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Genesis reports 60% drop in underlying profit

Genesis Energy has reported an $82 million underlying profit, down 60% on last year's $131.6 million, after lower wholesale electricity prices and decreased generation bit into revenue.

After write-downs of gas exploration and a decrease in value of the ageing Huntly Power Station, the state-owned company recorded a net loss of $136 million, compared to last year's $99 million profit.

Genesis paid $20.8 million in dividends to the government this year, including a $10.4 million final dividend.

The company’s generation assets show a $29 million net decrease in value, but chairman Brian Corban today announced it had struck a deal with Meridian Energy, which it says will extend the life of the Huntly plant.

Spokesman Richard Gordon said it was not able to talk about the terms and conditions of the deal, other than it was "very pleased with it." Essentially a dry-year hedge, the deal gave Meridian some cover for dry year risk, while giving Genesis some security around the Huntly plant, dragging out retirement plans.

Mr Corban said the company would seek further commercial arrangements to keep the Huntly generation capacity available to the New Zealand market.

Mr Corban said the underlying earnings of $82 million, showed a robust balance sheet. “Our underlying earnings are more than satisfactory given the very competitive markets and the increasing operational and fuel costs facing us.”

The economics of the Huntly units one to four were becoming increasingly challenging, he said.

“Without a commercial return, these units will need to be progressively retired over several years to save costs. Putting in place commercially-based transactions allows us to defer the retirement of these units.”

The company’s total revenue for the year was $1.9 million, down from last year’s $2.4 million because of lower wholesale prices and decreased generation.

Total operating costs were $1.75 million, compared to $2.1 million last year, mostly because of lower cost of electricity bought for retail business and a lower fuel cost.

Most of the $227 million in capital expenditure went to the Kupe project, along with plant upgrades at Huntly and Tokaanu Power Stations and gas exploration at Mangatoa.

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