GNE - Genesis Energy

[winner (n)]

Seems we are losers here even if we take up the rights

Going well when share price about $2.40. Take rights and average about $2.36 from where we were

And now talk of ongoing share price settling 210/220

And with increased number of shares expect dividend on per share basis to be cut ...maybe gross current 20 cents odd to something like 16 cents

OK still a great yield but over last few weeks lost nearly 10% of our capital over a few weeks

Or have I got it all wrong.

[entrep]

Seems we are losers here even if we take up the rights

Going well when share price about $2.40. Take rights and average about $2.36 from where we were

And now talk of ongoing share price settling 210/220

And with increased number of shares expect dividend on per share basis to be cut ...maybe gross current 20 cents odd to something like 16 cents

OK still a great yield but over last few weeks lost nearly 10% of our capital over a few weeks

Or have I got it all wrong.

Genesis has a fixed dividend policy of ~14.6 cps through FY28. The board reconfirmed this alongside the raise. They're not cutting DPS. The whole point of raising equity is to fund growth that supports (and eventually grows) that dividend. More shares, yes, but the per-share dividend stays the same.
At $2.21 that's a 6.6% gross yield. At $2.05 on your rights shares, it's 7.1%. Both are attractive.
On the capital side, remember part of the drop from $2.40 is the 7.30 cps ex-dividend adjustment, not a "loss." The rest is the market pricing in dilution, which is normal post any equity raise.
The way I'd think about it: you're being offered shares at $2.05 that the institutions just paid $2.15 for in the placement where retail only got a 7% allocation, in a company guiding to $490-520m EBITDAF this year and targeting $650-750m by FY32. The short-term pain is real but the medium-term setup at these prices is actually pretty decent.

[winner (n)]

From entrps's post - Genesis has a fixed dividend policy of ~14.6 cps through FY28.

We'll see how that pans out eh

[xafalcon]

Genesis has a fixed dividend policy of ~14.6 cps through FY28. The board reconfirmed this alongside the raise. They're not cutting DPS. The whole point of raising equity is to fund growth that supports (and eventually grows) that dividend. More shares, yes, but the per-share dividend stays the same.
At $2.21 that's a 6.6% gross yield. At $2.05 on your rights shares, it's 7.1%. Both are attractive.
On the capital side, remember part of the drop from $2.40 is the 7.30 cps ex-dividend adjustment, not a "loss." The rest is the market pricing in dilution, which is normal post any equity raise.
The way I'd think about it: you're being offered shares at $2.05 that the institutions just paid $2.15 for in the placement where retail only got a 7% allocation, in a company guiding to $490-520m EBITDAF this year and targeting $650-750m by FY32. The short-term pain is real but the medium-term setup at these prices is actually pretty decent.

I suggest you read their dividend policy, which they affirmed as remaining current until FY28. It is neither fixed, nor related to cps

Guidance figures for GNE are biased lower by their assumed thermal generation proportion of their committed energy sales (retail, commercial, industrial), and the need to forecast fuel purchase costs in the future. With TCC now decommissioned, no other gentailer has these considerations, except through their 50MW HFO's and a few peaking plants which are immaterial. GNE now carries all the firming and thermal baseload uncertainty, and budgets accordingly. Dryish years it will come out close to budget, wettish/windyish years it will exceed budget

When there is plenty of rain and wind, GNE buys off the wholesale market to supply their customers rather than running their thermal plants. This has played out in FY26 with all the rain that has fallen, with $30M upgrades in Q1 & Q2. It is looking like Q3 will be similar, as last week was the first week where renewable generation fell below 96% (to 95%) for the last 6 months. Wholesale prices have trended upwards recently so any Q3 improvement will be smaller and may not meet the threshold of a notified upgrade

But shares at $2.05 are definitely on my list of bargains. The recent SP weakness is common for GNE, which often sees an outsized reaction to perceived negative news. Personally i see the capital raise as their most positive action since they redirected Kupe revenue into new renewable generation projects a couple of years ago

[entrep]

I suggest you read their dividend policy, which they affirmed as remaining current until FY28. It is neither fixed, nor related to cps

Guidance figures for GNE are biased lower by their assumed thermal generation proportion of their committed energy sales (retail, commercial, industrial), and the need to forecast fuel purchase costs in the future. With TCC now decommissioned, no other gentailer has these considerations, except through their 50MW HFO's and a few peaking plants which are immaterial. GNE now carries all the firming and thermal baseload uncertainty, and budgets accordingly. Dryish years it will come out close to budget, wettish/windyish years it will exceed budget

When there is plenty of rain and wind, GNE buys off the wholesale market to supply their customers rather than running their thermal plants. This has played out in FY26 with all the rain that has fallen, with $30M upgrades in Q1 & Q2. It is looking like Q3 will be similar, as last week was the first week where renewable generation fell below 96% (to 95%) for the last 6 months. Wholesale prices have trended upwards recently so any Q3 improvement will be smaller and may not meet the threshold of a notified upgrade

But shares at $2.05 are definitely on my list of bargains. The recent SP weakness is common for GNE, which often sees an outsized reaction to perceived negative news. Personally i see the capital raise as their most positive action since they redirected Kupe revenue into new renewable generation projects a couple of years ago

Maybe there's a more detailed policy I haven't read, but Genesis's own interim report and investor presentation both use the words "fixed dividend" and "14 cents per share in real terms as at 2023" through FY28. Happy to be corrected if there's a separate policy document that says otherwise.
Agree on $2.05 being a bargain and the capital raise being a net positive. The market's reaction to dilution is creating the entry point. Taking up rights plus oversubscription feels like the right move here.

