Genesis Energy full-year profit drops 27.5%
By Pattrick Smellie
Aug. 26 (BusinessDesk) – Genesis Energy Ltd., the country’s largest electricity retailer and a major generator, reported a 27.5% drop in underlying tax-paid earnings to $63.5 million in the year to June 30.
When unrealised losses on electricity and other hedge contracts are included, the state-owned enterprise’s statutory net result was a loss of $16.6 million, compared with a net profit after tax the previous year of $69.3 million.
While the impact of unrealised financial instrument gains and losses is routinely excluded because of the distortion to year on year electricity company performance comparisons, both the statutory and underlying net position were assisted by the fact Genesis declared just $1 million in tax payable in the latest financial year.
On an earnings before interest, tax, depreciation, amortisation and fair value movement in financial instruments basis, Genesis saw operating earnings lift 18% to $293 million from $249 million.
Total operating revenue was down 3% to $1.834 billion, reflecting the weak wholesale electricity prices and lower than usual demand caused by a warm winter and the Canterbury earthquakes – influences which have depressed 2010/11 earnings announced by other power companies in recent days.
Reduced operating costs at and a the first full year’s earnings from Genesis’s 31% stake in the Kupe oil and gas field, worth $58.7 million, helped offset the weaker earnings in the electricity segment of the business.
In a more than usually competitive retail environment, Genesis also managed to grow its total retail customer base to 661,500, from 643,700 in June 2010. The balance of doubtful debt fell slightly over the year to $9.7 million, from $10.628 million a year earlier.
Notes to the accounts also confirm that Genesis now ascribes no capital value to the Huntly plant, which it plans to shutter over coming years, and that $9.4 million of capital expenditure on the plant was counted as an impairment charge.
“Genesis has reached the conclusion that the market is unwilling to pay for maintaining the capacity of the four dual fired units at Huntly,” said chief executive Albert Brantley. “This is the case even though those units have a continuing security of supply role, particularly in a dry year.”
The company was now using its 400 Megawatt gas turbine unit at Huntly, and had reduced average cost per MW hour of production by 22% by running “mid-merit” order plant instead of Huntly’s elderly units.
The company would move to close the plant on the schedule announced in its recent Statement of Corporate Intent.
The result also included the purchase and revaluation of the Tekapo A and B hydro stations from Meridian Energy.