GNE - Genesis Energy

[Otago K]

For me how well they achieve the transition to new generation infrastructure, and consequently the drop in their generation costs is going to in large part determine where the 3 - 4 year value of the shares sit.
winners post 898 above might sit with it but simply wall street indicating alert of drop in average of analysts PT drops from $3 to $2.63, on doubts of future EPS etc. At same time CEN went the other way. umh ?
For me a long time to go to assess the merits of GNE, gut still says it might be a value BUY at times over the next few years. Got an underlying dividend yield to prop the SP up to some extent for all the ups and downs, it is what it is, not the gem of gentailers but maybe where the value in the sector sits, and to be seen in a few years time 

[winner (n)]

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 ?

One thing is the final divie for F26 will be as expected ....they wouldn't dare cut it so soon after a cap raise would they

[Basil]

Doing a "heartland" has terrible optics, I agree. I think most retail investors are blissfully unaware of the risks of another dividend reset, others might be thinking even if the gross yield declines to 6-7% in due course at least that's now mostly from renewable resources so the chances of yet another reset are lower. Others might feel good about the improved ESG profile of GNE going forward. Maybe the dirty coal discount comes off the share price in the years ahead ?

[winner (n)]

Yield has always been high (esp relative to other in sector) because the market perceives Genesis as a 'risky' investment

Like you Basil unsure what to do with rights ....don't see much upside so probably will give it a miss and just suffer the loss of wealth that has occurred over the last week or so.

Probably partaking a no brainer for the likes of xafalcon with his 27,500 entitlement ...got to keep the love and commitment going.

[entrep]

Everyone's talking about AI energy demand (and I 110% believe this is coming in the next 5-10 years max) as a tailwind for utilities globally. But how realistic is this for Genesis specifically? NZ has a heavily regulated electricity market: regulated lines charges, an Electricity Authority focused on competition and affordability, and a government that's politically sensitive to power prices. Even if data centre demand materialises here, Genesis can't just pass through higher wholesale prices the way an unregulated generator might. So is the real play here simply that more demand underwrites their ~$2bn generation pipeline and gives them volume growth, rather than pricing power? Or am I being too cautious?

[Basil]

Vast amounts of new generation coming through from all the Gentailiers.  Hard, (impossible ?) to know if returns on capital are going to be acceptable in the future.
The whole Gen35 thing seems ESG / Kupe generation replacement motivated.    Suppose we just accept the high yield for the next few years and then try and convince ourselves we should feel are warm and fuzzy inside when the yield is lower because we've been supporting more environmentally friendly generation.

Is 6-7% possible future yield okay if through wonderful new ESG generation you feel all warm and fuzzy inside and get to have metaphorical cuddles with polar bears ?  I suppose the yield is pretty safe from all the ructions going on in the middle east, that's one good thing.

But is this just a metaphorical possum in the roof of my portfolio ?  I don't know but I sure feel like one stuck in the headlights lol
https://www.youtube.com/watch?v=GkncjNn-ygE

[winner (n)]

Does Operating Cash Flow or EBITDAF drive Dividend decisions at Genesis

EBITDAF (for all its sins) is a proxy for Operating Cash Flow. I reckon that's the key guide as to where divies might go in the future'

I threw these numbers together to get a feel for how things go. Might enlighten some.

I reckon they can afford $180m in dividends in F26. This implies they might be able to squeeze another 7.5 cents as a final dividend


Going forward they better perform a lot better or else 14 cents is unlikely

Observation- EBITDAF is a bit up and down eh

You cannot view this attachment.

[Basil]

Gosh if you put a value on the Kupe field at current spot prices for oil and gas it would be worth quite a lot more than last month.

[entrep]

AI:

What We Know�

27.9 million shortfall shares to be sold in the bookbuild
$48.1 million in oversubscription demand from retail shareholders
Market price: $2.22
Rights price floor: $2.05
The earlier placement cleared at $2.15 (when market was ~$2.34 ex-div)
Likely Bookbuild Range: ~$2.12–$2.18�

Why not much lower than $2.12:
Strong retail oversubscription demand ($48.1m) puts a floor under the price
The placement cleared at $2.15 just a few weeks ago
Only 27.9m shares — not a huge amount to clear

Why not $2.22 (full market price):
Institutional bidders will demand some discount to participate
That's how bookbuilds work — there has to be a reason for institutions to bid

Scaling�
You'll likely get scaled back. The $48.1m in retail oversubscription alone nearly covers the $57m shortfall, before any institutional bids. Don't expect to get everything you applied for.

