Genesis holds ETS charges

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Genesis Energy intends to take its time before passing on to retail consumers the impact of the emissions trading scheme.

The state-owned generator runs the country's only coal-fired power station at Huntly, as well as gas combined cycle plant, and consequently faces the largest direct impact of the ETS, which since July 1 has put a price on carbon emissions.

It expects the cost this year to be in the order of $30 million.

But chief executive Albert Brantley said that although some of its competitors had immediately raised retail prices, Genesis preferred to let the markets settle down before deciding on pass-through.

Wholesale electricity prices have been depressed by an unusually wet year and in any case had already reflected the prospect of carbon pricing to some degree. Retail markets, meanwhile, are intensely competitive as the state-owned power companies, whose assets are to be reshuffled under the Government's electricity reforms, seek new customers closer to their new generating capacity.

Genesis achieved a 23 per cent rise in operating earnings to $249 million in the latest June year, despite generating less, shedding customers and facing higher fuel costs. The increase in earnings before interest, tax, depreciation, amortisation and fair value movements (Ebitdaf) defied a difficult trading environment, said chairwoman Dame Jenny Shipley.

Genesis had faced a 10 per cent increase in average fuel costs as it burned less coal and more natural gas.

Wholesale electricity prices were down 9 per cent overall.

Genesis lost 32,000 customers, about 13 per cent, in the year to June 2010 despite acquiring 6000 new ones in the South Island, where it is due to acquire from Meridian Energy the Tekapo A and B stations in the upper Waitaki system. It expects to increase its southern customer base to around 20,000 by the end of the year.

Some reduction in retail customer numbers is strategic, Brantley says.

It gives the company more flexibility in running Huntly so that it can do so when wholesale market conditions make it worthwhile, rather than to cover a large retail load. At present just over a fifth of its generation is from renewable sources, mainly the Waikaremoana hydro scheme.

But it has plans for up to 600MW of wind power from a project in the Wairarapa. Consenting was always fraught with peril, Brantley said, but the site of the planned turbines was particularly thinly populated.