GNE - Genesis Energy

[Basil]

I doubt the other generators would say much about it, but GNE likely would have. The lack of mention of their market security options announced ages ago in more recent updates is slightly embarrassing and so I would imagine they would have mentioned literally any success if there was any to discuss.

As per transpower website they cannot compel generators to provide power. But I imagine there is an implied compulsion to prevent them to avoid political and consumer fury.

As for a "punitive rate"... In the last dry year the demand for thermal was so high that the third rankine had to be pulled out of storage to assist. So we had tight supply and significant excess capacity being sold into the market for a prolonged period of time. Yet EBITDA that year was only ~430 million from memory. If GNE has the ability to charge punitive rates going forward, I would ask what was different the last dry year that prevented them doing it then. Perhaps at the time they did not want the negative publicity from "holding the market to randsom". Are the happy to do that now?

Thanks, I appreciate your thoughts.  The highlighted bit is why I asked the question.  They've tried this before and the other Gentailiers have snubbed them.  I think they will have to play hard ball.

[kiwi2007]

Bit late but MorningStar

 -Narrow-moat-rated Genesis Energy announced at its investor day that it will accelerate investment to transition to 95% renewable energy by 2035, with the investment partly funded by a 20% cut to dividends. We support the strategy, with greater investment better offsetting longer-term earnings headwinds from the depletion of Kupe and closure of thermal power stations. After lowering the dividend, the firm still offers a solid 5.9% yield at current prices, with management guiding to Consumer Price Index-like growth in dividends.

Management reaffirmed guidance for EBITDA of NZD 430 million in fiscal 2024 and provided guidance for about NZD 500 million in fiscal 2025, representing growth of 16%. This growth is expected to be driven by retail cost savings, higher Kupe production volumes following recent drilling, the start of the Tauhara geothermal and Lauriston solar power purchase agreements, and improved LPG retail margins. Management also provided guidance for EBITDA to be over NZD 550 million from fiscal 2026 to 2028, with up to NZD 100 million per year coming from new assets.

In total, Genesis plans to invest about NZD 1.1 billion on new renewable generation and storage assets by 2030. We lift our medium to longer-term EBITDA forecasts by 15% to 20% and double our capital expenditure forecasts to reflect the firm's new investment plans. These changes result in our fair value estimate rising 4% to NZD 2.70 per share. At current prices, the stock screens as slightly undervalued.

Currently, Genesis augments its hydro and thermal generation with power purchase agreements from third-party renewable generators. Under the new plan, the firm will also build wind and solar farms on its own and in joint ventures. While solar is typically less attractive in New Zealand because of significant cloud cover, solar farms are cheap and quick to build.

[Shareguy]

From theredbaiter

New Zealand needs to take a good look at Alberta, a Canadian province that has gone full tilt converting its energy supply to renewables.
Yesterday, with extreme cold and no wind the Alberta govt had to issue an emergency alert telling everyone to stop using heaters and charging their electric cars. (see attached graphic) The alert also asked drivers not to heat their engines as is customarily done to stop petrol/ diesel engines from freezing solid overnight.
No matter whether your car is an EV or ICE model, it doesn't matter because you can't drive it anyway. No power for electric, and your ICE car's engine is frozen solid. So just sit isolated in your home and freeze like the good little caveman/ woman that Mr Trudeau wants you to be.
Alberta is home to more than three quarters of the wind and solar built in Canada in 2022. It is on track to meet its target of generating 30 per cent of its total electricity from renewable sources by 2030.
Shortly after the attached alert was issued, Saskatchewan Premier Scott Moe put out a tweet, saying his province was providing 153 megawatts of power to Alberta to help them during the shortage.
"That power will be coming from natural gas and coal-fired plants, the ones the Trudeau government is telling us to shut down (which we won't)," Moe wrote


https://theredbaiter.com/2024/01/15/events-in-alberta-are-a-warning-for-nz-govts-renewables-push/

[Plata]

Thermal plants are not as infallible as you might think. Remember the Texas cold snap? Or looking locally, one need only look to GNE's resource consent for Huntley to see what might happen if things get a bit warm in the river... Good thing they built that cooling tower right?

[xafalcon]

Thermal plants are not as infallible as you might think. Remember the Texas cold snap? Or looking locally, one need only look to GNE's resource consent for Huntley to see what might happen if things get a bit warm in the river... Good thing they built that cooling tower right?

