Genesis Energy reinvests full profit

11 October 2006

Genesis Energy reinvests full profit into new generation

All of Genesis Energy’s 2005/06 net profit after tax of $83.7 million is destined to be invested in new electricity generation, with the state-owned company not declaring a dividend payment to the Shareholder this year.

Net profit after tax at Genesis Energy of $83.7 million in the year to 30 June 2006 was achieved in an ever-challenging environment of increasing fuel costs and greater demand on thermal generation. Total operating revenue rose to $1,987 million from $1,496 million in 2004/05 due to retail growth and increased wholesale electricity market prices.

Reduced inflows and rapid draw-downs of South Island hydro reserves during the spring of 2005 and late summer 2006 resulted in the 1040MW Huntly Power Station producing its highest ever annual amount of electricity generation with 6,009GWh output.

However, higher generation at Huntly Power Station was offset by higher operating costs, including higher gas prices, increased consumption of coal and increased maintenance expenses.

Genesis Energy’s fuel bill increased 32.2 per cent over the previous year to $280 million, which is the cost of providing certainty of power supply when the country’s hydro reserves are under pressure or in decline.

Genesis Energy Chairman Brian Corban said the net profit was a strong result considering the rising cost of fuel and extensive development that Genesis Energy is engaged in.

“Again this year we have been running Huntly hard to meet the growing demand for electricity, with four 250MW generators on full output for six months over winter. The increased demand means our new 385MW Huntly combined cycle gas turbine will provide welcome relief when it is fully commissioned in April 2007,” Mr Corban said.

Whenever the Huntly plant is available, it is offered into the market. This year’s high dispatch reflects the current narrow gap between supply and demand.

During the year the Huntly Power Station fired 2.4m tonnes of coal, which was 85.2% of the fuel used. Total fuel consumed in all Genesis Energy thermal generation was 66PJ.

Construction of the new combined cycle gas turbine at Huntly substantially advanced during the financial year and together with the new cooling tower for the existing station, which was completed during the year, contributed to capital expenditure of $265 million for the year.

On the retail side of the business, Genesis Energy’s customer numbers, which include subsidiary company Energy Online, grew 17,000 over the year to 702,000 connections, including 121,000 gas customers.

In a bid to achieve new gas supplies, Genesis Energy is involved in the development of the offshore Kupe Gas Project and the testing of the onshore Cardiff gas field. During the financial year the joint venture partners of the Kupe Gas Project agreed to proceed to development of the offshore production wells, pipeline and onshore processing facility.

Mr Corban said, “Genesis Energy is on track to building a first class energy company, underpinning the continued development of the New Zealand economy.”

ENDS