GNE - Genesis Energy

[Basil]

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

You asked so here's my opinion. Safe in that they can pay a dividend, yes.  Unfortunately, the promise they made at the time of the IPO to grow dividends in line with inflation has proved to be a worthless empty one.  They never really tried to properly match dividends to inflation over the years before the huge recent downward dividend reset, which also came with the promise of matching inflation going forward.  Hmmm, how credible is that current promise when directors treated their previous undertaking in that regard with utter contempt...

Frankly, who knows there won't be another major downward dividend reset in the years ahead, all in the name of growing their ESG friendly generation portfolio?  One thing you can be sure of with them being a quasi Government department, (Govt controlled company), the already quite excessive woke policies will only get worse over time.  Go woke go broke, look how excessive wokeness has worked out for Synlait and Heartland over the long haul.
I was an investor for many years and did okay-Ish but I'm not coming back.  I've had enough of empty promises and nauseous amounts of excessive ESG grandstanding.

[lorraina]

Make what you want to,but looks to me as though Playa is right.
https://nz.finance.yahoo.com/quote/GNE.NZ/chart/
https://nz.finance.yahoo.com/quote/GNE.NZ/chart/

[BlackPeter]

Make what you want to,but looks to me as though Playa is right.
https://nz.finance.yahoo.com/quote/GNE.NZ/chart/
https://nz.finance.yahoo.com/quote/GNE.NZ/chart/

Actually - both of them (Basil and Playa) can be right at the same time.

1) Pseudo bonds (like Gentailers) always go up when interest rates drop, but ...
2) Basil just said, that they are playing their hand not the best they could, didn't he?

Discl: holding some of them (GNE) in my essentials portfolio ... Come Trump, Putin, Xi or Hurricane - people always will need power.
 

[Cod]

GNE back to 2018 numbers and Covid low area, has exited stage right from down channel, IMHO - DEI + ESG bureaucracy has and will retard profits, the only upside is the fast track approcvals for new generation if such a proposal exists.

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[xafalcon]

GNE back to 2018 numbers and Covid low area, has exited stage right from down channel, IMHO - DEI + ESG bureaucracy has and will retard profits, the only upside is the fast track approcvals for new generation if such a proposal exists.

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I think there are other forces at play.

Cooperation between generators on keeping Huntly fueled and operating is being forced by regulatory threat. Just look at transpower reports to see how much thermal vs hydro is in play atm. Very atypical for a hydro system that is still at 90% of historical capacity

Work on KS9 isn't finished

Gas prospecting is happening in NZ again, with a significant find near Turangi. Note that GNE is not participating in this, but would likely be a purchaser if anything comes of it, as gas is a limiting factor which drives coal consumption instead

TCC is on borrowed time, and was due to decommission in 24/25. It is being kept available as an additional option. But gas is a limiting factor until Methanex up-sticks and leave NZ (likely selling their gas entitlements for good returns). But when TCC finally closes, GNE will be the last (thermal) man standing = IMO, a very key position to hold

Big battery project will be a step up in profitability through minimal construction cost and daily arbitrage of 2-400MWH (0.2-0.4% of total NZ daily use)

Domestic wood waste pellets production close to green light

Meridian has already called in 1 of their 3 permitted "demand reductions" from NZAS, in the first year of a 20 year contract. They are up against a wall, and in a weak negotiating position for the next 19 years

The politicians are dead-scared of the lights going out. They also know that heavy regulation will inhibit new generation investment, and that thermal backing is the only true option for NZ. GNE may be able to negotiate something with the government to keep their plant available as a contingency

[lorraina]

Hmmmmmmmmmm.?
Current
EBITDAF $216.5 m
Forecast.$460 m
Adding a few more to the wife's holding this morning..

[Basil]

https://api.nzx.com/public/announcement/447134/attachment/437985/447134-437985.pdf

Still up to their age old tricks of not matching inflation.  Dividend up from 7 to 7.13 cps, up 1.85% while the latest reported inflation for the year top 31 December was 2.2%.  As predicted, a leopard does not change its spots and this pattern has existed ever since the IPO.

That said, the gross yield is not too shabby at 8.50% but mark my words, it will decline in real terms over time and there remains the very real prospect of another substantial dividend reset in the years ahead. 

[lorraina]

https://www.rnz.co.nz/news/business/542584/genesis-energy-half-year-profit-almost-doubles-thanks-to-high-wholesale-prices

The right link this time.

[xafalcon]

https://api.nzx.com/public/announcement/447134/attachment/437985/447134-437985.pdf

Still up to their age old tricks of not matching inflation.  Dividend up from 7 to 7.13 cps, up 1.85% while the latest reported inflation for the year top 31 December was 2.2%.  As predicted, a leopard does not change its spots and this pattern has existed ever since the IPO.

That said, the gross yield is not too shabby at 8.50% but mark my words, it will decline in real terms over time and there remains the very real prospect of another substantial dividend reset in the years ahead. 

CPI = 2.2%, or 0.55% per quarter. Dividend is for proceeding 6 months

Last time I checked, 0.55% x 2 = 1.1%, and 1.85% >> 1.1%

You are still banging on about something from 2014. Let it go and move on!