And to put some perspective into your comment

Solar plants are 40% up time, but output is variable due to clouds. Average 50% output = 20% overall
Wind plants are 80% up time, but output is variable due to wind speed varying greatly. Average 35% output = 28% overall
Thermal plants are 95% (plus) up time, but output is potentially limited for a few days each year. Average 98% output = 93.1% (plus) up time

Note also the CCGT lessens the likelihood of river temps ever being a problem

So, yeah, Thermal isn't infallible. But it's the closest to infallible that we have

The Texas situation was not a failure of plant, it was exceptional and unexpected demand with insufficient generation backing due to the widespread nature of the unprecedented weather so Texas couldn't import their shortfall. How often does it snow very heavily in Texas???

Huntly has never had an "e"

[BlackPeter]

And to put some perspective into your comment

Solar plants are 40% up time, but output is variable due to clouds. Average 50% output = 20% overall
Wind plants are 80% up time, but output is variable due to wind speed varying greatly. Average 35% output = 28% overall
Thermal plants are 95% (plus) up time, but output is potentially limited for a few days each year. Average 98% output = 93.1% (plus) up time

Note also the CCGT lessens the likelihood of river temps ever being a problem

So, yeah, Thermal isn't infallible. But it's the closest to infallible that we have

The Texas situation was not a failure of plant, it was exceptional and unexpected demand with insufficient generation backing due to the widespread nature of the unprecedented weather so Texas couldn't import their shortfall. How often does it snow very heavily in Texas???

Huntly has never had an "e"

Maybe you should look at the whole picture. While some renewables produce power with less reliability (like e.g. wind and solar panels) than burning carbon, other renewables do have outstanding reliability (hydro, geothermal).

As well ... given that you seem to be a proud propagator for pumping more carbon into the atmosphere ... maybe you should consider as well the costs of increasing extreme weather events (like storms, floodings, droughts) and the costs of a rising sea level. While these effects might be quite reliable (you burn and they happen), they do carry a high cost for all of us.
 
Always look at the big picture.

[Plata]

Maybe I'm mistaken but I recall reading about multiple thermal plants in Texas going offline during that event due to the extreme cold. Does the CCGT not require cooling? Or are you referring to the efficiency difference between it and the rankines?

[xafalcon]

Maybe you should look at the whole picture. While some renewables produce power with less reliability (like e.g. wind and solar panels) than burning carbon, other renewables do have outstanding reliability (hydro, geothermal).

As well ... given that you seem to be a proud propagator for pumping more carbon into the atmosphere ... maybe you should consider as well the costs of increasing extreme weather events (like storms, floodings, droughts) and the costs of a rising sea level. While these effects might be quite reliable (you burn and they happen), they do carry a high cost for all of us.
 
Always look at the big picture.

My comment was in the context of hydro being constrained due to dry weather, as is the situation at present and aligns with high river temperatures that OP noted. But I did not make that clear.

Hydro has a lower output than thermal (very high efficiency but fuel constrained every year [except last] at this time)

Geothermal is below hydro and averages about 80-85%. But is very capital intensive, there is very limited scope to expand, and CO2 emissions are significant. So does contribute to the environmental issues you are concerned about

My comment was clearly related to the suggestion that thermal is not a super-reliable source of electricity. Nowhere did I make any assertion that more thermal was a good idea, or that I supported thermal over any other source of electricity. And you may recall my past support for Lake Onslow, so I'm clearly a supporter of renewable electricity.

Always look at the context of what is written, otherwise you risk going off on an irrelevant tangent

[xafalcon]

Maybe I'm mistaken but I recall reading about multiple thermal plants in Texas going offline during that event due to the extreme cold. Does the CCGT not require cooling? Or are you referring to the efficiency difference between it and the rankines?

Yes CCGT converts more chemical (gas) energy into electricity, so heat losses (to the river) are lower per KWh generated, when compared to the rankines burning gas or coal

Basically the GT part does not require any cooling, and uses the waste heat in the exhaust to heat water to turn a steam turbine

[LoungeLizard]

The market seems to like GNEs Q2 Performance Report.Customer numbers up 4500 and a few strategic goals ticked off. GNE definitely back in favour again.

[BlackPeter]

The market seems to like GNEs Q2 Performance Report.Customer numbers up 4500 and a few strategic goals ticked off. GNE definitely back in favour again.

The market is a funny beast. Personally I liked GNE more when the SP was below $2.40, but hey - I guess this premium is the price for buying a popular stock. Still looks cheap compared to MCY and MEL (based on dividend yield as well as EPS).