[xafalcon]

Maybe there's a more detailed policy I haven't read, but Genesis's own interim report and investor presentation both use the words "fixed dividend" and "14 cents per share in real terms as at 2023" through FY28. Happy to be corrected if there's a separate policy document that says otherwise.
Agree on $2.05 being a bargain and the capital raise being a net positive. The market's reaction to dilution is creating the entry point. Taking up rights plus oversubscription feels like the right move here.

Their official dividend policy is on Genesis' web site, under investor centre in the dividend section

Yes, im also applying for additional shares above my pro-rata allocation of approx 12,500 shares. There will be a bunch of inelligible shareholders, so the pool could be quite large. However i expect many eligible shareholders will apply for additional shares

Some of the SP weakness will be shareholders selling to fund their pro-rata allocation. I sold a small quantity at $2.38 to fund the final part of my additional shares application, and will simply re-purchase on market with any money returned

[winner (n)]

Our dividend policy

In determining dividends payable to shareholders, Genesis will comply with the solvency test specified in the Companies Act.

Under ordinary business circumstances, the dividend to be declared is determined by reference to Genesis':

- working capital requirements;
- medium-term fixed asset expenditure programme;
- investment in new business opportunities; and
- risk profile, taking into account the sustainable financial structure for the business and considering predictions of short and medium-term economic and market conditions.

Subject to the above circumstances that, from year to year, may affect the quantum of dividend paid, it is Genesis' intention to maintain dividends in real terms and grow where appropriate.

Genesis Energy intends to pay dividends semi-annually, typically in April and October of each year.

[Basil]

They're full of it. Never in their history have they ever correctly matched the dividend increase to the rate of inflation. Its always been less. As for growing it in real terms, yeah, a whole herd of pink pigs might fly by my office one day.

What does return to market rates after FY28 mean ?
See footnotes from recent half year announcement.
Market rates what ? compared to others in the sector ?
I think those buying for the income need to sit down and have a good long think about what their average income from GNE might be over the next 10 years.  Sorry, but to me, the medium term future of dividends appears to be about as clear as mud

[777]

I thought they just rang up the Minister of Finance and asked how much they wanted this year.

[winner (n)]

They're full of it. Never in their history have they ever correctly matched the dividend increase to the rate of inflation. Its always been less. As for growing it in real terms, yeah, a whole herd of pink pigs might fly by my office one day.

What does return to market rates after FY28 mean ?
See footnotes from recent half year announcement.
Market rates what ? compared to others in the sector ?
I think those buying for the income need to sit down and have a good long think about what their average income from GNE might be over the next 10 years.  Sorry, but to me, the medium term future of dividends appears to be about as clear as mud

Agree with your thoughts Basil

The FY26 divie will probably be around 14 cents a share  again - they could risk pissing off shareholders by reducing it could they

Come FY27 the divie will be 12 cents - wonder what share price will be in a years time under that scenario

Based on paying out about 38% of EBITDAF at best - probably will only be able afford  $160m payout

[xafalcon]

They're full of it. Never in their history have they ever correctly matched the dividend increase to the rate of inflation. Its always been less. As for growing it in real terms, yeah, a whole herd of pink pigs might fly by my office one day.

What does return to market rates after FY28 mean ?
See footnotes from recent half year announcement.
Market rates what ? compared to others in the sector ?
I think those buying for the income need to sit down and have a good long think about what their average income from GNE might be over the next 10 years.  Sorry, but to me, the medium term future of dividends appears to be about as clear as mud

You will never ever ever touch this company was your position for ages. All the same tired, irrelevant and just plain incorrect reasons, how this was a bad company to invest in, that you previously documented in this thread. Then you buy in??

Here's a suggestion for you. They have an investor contact listed. Why dont you call him and educate yourself? Or ask questions at the annual results presentation? I use both of these to drill down into various areas of the business

Like most other investors, i do my own research. And my conclusion is different to yours

[entrep]

Lot of heat in this thread so let me try to bring some light with the actual numbers.

The cut that already happened

Before arguing about future dividends, let's acknowledge the elephant in the room — Genesis already slashed the dividend in FY24. It went from 17.6 cps in FY23 down to 14.0 cps in FY24. That's a 20.5% cut. That's the "reset to 14 cps in real terms as at 2023" they keep referring to. It already happened.

