Genesis Energy is investing heavily in solar power.
Genesis Energy is investing heavily in solar power.
Genesis Energy lifted its earnings in the first half despite spending an extra $59 million on gas during last year’s power price spike.
The company said its earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) came to $216.5m in the half-year to December 31, compared with $202.1m inthe previous comparable period.
The power generator and retailer’s net profit was $70.3m (up from $38.3m) and the interim dividend was set at 7.13 cents from 7c.
Power prices broke over $800 a megawatt hour last August in response to poor hydro conditions and constrained gas supply.
Genesis, which performs a vital role in supporting the system during dry years through its Huntly Power Station, bought gas from methanol exporter Methanex at the start of August.
Then the rain came in late August and September, which was good for the company’s extensive hydro assets.
“We ended up very long gas during September-October and while we sat on that contract gas we had to burn it – it was take or pay and we paid it – so the winter cost us $59m.
“But once the gas was burnt and gone and the contract finished, we were able to go very short generation in the market and make up a portion of that during November, December when it was wet and there was lots of hydro in the system.
“And so I think the number one influence on our ebitdaf number in the six months was how much generation we were able to put into the market in the wintertime.”
Wholesale power prices have been firming in recent weeks, this week trading at $218.80/MWh compared with $152/MWh a month ago.
Commenting on the system, Johns said everything hinges on rainfall, and January and February have been very low in terms of lake inflows.
“We’re starting to see prices reflect that,” he said.
Malcolm Johns, chief executive of Genesis Energy. Photo / NZME
“What we’re also seeing, though, is lessons learned from winter ’24.”
Two of Genesis' three thermal generating units – called Rankines – are currently running at Huntly.
Genesis offers the market Huntly Firming Options (HFOs), which allows participants 1MW of generation per option, available 24/7, for a fixed price over two years.
“In February last year, we didn’t have any Rankines running and so our own HFOs are starting to use Huntly earlier, and it clearly takes pressure off water earlier.”
Johns noted there was different behaviour in the wholesale market after the lessons learned from the winter of 2024.
“There’s no question that winter 2025 will be challenging, but it’s quite a different sort of construct from a Genesis perspective.
“When we went into winter ’24, we never expected to have the gas shortage, we never expected to be importing coal, we never expected the Rankines to come back into importance again.
“We now know those things and so we’re able to change the way that we look at it.
“So we have over 500‚000 tonnes of coal in Huntly now, but the most important thing is we have confirmed orders for another 500,000 tonnes over the next six months, whereas last year we didn’t have those orders in place."
Genesis coal supply logistics will be better this winter than they were last winter.
“And of course we don’t know what the rainfall will be between now and the middle of winter, but people are clearly starting to assume that it’s dry in January and February, and so we’re starting to act as if it will be dry during the wintertime,” he said.
“I think that will be much more beneficial for the system overall than the surprise everybody got last year.”
While Genesis “took one for the team” last year by supporting the system with extra gas secured – at a cost – from Methanex, Johns is not keen on a repeat performance.
Earlier this month, the big-four power companies teamed up to look at ways of extending the life of Genesis’s Rankines at Huntly to improve security of supply in response to last winter’s “pinch point”.
The company is investing heavily in solar and battery power, and has plans to use alternative fuels for Huntly.
“We’re targeting 500 megawatts of solar generation and that’ll be around 800 gigawatt hours of energy and that will help us displace gas generation, particularly over the summer months, and it also helps us use our lakes more flexibly,” he said.
Looking ahead, Genesis said it expected full-year ebitdaf of about $460m and capital expenditure of between $130m and $140m – both in line with market expectations.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
