing that to its fullest extent is out of the question due to the realities of debt and cashflow. Time to gaze into my crystal ball...

They said FID for the 45 MW solar plant was FY2024H1. I don't think it is a coincidence there is a strategy update within FY2024H1. They made this into a big deal by keeping us waiting, I don't think they would do this unless they were waiting for a few things to fall into place to announce all at once so that they seem bigger than they actually are. They will announce at least another 100 MW worth of late stage solar projects with FIDs in FY2025, and a battery storage project with FID being made FY2024H2 or FY2025H1.

[Ferg]

Understood and thanks for that.  I don't see adding additional generation capacity as anything overly strategic or exciting....IMO that should be BAU. If population +/- usage is growing at x% per year, then they would need to add at least x% capacity each year to maintain market share, assuming similar utilisation rates & yields.  To me that's not strategy; it's more like tactics.

Maybe I am expecting too much from what is essentially a cash cow.

I just looked up their generation capacity and I see it is currently 1,652MW.  Adding another 150MW over the next 2 years is adding 9% capacity.  But that includes Huntly which I believe is not fully utilised (I don't know enough about this).  Taking Huntly out of the equation, the 150MW is an increase of 21% which is a bit more meaningful.  Do we have any stats on the utilisation rates of Huntly? e.g. is it used say 10 or 20% of the time?

[Plata]

Its likely all about messaging.

Hey market,
Look at us, we just announced 2-5 renewable projects in one day, please value us like meridian 
kind regards,
genesis.

The utilization on the Rankine's varies a lot. The third rankine isn't really an active service unit, more for emergencies. If you just look at the two active service units I think long run output is sub 50% of capacity (500 MW). Unit 5 does all the work, whenever I look it is almost always on near full output. You could argue that the solar stuff comes under strategy given GNE hasn't made any investment in renewables for years and years. Stretching its balance sheet to do so now and in the future is arguably a change in long term goals for the company. Your right the solar stuff is minor in the grand scheme of output. Where I suspect it will be more pronounced is in average generation cost. Cost of solar power per kWh is almost certainly going to be sub $0.07 which is a significant saving from using  unit 5 to get that power. I'm not sure how bad daily operating expenses are for a solar farm but I've seen numbers of $0.04-$0.10 per kWh when you factor in all expenses such as interest on debt etc, and split the capex across all energy generated over the 25+ assumed lifetime.

[Onemootpoint]

..... Turning around an organisation of this size could be like trying to turn around the QE2.

Probably an oil tanker. 

I've been on the QE2's sister ship Queen Victoria twice... she turns on a dime.

[Onemootpoint]

Interesting posts.

Price closed on $2.40. Seems to still be edging down.

At the time of posting the S & P is down by 0.6%. May have an effect on our market tomorrow.

May yet reach the lower 'targets' during the next month for those interested in stocking up.

[Red Baron]

I'm curious what strategic initiatives such an organisation can implement that will make a meaningful difference.  Options including either a local or overseas acquisition which would require a CR and/or extra debt, or some new technology that may require a lot of time to be financially meaningful.  Turning around an organisation of this size could be like trying to turn around the QE2.

Probably an oil tanker. 

I've been on the QE2's sister ship Queen Victoria twice... she turns on a dime.

No you haven't (been on a zister zhip to the QE2 that is - because there never was a zister zhip to the QE2),

The zister zhip to the 'Queen Victoria' is commonly known as zhe 'QE' for 'Queen Elizabeth'
https://en.wikipedia.org/wiki/MS_Queen_Elizabeth
launched on 5th January 2010.   

The zhip known as the QE2 eez this one.
https://en.wikipedia.org/wiki/Queen_Elizabeth_2
Launched 20th September 1967, out of service 27th November 2008.

"Queen Elizabeth 2 retired from active Cunard service on 27 November 2008. She had been acquired by the private equity arm of Dubai World, which planned to begin conversion of the vessel to a 500-room floating hotel moored at the Palm Jumeirah, Dubai. The 2008 financial crisis intervened, however, and the ship was laid up at Dubai Drydocks and later Mina Rashid. Subsequent conversion plans were announced in 2012 and then again by the Oceanic Group in 2013, but both plans stalled. In November 2015, Cruise Arabia & Africa quoted DP World chairman Ahmed Sultan Bin Sulayem as saying that QE2 would not be scrapped and a Dubai-based construction company announced in March 2017 that it had been contracted to refurbish the ship."

"Queen Elizabeth 2 reopened in Dubai as a floating hotel on 18 April 2018 following an extensive refurbishment."

Given the actual position of the QE2 today, Ferg's analogy is even more apt than he theenks it eez.

RB

P.S.  And for those of us vith longer memories than that, (like old pilots), the real Queen Elizabeth was zees one
https://en.wikipedia.org/wiki/RMS_Queen_Elizabeth

[Plata]

Of the 94 million paid out as dividends, 20 million was returned via DRP. That is enough to pay off 75% of the current solar project at 40% ownership 1.5 million per MW as guided by GNE.