[winner (n)]

Bonus 17 cents good stuff - more than a years dividend lol

I didn't need any more GNE shares ...had enough so didn't participate ..but heck I've been diluted I'm told but don't think I'll notice

Thanks Genesis

[Basil]

Shortfall bookbuild completed at $2.22 per share. Those like Winner and I that chose not to participate will get a bonus dividend of 17 cents per eligible share.  Happy with that.

[entrep]

Too high for my liking, wish I didn't participate now. Curious to know what the scaling will be like. Must be massive that high.

[entrep]

Retail fxxed over as usual...

WHAT THE DATA TELLS US�
The full picture across the entire $400m raise:

Institutional Placement (February): $2.15 per share — retail shareholders received approximately 7% of the allocation they applied for
Rights Offer (March): $2.05 per share — full entitlement available to eligible shareholders (80% total take-up including the Crown)
Shortfall Bookbuild (March): $2.22 per share — retail shareholders received 100% of their applications with no scaling, at the maximum permissible price

Read that table carefully. The cheaper the shares, the more institutions got. The most expensive shares went entirely to retail.

THE BOOKBUILD MECHANICS — WHAT ACTUALLY HAPPENED�

~27.9m shortfall shares available after 80% rights take-up
Retail had applied for $48.1m in oversubscription (~21.7m shares at $2.22)
That left only ~6.2m shares for institutions

Institutions bid the price to $2.22 — the absolute maximum permitted (equal to the Mar 19 closing price)

But institutions barely took any shares because the offer document gave retail priority

So institutions set the price but didn't bear the cost. They effectively priced the auction for retail and then stepped aside. Whether this was deliberate gaming or just how the math worked out, the outcome is the same — retail paid the highest price of any participant in the entire capital raise.

THE CONTRAST IS DAMNING�

February Placement ($2.15):
Market price: ~$2.34 (ex-div adjusted)
Discount to market: ~8%
Retail allocation: 7% of what they asked for
Institutions: got the lion's share at a good discount

March Bookbuild ($2.22):
Market price on day of announcement: ~$2.15-$2.20
Effective premium to market: +1% to +3%
Retail allocation: 100% of what they asked for
Institutions: barely participated

Retail got scraps when shares were cheap, and full bags when shares were expensive.

IS IT "GAMING" OR JUST BAD LUCK?�
Honestly, probably a bit of both:

The legitimate explanation:

The stock was genuinely at $2.22 on March 19

Geopolitical events (Middle East tensions) hammered markets over the weekend

By Monday March 23, the stock had dropped to $2.15-$2.20

Terrible timing, not manipulation

The structural problem:

The bookbuild mechanism allows institutions to set the price without bearing proportional risk

One institution bidding $2.22 on a small volume can set the clearing price for ALL retail oversubscribers
The offer document prioritises retail allocation — but at whatever price institutions set

This creates a perverse incentive: institutions can push the price up knowing retail absorbs the cost

The cynical read:
Jarden (the underwriter) runs the placement AND the bookbuild
Their institutional clients got $2.15 in February with priority allocation
Those same institutions then set the bookbuild at $2.22 for retail
Jarden earns fees on the total raise — higher bookbuild price = more money raised = more fees
I can't prove manipulation, but the structure is inherently tilted against retail.

THE SILVER LINING (SMALL)�
Non-participating shareholders get $0.17 per right in surplus proceeds
If you took up your rights at $2.05 AND got additional at $2.22, your blended average across the whole raise is still reasonable
The stock should find support around $2.15-$2.20 once the capital raise dust settles

MY HONEST TAKE�
Were retail investors treated fairly? No. The structure systematically disadvantaged them — underfed at $2.15, overfed at $2.22. The mechanics may have been "by the book," but the outcome is exactly the kind of thing that erodes retail trust in capital markets.

Should you panic? No. If you bought at $2.05 (rights) and $2.22 (oversubscription), your blended cost is probably around $2.10-$2.12 depending on proportions. The investment case hasn't changed — you're still getting ~6.6% yield with a credible growth story. The $2.22 stings right now but will matter less in 12 months if the stock moves toward $2.30-$2.50.

Should the process be reformed? Absolutely. NZSA should push for bookbuild mechanisms that don't allow institutions to set prices for retail without taking proportional allocation. This is a known structural problem in NZ capital markets.

[Basil]

Might put today's regular dividend and my bonus 17 cps dividend towards an EV.

[Red Baron]

Might put today's regular dividend and my bonus 17 cps dividend towards an EV.

Zhis vun, Evie, might zuit you Basil.  She has been out of ze ad campaigns vor a vhile zo could be vor zale?    A volly of Vraser Vineray, 2CEOs back?

https://www.youtube.com/watch?v=ODAZLJMuSe8&t=86s

RB