GNE - Genesis Energy

[winner (n)]

For what it's worth the the spread/difference between GNE yield and NZ 10 year Govt is close to the long term average ....implying that the current GNE share price is about 'right' on a risk adjusted basis.

[Basil]

Good to know but that raises the old chestnut issue of whether the current dividend is maintainable.  Some recent large solar farm consents for other gentailers, for example this huge one in Northland that will power half of all the homes in Northland https://www.rnz.co.nz/news/national/529428/consent-granted-for-large-solar-power-station-at-ruakaka-in-northland make me think that not only is there a question as to whether GNE's solar plans are capable of replacing earnings from aging legacy assets but also whether there might be a surplus of this sort of renewable energy production in the future, including wind, when what's really needed is the baseload consistent generation that the likes of the Rankine units produce now.  With the Rankine units having a maximum apparent remaining life of ~15 years (2040), perhaps that doesn't concern some people, but Kupe is running out FAR more quickly than they thought so the earnings from that will need replacing a heck of a lot sooner than that.  The other thing is just as well major new solar and battery farm projects never go over budget eh     
I get it that the new CEO Malcolm John's wants to get stuck into all things ESG and leave a legacy but how has focusing on all things ESG worked out for Synlait and Heartland...

Put another way, when GNE originally listed on the NZX, Huntly and Kupe still had so much life left in them it didn't register as a concern.  Now, anyone coming in would do well to consider if the future dividends are maintainable in the long run or not.   

[winner (n)]

Basil ...good thoughts there

Also what's overlooked is the current dividend is less than what is back in 2016..... hasn't really been much in thee way of pay rises for the long term holder (prob holding for the income)

[winner (n)]

I note Genesis have sold a wind farm to NZ Windfarms.

From Nzz Windfarms -

NZ Windfarms (NZX Code: NWF) is delighted to announce that it has acquired Hau Nui wind farm from Genesis Energy

[Basil]

It's just as well there's huge growth in one part of GNE's business...it's just that it's the wrong part...salaries and wages.  Their annual human resources operating costs are growing at a remarkable rate, vastly above the rate of inflation.

https://www.nzherald.co.nz/business/genesis-sells-hau-nui-wind-farm-to-nz-windfarms/IX77K7SQLNHZPG3RZHQC2HGBAE/
Tells you nothing about the sale price or economics but I reckon GNE was a price taker, rather than a price maker on that deal.  NWF have all the I.P. to run that farm and develop it with new units so are best placed to benefit and GNE was something of a silent partner.  Silent partners usually get the short straw.

P.S. End of day reporting
NZ Windfarms increased 1.2c or 9.68% to 13.6c after buying the 8.65MW Wairarapa Hau Nui wind farm from Genesis Energy. Five of the 15 turbines are not currently operating but will be refurbished.  The company upgraded its full-year operating earnings (ebitdaf) guidance to $4.5m-$6m, from $3m-$5.5m, because of extra generation from the existing Te Rere Hau wind farm near Palmerston North.
My comment.  That speaks for itself in terms of who got the better end of that deal.

[winner (n)]

Genesis joins a MSCI Index on Nov 25th

That should stop share price falling to 2 bucks

[Basil]

Msci Micro cap index. No idea how much buying that creates?

[BlackPeter]

Msci Micro cap index. No idea how much buying that creates?

From Dr. Google:

MSCI USA Micro Cap Index (USD) | msci.com. The MSCI USA Micro Cap Index is designed to measure the performance of the micro cap segment of the US equity market. With 1,134 constituents, the index represents approximately 1% of the free float-adjusted market capitalization in the US.

Given that I don't see why the proportions should be different for non US stocks, 1 % of GNE's free float would be something like 1% of 500m shares (the other 500m belong to the crown) - i.e. 5m shares.

That would be (again very roughly) 1 months normal trading volume.

I think this is material, unless some other index funds would concurrently sell, but hey - who is smaller than micro?

PS: All done on the back of an imagined envelope - i.e. somebody might want to check these numbers.

[winner (n)]

They say for every winner there's a loser

Genesis the winner this index change ...Accordant the loser

Seems rather amusing

[Basil]

Our market to the US is what a sprat is to a whale.
Also when a stock just squeezes into an index that means it's allocation is very small because its based on market cap.. e.g When Turners went into the NZX 50 it's weighting was 0.4% not the face value 2% 50 stocks if weighted equally would have. Just anecdotes, I have no idea what the number would be but I would wager it's a lot less than the number you suggested BP

[bulltrap]

From Dr. Google:

Given that I don't see why the proportions should be different for non US stocks, 1 % of GNE's free float would be something like 1% of 500m shares (the other 500m belong to the crown) - i.e. 5m shares.

That would be (again very roughly) 1 months normal trading volume.

I think this is material, unless some other index funds would concurrently sell, but hey - who is smaller than micro?

PS: All done on the back of an imagined envelope - i.e. somebody might want to check these numbers.

That's about the index, rather than funds that track the index. MSCI segments investable markets (e.g. NZ) into three tiers, with the largest companies at the top:

Standard (Large+Mid) - top 85%
Small Cap - next 14%
Micro Cap - 1% dregs

Last I looked into this, I couldn't find any index funds or trade volume tied up with MSCI Micro Cap. Basically Micro Cap inclusion is saying, these companies are inconsequential in size, but with enough share market liquidity to consider investing in.

[Crackity]

Now the major problem is how to keep the thermal units fuelled for when they are needed, while Genesis is focused on increasing shareholder value.

In July, Jarden mooted the idea of splitting Genesis into two parts to unlock value. "The intent was to highlight to investors the inherent renewable value in the entity that, if valued similar to its peers, alone would have been worth circa 25% more than what the combined entity was trading at," Jarden said.

In a note this week, Jarden looked at the Gen35 strategy and concluded Genesis "is on track to monetise its entire fleet, unlocking synergies between the 'two parts'," referring to its thermal plant and its renewable fleet. Most importantly, the company is positioning the 1,204 megawatts (MW) of thermal capacity as part of the country's longer-term solution, and not as a stranded asset. "We view Genesis as a compelling investment with more than 50% upside potential."


Excerpt from BusinessDesk today......lucky I subscribe eh 

[Playa]

Looks like they are breaking out into an uptrend in this environment of falling interest rates. A safe divvy hounds stock?

[lorraina]

We have enjoyed GNE's divies for years,and expect to enjoy them for years to come.
More choices of fuel for Huntley has made GNE's future look a lot more positive.

[lorraina]

Looks like they are breaking out into an uptrend in this environment of falling interest rates. A safe divvy hounds stock?

Impeccable timing Playa.