It's 2025, and surprisingly, things and people and business practises at genesis have changed over time

All your predictions of impending doom about genesis in the last couple of years have come to exactly nothing.  They are still fully imputing their dividends, they are selling more firming options than ever, they are still generating lots of electricity, and it seems the other major generators are seriously considering chipping in to keep the Rankines running and the fuel stockpile funded. That's all of your gripes I can remember, beside the old chestnut from 2014 about inflation adjusting dividends

You seem to gloss over anything positive, such as these recent changes. Full ownership of Ecotricity, 65% ownership of Chargenet, Solar farm now on-line, big battery project underway, imminent TCC retirement, other generators support for Huntly thermal

You hate them, we know that. You won't invest in them, that's your choice. But FFS stop your consistent unsubstantiated denigration. Here's and idea, bring some new facts to the table to back up your pessimism, so we can all consider the underlying rationale for your still downbeat outlook

[Basil]

See page 11 of the presentation.  Dividend 1H FY24 was 7.0 cps, and 1H FY25, a year later is 7.13cps, up 1.85%, lower than the inflation rate.

2 years ago the share price was $2.88 so its down 20% over that timeframe so that makes me...Yeap, you guessed it, correct.  A 20% capital loss is more than you have received in dividends in the last 2 years.  My two biggest holdings, HLG up 50% in the last 2 years and TRA up 85% by comparison...but you think you know best.  Hmmm

You've conveniently glossed over the rampant cost increases in the business, the extremely rapid decline of Kupe, the major dividend reset and questionable investment in Charge net which if I recall correctly was not supposed to be eps accretive, (why bother if it isn't ?).  EV sales have fallen off a cliff.
Others are rolling out bigger solar farms more quickly than GNE.  Sure, they might be able to run the Rankins of pallets but for how much longer?

Sure, you have more knowledge of the electricity industry than I have but where's that got you?  Into a  value / dividend trap is where, in case you are wondering.

Yeap, they're trying to make the most of old near to end of useful life assets, but you can't stop the tide going out is how I see it and I've been right so far.  I sold most of mine a while back at over $3, some at $3.90, and as noted above, reinvested very profitably elsewhere so what would I know...

Oh, and for the record, I also called Spark a dividend trap at ~ $3 when all sorts of keyboard warriors and even analysts were saying it was worth at least $4.  I wonder how they're feeling today...

[winner (n)]

GNE said last year that a ESG discount was holding back the share price

That discount still present

They really saying divie yield shoukd be in line peers

If so share price should be about $3.50

[Basil]

Good luck with that.  Its clear the market doesn't think the current yield is sustainable long term.  Market underwhelmed with today's result too, down 8 cps, (there's goes the divvy + some down the toilet right there) to $2.28.  This at a time when interest rates are falling quickly.  Hmmm

[BlackPeter]

Good luck with that.  Its clear the market doesn't think the current yield is sustainable long term.  Market underwhelmed with today's result too, down 8 cps, (there's goes the divvy + some down the toilet right there) to $2.28.  This at a time when interest rates are falling quickly.  Hmmm

Hmm - not quite sure I understand the argument. If interest rates are falling (and yes, they do) - shouldn't that lift the SP of a pseudo bond?

[Basil]

Hmm - not quite sure I understand the argument. If interest rates are falling (and yes, they do) - shouldn't that lift the SP of a pseudo bond?

Quite right mate, but its not.  Just like Spark's dividend is not sustainable, (much more obvious in that case which is one of the key reasons its under the pump in a big way).

[BlackPeter]

Quite right mate, but its not.  Just like Spark's dividend is not sustainable, (much more obvious in that case which is one of the key reasons its under the pump in a big way).

Not quite sure, though, whether it is fair to compare GNE with Spark.

Spark is basically a gutted corpse of a once profitable company left to the vultures after a long and now finished pillage. Their NTA is laughable (15% of SP), and the stuff they do own is basically losing value by the day. Communication technology ages fast - and museums don't need that much outdated communication equipment.

GNE on the other hand is one of the pillars of our energy infrastructure with NTA close to its current SP - and things like hydro don't lose value after a handful of years or decades - most of this stuff will still generate into the next century. Still remember a visit at the Lake Colerige Powerstation some years ago (yes, MNW, but same story) - and most of the equipment looked like 80 to 100 years old, but in good shape, humming and making money. Try that with a Switch exchange from that time - oh, oops, in NZ they used to have the telephone girls, didn't they?

So, sure - they might need to invest into more renewables, but even a solar farm has a life span of several decades - and wind (if properly done) - is comparable to water ... and cheap.

Spark has at $2.88 a forward PE of nearly 16 coming with negative EPS growth. Looking at their market position - its getting easier and easier for competitors to wiggle in and eat their lunch, and they do.

GNE on the other hand has a forward PE of 14.4 and that coming with a forward CAGR of +6.6 (or a 10yr backward CAGR of +9.6).

Sure - they might invest in future a bit more then the analysts predict, but personally I prefer long term investments into a growing company with a moat, providing an essential service rather than a company without substance and easily replaced by any newcomer.

GNE provides stuff people need - and they do have a moat (its not so easy to build a new hydro power station - and I am rather confident, that we will use Huntley as well for some time to come). SPK on the other hand did sell their moat and distributed the gains. They can't eat their cake and have it too.