Genesis Energy reports improved 2011 operating result
Media Statement 26 August 2011
Genesis Energy reports improved 2011 operating result
Group operating result increases 18% from $249 million to $293 million Tekapo A and B stations acquired and now integrated into the Genesis Energy portfolio Successful issue of $275 million Capital Bonds to fund the Tekapo A and B acquisition Customer numbers increase from 643,700 to 661,500 despite tough competition Early gains delivered on strategy to become New Zealand’s leading customerfocussed energy company
Genesis Energy, New Zealand’s largest energy retailer, today reported an improved group operating result for the 12 months to 30 June 2011, despite facing challenging market conditions.
Earnings before net finance expense, tax, depreciation, amortisation, fair value changes and other gains and losses (EBITDAF) rose to $293 million in the 2011 financial year from $249 million in 2010 as the company reduced operating costs and benefited from improved retail prices and a full year’s contribution from the Kupe oil and gas project. Genesis Energy chairman, The Right Honourable Dame Jenny Shipley, said: “These results are an achievement when set against the past year’s challenging market conditions. Warm and wet weather suppressed demand for power produced by our thermal generation assets and we faced fierce competition for electricity and gas customers.”
Total customer numbers increased by 3% to 661,500. The Company’s electricity customers also rose 3% on the back of the Company’s success in gaining customers in the South Island - where subscribers rose to 42,500 at the end of June from 16,000 at the start of the financial year.
Genesis Energy’s focus on customer experience also buttressed customer growth and insulated the company from the effects of intense competition throughout New Zealand. The installation of 170,000 Advanced Meters by year end, which give customers more information on their energy consumption, creates a future platform for increased customer services.
The other notable achievement during the year has been the expansion of the Genesis Energy generation portfolio to include the Tekapo A and B hydro power stations.
“These assets will assist the company’s strategy of increasing its lower-cost renewable asset base and expanding its presence in the South Island. The stations provide an immediate growth opportunity and access to not-easily-replicated long-life assets, and will reduce the carbon intensity of the company’s generation portfolio,” said Genesis Energy’s Chief Executive Albert Brantley.
The 30 June 2011 revaluation of generation assets saw a net increase of $297 million to $2,596 million, notwithstanding the Tekapo assets decrease of $96.8 million ($67.8 million after tax) against the $821 million acquisition valuation of the assets. The Company made the adjustment against Tekapo because it considers the cost of Tekapo remedial work, including capital expenditure associated with canal repairs planned for the 2013 financial year, and the costs of the related generation outages is greater than the contingency provided in the acquisition price.
“In spite of the revaluation charge, the Board supported the acquisition of the Tekapo assets as accounting standards did not permit the expected portfolio benefits of the acquisition to be taken into consideration,” Mr Brantley said.
Underlying profits fell to $63.5 million in the 12 months, down from $87.7 million in the prior financial year after backing out the effects of revaluation, the write down in the fair value of instruments and one-off charges,.
Net profit after tax fell from $69.3 million in 2010 to a loss of $16.6 million for 2011. Revenue fell to $1,834 million in the 2011 financial year from $1,895 million in 2010 reflecting the lower wholesale electricity prices and reduced electricity sales to industry.
However the company’s customer centric strategy was already delivering results. “Our vision is to be New Zealand’s leading customer-focused energy company. Our strategy shift from being merely a provider of energy infrastructure is built on the three key themes of customer experience, portfolio optimisation and innovation. Our 2011 results show we are delivering on all three,” Mr Brantley said.
Mr Brantley said for some time now the Company has also been considering the future of its 250MW coal and gas units (Units 1 to 4) at the Huntly Power Station. These units have become increasingly expensive to maintain while at the same time are despatched less into the wholesale market.
“We have departed from our past practice of achieving 100% availability of generating plant, and are now matching retail customer demand with our renewable generation capacity plus Unit 5, the 400MW gas turbine at Huntly. Running mid-merit plant less this past year reduced the cost per megawatt hour produced by 22 per cent.” Mr Brantley commented.
“Genesis Energy has reached the conclusion that the market is unwilling to pay for maintaining the capacity of the four dual fired units at Huntly. This is the case even though those units have a continuing security of supply role particularly in a ‘dry year’. As a result, the long term storage profile of these units identified in our recently released Statement of Corporate Intent will be implemented,” Mr Brantley said
In the past year Genesis Energy has put considerable effort into its relationships with stakeholders. Key achievements and initiatives over the last year include:
Reflecting the agreements with Whanganui and Ngati Rangi iwi to work together in a non-adversarial environment, their appeal to the Supreme Court regarding the length of consents for the Tongariro Power Scheme was withdrawn. The Huntly Marae relationship agreement continues to drive positive outcomes in the Huntly rohe. A significant donation was made to the Red Cross Christchurch Appeal after the September 2010 and February 2011 Canterbury earthquakes, and the Company worked with the Red Cross to organise the Neighbourhood Muck In which involved sending 250 volunteers to Christchurch to help rebuild community facilities under the guidance of the Red Cross.
Canterbury customers were given a two month waiver of daily fixed charges following the September and February earthquakes.
Full year safety results are positive showing a 25% reduction in the Total Recorded Injury Frequency Rate and a 72% reduction in the Lost Time Injury Frequency Rate. During the year there were seven lost time injuries, compared to 10 in 2009/2010. Genesis Energy practises and promotes respect for everyone in its workforce.
Diversity within our organisation allows us to relate to and reflects the value we place on delivering energy services to our customers effectively. As a demonstration of this commitment the Company will follow the ASX guidelines on diversity reporting to report on the age and gender diversity of its employees in its Annual Report.
The Company will report that 55% of its Board Directors and 22% of its Executive management team were female at 30 June 2011. Of the total Genesis Energy workforce, 48% are female. As at 30 June 2011, one out of three directors on each of six (out of seven), wholly owned subsidiaries was a woman.
“In 2011 Genesis Energy became a truly national energy company with an electricity and gas offering across the country, a broad customer base and with diverse generation assets in the North and South Island. The industry will continue to change and we are well positioned to be at the forefront of that change” said Dame Jenny. Summary financial results 2011 2010 Change
12 months to 30 June 2011 $million $million (%) Revenue 1,834 1,895 -3% Total operating expenses(1) 1,541 1,646 -6% EBITDAF (2) 293 249 +18% Depreciation, depletion, amortisation & impairment -154 -112 Revaluations & fair value changes -108 -5 Earnings before net finance expense and tax 31 132 -77% Net finance expense -49 -25 Tax -1 -38 Profit for the year -17 69 -125% Underlying profit(3) 63 88 -28% (1) Includes cost of electricity purchases (2) Earnings before net finance expense, tax, depreciation, amortisation and fair changes and other gains and losses (3) Excludes one-off items and changes in the fair value of derivatives