Is Basil right that they've never matched inflation?

On the historical record, largely yes. From FY17 to FY23, dividends went from 16.6 to 17.6 cps — roughly 6% total growth over six years, call it 1% per annum. NZ cumulative CPI over the same period was somewhere around 20-25%. Not even in the same postcode.

Post-reset, it's closer but still slightly short. FY25 grew about 2.1% vs CPI of roughly 2.5-3%. FY26 is tracking about 1.2% growth vs CPI of about 2-2.5%. Better than before, but the "real terms" promise still isn't being perfectly delivered. So the pink pigs comment is harsh, but the track record backs it up. Fair point Basil.

Will the dividend drop to 12 cps in FY27?

No factual basis for this. The logic of "38% of EBITDAF divided by 1,300m shares" has a fundamental problem — dividends aren't paid from EBITDAF, they're paid from cash flow. Operating free cash flow was $183m in H1 alone, annualising to roughly $366m. That comfortably covers approximately $188m in total dividends at the current per-share rate on the enlarged share count.

Genesis has explicitly committed to the fixed policy through FY28. They literally just reaffirmed it during the equity raise two weeks ago. The Crown — which owns 51% — just backed a $400m raise. They're not going to support that and then accept a dividend cut 12 months later. The entire point of raising equity rather than just leveraging up was to fund growth WITHOUT cutting the dividend.

What does "return to market rates after FY28" actually mean?

This is where Basil has a genuine point, and I'll give credit where it's due — the post-FY28 outlook really is unclear. The exact footnote from the investor presentation says the Board's expectation is that Genesis "may return to a more market-aligned policy beyond this period, although that will be a decision for the Board at that time."

Other NZ gentailers typically pay 70-90% of free cash flow. If Genesis shifts to a similar approach post-FY28, it could go either way. If the growth programme delivers and EBITDAF hits the $650-750m FY32 target with generation costs dropping from $82 to $60/MWh, free cash flow should be substantially higher and could support higher dividends. But if they're still in heavy capex mode, a payout ratio approach could mean a lower per-share number even on higher earnings.

So "clear as mud" post-FY28? Honestly, that's fair. Nobody knows what "market-aligned" means in practice until we get there.

The bottom line

"Never matched inflation" — mostly true on the historical record, and even post-reset it's been slightly short.
"Dividend dropping to 12 cps in FY27" — no factual basis, policy is committed and cash flow covers it.
"Post-FY28 is uncertain" — fair point, genuinely ambiguous.
"Capital raise is positive" — agreed, it funds real growth with Crown backing.

Through FY28, the dividend at roughly 14.5 cps is about as secure as any equity dividend gets — Crown backing, explicit policy, strong cash flow coverage. After FY28 is genuinely uncertain, but if the growth investments deliver, the direction should be upward not downward.

At $2.05 via the rights offer you're getting about a 7.1% fully imputed yield for the known policy period. The actual risk isn't the FY26-28 dividend. The real question is whether the $2bn growth programme delivers the earnings to support whatever comes after that.

[Basil]

Genesis has a fixed dividend policy of ~14.6 cps through FY28. The board reconfirmed this alongside the raise. They're not cutting DPS. The whole point of raising equity is to fund growth that supports (and eventually grows) that dividend. More shares, yes, but the per-share dividend stays the same.
At $2.21 that's a 6.6% gross yield. At $2.05 on your rights shares, it's 7.1%. Both are attractive.

My understanding is that the dividend will go up a bit this year, in FY27 and FY28, not by as much as inflation, it never does but its likely to go up a bit.
Average of 4 analysts covering it is FY26, 14.68 cps, FY27 14.93 cps, FY28 15.15 cps.  https://www.marketscreener.com/quote/stock/GENESIS-ENERGY-LIMITED-17595957/finances/
They now seem to be making enough to cover the full imputation credit so grossing those up for full imputation credits that becomes (rounded) 20.4 cps 9.1% gross yield for FY26 at $2.25, 20.7 cps 9.2% gross for FY27, 21 cps 9.3% gross for FY28.  I still think its anyone's guess after that as they're giving no real insight as to what it could be.

At the issue price of $2.05 those gross yields become FY26 9.95%, FY27 10.1%, FY28 10.24%.  Is it a dividend trap though ?....that's the real question and I have no insight as to the answer.  Disc: Modest 4.5% portfolio position.

[winner (n)]

Basil, those forecasts - average of 4 analysts covering it is FY26, 14.68 cps, FY27 14.93 cps, FY28 15.15 cps.

I'd hazard a guess they came up with those before the cap raise

When account for new shares I'd say they'll go down to 12 / 13 cents odd

[Basil]

You could be right mate but that's not my read on it. They seem committed to maintaing their present dividend policy of promising to increase dividends in line with inflation, while based on their long term track recod, skimming a bit off the inflation rate each year until FY28. After that its anyone's guess ?