GNE - Genesis Energy

[winner (n)]

Power companies dividends bit skinny (except GNE) so I had a look at Total Shareholder Return over 5 years - ie capital gain plus dividends but not allowing for imputation credits

Total returns over the last 5 years have been

CEN    7.3% pa
MCY    7.2% pa
MEL    4.0% pa
VCT    6.5% pa
GNE    6.0% pa

Don't seem that good ... must have picked the wrong start sate lol

[Basil]

Pretty sure I recall Jarden did some research a while back and came out with fair value based on their renewable assets only of close to $3 per share if you value them the same as their peer group.  Maybe the dirty coal ESG discount means Mr Market is ascribing a negative value to the Rankine units and Kupe ?  Even if  that's not the case I don't think there's much value ascribed to these "uncool" assets by the Market and not sure that their somewhat limited remaining life to 2035-2040 is really all that much of a concern.  I like the  gross yield of just over 8%.  That's a solid yield in a low, (and headed lower), interest rate environment.

[Shareguy]

I think the latest government announcements and reading the agm info pave the way for a cr to transition to a greater renewable position to replace the rankines and CCGT as well as reducing debt.

Craigs latest note say that GNE the most capital constrained and continue with 20 percent discount to spot valuation excluding Kupe.

[mcdongle]

Interesting article on the problems the Dutch are having with their grid moving to renewables.12000 companies waiting for permission to use more electricity. In some cases people will have to pay to feed their solar electricity to the grid.

https://www.bbc.com/news/articles/cn40y9yxkgvo

[Basil]

Interesting.  https://www.nzherald.co.nz/bay-of-plenty-times/news/foresta-welcomes-government-support-for-wood-energy-as-kawerau-plant-planned/27GBMHMWPRE2RFAQGBIJ52WTOA/

[Plata]

I reckon they will come in at top end of the new guidance if not above it, absent any dry spells. Spot pricing environment looks like it has been very favourable the last few months and thermal contribution to energy mix has consistently been below 10%, bodes well.

[Basil]

Solid price rises for retail customers this year too.

[lorraina]

Genesis Energy has acquired the rights to develop an advanced stage, 271MWp solar farm development near Rangiriri in Waikato. The acquisition is conditional on vendor deliverables expected to be completed by Q2/Q3 FY26.

The site is strategically positioned near Auckland and Transpower's planned new 220kV substation at Glen Murray, providing optimal grid connection and market access and is located close by Genesis's 200MWh battery at Huntly Power Station currently under construction.

The Rangiriri project will be funded through Genesis's balance sheet with an opportunity for future capital recycling. This aligns with Genesis's capital management plan to develop new renewable generation on balance sheet and leverage third-party capital at a future date post-development.

With the addition of this high-value site, Genesis now has a pipeline of advanced-stage solar options totalling c700MWp, allowing credible delivery of the Gen35 objective of building up to 500MWp of solar to improve the value of Genesis's three hydro generation sites and displace gas generation, in particular, over summer months.

IGP New Zealand Limited, trading as Pioneer Green Power, an international solar farm developer, is the vendor of the site.

[Shareguy]

The Commerce Commission has this morning published a final determination authorising MEL, CEN, and MCY to enter into the 10-year Huntly Firming Options agreement with Genesis. This outcome was generally expected, given the ComCom's draft decision was to grant authorisation back in late September, but it is helpful to have it confirmed. Genesis had required the certainty of an authorisation by November 2025 in order to make Rankine Unit 2 operational by winter 2026. $50m of capex is required for the Rankine's in FY26 specifically ... NZers (and Aucklanders in particular) can now rest assured there will be no black-outs next winter

[Basil]

I reckon they will come in at top end of the new guidance if not above it, absent any dry spells. Spot pricing environment looks like it has been very favourable the last few months and thermal contribution to energy mix has consistently been below 10%, bodes well.

