UPDATE: Genesis underlying profit up on improved retail performance
(Adds share price reaction, divisional earnings and 2020 earnings forecast from 6th paragraph)
By Gavin Evans
Aug. 28 (BusinessDesk) - Genesis Energy reported a 16 percent increase in underlying full-year profit, with improved retail earnings offsetting a flat performance from its generation arm and weaker oil production from its Kupe interests.
The country’s biggest electricity and gas retailer said net profit more than doubled to $59 million for the year ended June 30, buoyed by $35 million of fair value gains. Excluding those gains and other one-time items, underlying profit rose to $67 million from $57 million a year earlier.
Earnings before interest, tax, depreciation, amortisation and financial instruments rose almost 1 percent to $363 million.
Retail ebitdaf was $13 million higher at $123 million, wholesale ebitdaf was unchanged at $178 million and earnings at Kupe fell to $109 million from $115 million.
In April, the firm warned that reduced gas supplies from the Pohokura field, lower water in its own hydro catchments and increased coal imports would mean its full-year ebitdaf would fall in the lower end of the $360-375 million range it had signalled.
Genesis shares fell 0.2 percent to $3.36, trimming their gain this year to 30 percent.
Chief executive Marc England said the firm’s retail arm built momentum during the past year, while the wholesale business demonstrated its resilience.
Retail electricity volumes rose 1.5 percent, driven by increased sales to firms and industry, while a decline in mass-market power accounts was offset by increasing gas and LPG connections.
Cost-to-serve each connection fell 7 percent to $141 at the same time as a 6.8 percent increase in customers taking more than one fuel from the firm.
England noted that volumes and returns were up across both its residential and business customer base, with increasing digital billing and customer contacts helping drive down costs.
Coal-fired production at the firm’s dual-fuel Rankine units at Huntly doubled to 1,404 GWh in the period in order to offset a 24 percent fall in the firm’s gas-fired generation and a 7 percent decline in the firm’s hydro production.
The Kupe gas field, 46 percent-owned by Genesis, delivered a record 25.7 PJ of gas in the period and increased its LPG production. But declining oil production and increasing emissions costs weighed on earnings.
Genesis is forecasting current year ebitdaf of $360-380 million, assuming normal hydrology and gas supplies. That figure assumes a $10 million impact from a 30-day shutdown planned at Kupe in November and natural decline reducing gas production from the field to 24 PJ.
Capital expenditure is expected to increase to $100 million, from $89 million the past year, reflecting seismic strengthening to the intake gates at its Tekapo hydro scheme and the expected start of work adding new compression at the Kupe field.
Genesis says natural decline could take daily output from Kupe down to about 60 terajoules in mid-2021 from about 77 TJ last month. The compression project would then restore production to that level in the second half of 2021.
The company says it is still aiming to deliver $400 million-plus ebitdaf by 2021. It currently expects a figure of $400-420 million, with gains from changes in accounting standards helping to offset lower savings expected from the roll-off of its existing term gas contracts.
The company will pay an 8.6 cent final dividend on Oct. 31 to shareholders registered at Oct. 17. That is unchanged from a year earlier and takes the full-year payout to 17.05 cents from 16.9 cents last year.