Discl: holding some ...
 

[winner (n)]

Market hasn't unwound that ESG discount ...the penalty for doing bad stuff

Without that share price would be about 330/340

So looking good from here ......only one way to go for share price and that's up

[LoungeLizard]

The market is a funny beast. Personally I liked GNE more when the SP was below $2.40, but hey - I guess this premium is the price for buying a popular stock. Still looks cheap compared to MCY and MEL (based on dividend yield as well as EPS).

Discl: holding some ...
 

Damn market eh? How's an investor supposed to accumulate when the SP keeps going up? Oh well, just have to take those gains I guess.. (sigh).

[xafalcon]

Market hasn't unwound that ESG discount ...the penalty for doing bad stuff

Without that share price would be about 330/340

So looking good from here ......only one way to go for share price and that's up

I'm having difficulty keeping up with your predictions. On 3rd December you said your newly revised calculations were predicting a fall to $1.86

Just 6 weeks later and the SP has risen from 230's to 250's, and now you're predicting more increases?

The way I view SP movements over the past few months are

The SP decline

- unprecedented selling volumes (biggest since listing) as GNE was removed from an index fund
- SP fell in response, probably leading to selling by other investors, creating a feedback loop
- interest rates have held up longer than expected, creating highish return / low risk options for those who wanted them


The SP turn around

- realisation setting in that even a slightly reduced GNE dividend is still better than the other gentailers
- new strategy, if executed, seems like a viable way forward, and addresses their carbon emissions by making it a NZ electricity issue rather than GNE specific
- interest rates are expected to fall quickly and considerably across the western world
- alternative high return options are disappearing (I put $1M into BNZ 1 Yr TD @ 6.25% before Christmas, but that rate is now gone)
- people are getting a better understanding of how important electricity generation is to fight climate change, more people realise how electricity demand will increase 50% over the next 10 years. So generators are strongly placed to increase earnings
- Lake Onslow has been stopped. A short-sighted decision that we will come to regret. But the outcome is very positive for the generators, and especially so for baseload generators like GNE

I do expect SP to continue grinding upwards over the next 4 months, maybe to $2.85. Then get a second wind as RBNZ starts cutting the OCR, rising to the $3.10 range

Just my $0.02 worth.....

[winner (n)]

I'm having difficulty keeping up with your predictions. On 3rd December you said your newly revised calculations were predicting a fall to $1.86

Just 6 weeks later and the SP has risen from 230's to 250's, and now you're predicting more increases?

The way I view SP movements over the past few months are

The SP decline

- unprecedented selling volumes (biggest since listing) as GNE was removed from an index fund
- SP fell in response, probably leading to selling by other investors, creating a feedback loop
- interest rates have held up longer than expected, creating highish return / low risk options for those who wanted them


The SP turn around

- realisation setting in that even a slightly reduced GNE dividend is still better than the other gentailers
- new strategy, if executed, seems like a viable way forward, and addresses their carbon emissions by making it a NZ electricity issue rather than GNE specific
- interest rates are expected to fall quickly and considerably across the western world
- alternative high return options are disappearing (I put $1M into BNZ 1 Yr TD @ 6.25% before Christmas, but that rate is now gone)
- people are getting a better understanding of how important electricity generation is to fight climate change, more people realise how electricity demand will increase 50% over the next 10 years. So generators are strongly placed to increase earnings
- Lake Onslow has been stopped. A short-sighted decision that we will come to regret. But the outcome is very positive for the generators, and especially so for baseload generators like GNE

I do expect SP to continue grinding upwards over the next 4 months, maybe to $2.85. Then get a second wind as RBNZ starts cutting the OCR, rising to the $3.10 range

Just my $0.02 worth.....

The 186 was based on 10 year Govt stock v divie yield trends ....... Reflecting if punters wanted to retain the risk premium that had 'demanded' since listing they would want to ay 186.

Never mind risk off now so that doesn't apply any more...happy to take a lower yield

Then there's this 'ESG discount' that's been holding back the share price. Now they've said they won't be bad boys with the new strategy that ESG discount is going to unwind ....ie GNE valued in line with their peers and that's where the 330/340 comes in.

Yep it'll should start grinding up to that level ...and if rates drop quite a lot go even higher.

Can't lose from here I reckon .....nice punters are keen on this ESG stuff  at moment and prepared to get a lower divie yield