Interesting that the new upgraded guidance is after the cost of a ~ $60m one-off technology spend in FY26 https://www.nzherald.co.nz/business/companies/energy/commerce-commission-clears-huntly-power-deal-to-secure-electricity-supply/AJEARTIHWRAIVGQKXLRYFR5C5E/
Analysts have been wondering how they get to late $500m's EBITDA in FY28.  Not having a $60m one-off tech cost repeating is one way and the Huntly firming option deal just agreed to, is another.  8.1% prospective gross yield for FY26 is a very satisfactory yield and don't forget it is forecast to increase a bit each year although for reasons best known to the company directors, never quite seems to really be at the rate of inflation as promised.

[Basil]

Crickey there's a lot in there in the attachments to try and wrap your head around.  https://www.nzx.com/announcements/463396

I had a listen to this interview with Malcolm John's and thought he came across very well.
https://craigsip.com/news/exec-talks-series-malcom-johns-genesis-energy

I bought a few more for the gross yield of just on 8.2% today.   Taking the DRIP at a 2.5% discount boosts the gross yield to 8.45% which is very good in a low interest rate environment. People are always going to use electricity and I think GNE are well positioned.   GNE are pretty boring but sometimes a bit of boring is a good thing. Cash at call is returning almost nothing now, might as well be very close to fully invested, maybe have a rainy day PF allocation of 5% to cash.

[alkebab]

Crickey there's a lot in there in the attachments to try and wrap your head around.  https://www.nzx.com/announcements/463396

I had a listen to this interview with Malcolm John's and thought he came across very well.
https://craigsip.com/news/exec-talks-series-malcom-johns-genesis-energy

I bought a few more for the gross yield of just on 8.2% today.   Taking the DRIP at a 2.5% discount boosts the gross yield to 8.45% which is very good in a low interest rate environment. People are always going to use electricity and I think GNE are well positioned.   GNE are pretty boring but sometimes a bit of boring is a good thing. Cash at call is returning almost nothing now, might as well be very close to fully invested, maybe have a rainy day PF allocation of 5% to cash.

My biggest take from this morning's announcement is.........Unit 7?

Might as well dust off the plans for Rodney Power Station.

To me it also suggests that they may have a solution for LNG supply security, especially if Kupe is running dry. I'd like to know more on this as I thought the Kupe reserves were a big source of uncertainty that affected the stock price.

Even the Aussies are building gas turbines again in the face of overwhelming solar and batteries. The current gas peaking plants and CCGTs over there in service are also running a lot more compared to 2-3 years ago.

[winner (n)]

GNE close at $2.43 today ...sliding back into the $230's?

Market wrap had this about the current sentiment with gentailers -

"The flurry of investor days has probably left the question with investors of, it's great you've got all of these generational investment plans, but what are the returns on them, and the companies have been a lot quieter on what those returns are," Goodson said.

"I think that is the concern that is nagging at investors."

[Basil]

I had a look at the agenda for GNE's Taupo investor days. Day 1 kicked off with Maori prayers and Day 2 there was a field trip that included a chance to meet with local IWI leaders and learn about the cultural significance of the lake. Bet analysts were absolutly thrilled to partake in those aspects of this 2 Day event.

[Basil]

GNE close at $2.43 today ...sliding back into the $230's?

Market wrap had this about the current sentiment with gentailers -

"The flurry of investor days has probably left the question with investors of, it's great you've got all of these generational investment plans, but what are the returns on them, and the companies have been a lot quieter on what those returns are," Goodson said.

"I think that is the concern that is nagging at investors."

I think the dirty little secret that nobody wants to talk about is that the huge amount of investment required to get into the high 90% range of renewable energy generation by 2035 is going to be passed onto customers with much higher energy prices over the next decade. Good example over the Tasman where Australian energy prices are up more than 30% in the last year.

John's sounds very confident GNE will earn mid to high $500m EBITDA by FY28. Expect price increases every year.