Genesis Energy delivers steady earnings in FY17

Chief executive Marc England says its acquisition in the Kupe oil and gas field created "an integrated position between LPG production...and our significant retail position"
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Genesis Energy, the country's biggest electricity retailer by customer numbers, delivered steady full-year earnings, reflecting both positive and negative effects from swiftly changing South Island hydro-generation conditions in the last half of the year.

The Auckland-based company posted earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments of $335 million in the 12 months to June 30, a 1 percent fall on the previous year but ahead of previously announced earnings guidance.

"A refreshed strategic direction, two major acquisitions, and keeping a constant focus on moving towards a customer-centric future all helped to make FY2017 a successful one for Genesis Energy," said chief executive Marc England.

Chair Jenny Shipley said "the positive effects of revenue growth and lower costs had been offset by lower wholesale prices for most of the period".

The company will pay an 80 percent imputed final dividend of 8.4 cents per share, payable on Oct 13, and representing a 1.2 percent increase on the previous financial year.

During the latter half of the year, Genesis experienced drier than normal conditions in its South Island hydro catchment, but high rainfall saw its North Island hydro assets running at capacity while reduced generation by all three major South Island hydro generators - Genesis, Meridian, and Contact - saw Genesis run its usually dormant coal and gas-fired Huntly power station in the last two months of the year.

However total carbon emissions for the year were down 32 percent on the previous year.

Net profit after tax fell 36 percent to $184 million, which showed an inflated result thanks to asset revaluations.

The result was achieved on total revenues of $1.951 billion, down 3 percent on the previous year, while operating expenses rose 3.4 percent to $1.619 billion.

Genesis made two key acquisitions during the year, increasing its share in the Kupe oil and gas field by 15 percent and acquiring the Todd Energy-owned Nova Energy's LPG business, the transactions involving total investment of $360 milliion.

"These deals mean Genesis now has an integrated position between LPG production from Kupe and our significant retail position in a relatively high-margin market that continues to grow," said England. The Kupe deal also delivered $15 million in additional earnings in the second half of the year.

For the year ahead, Genesis is forecasting ebitdaf to rise to between $345 million and $365 million, assuming "average hydrological conditions, an average hedged oil price of US$56 per barrel and $15-to-$20 million of additional operating expenditure to support future growth".

Capital expenditure guidance for FY18 is $50-to-60 million with an additional sum of up to $10 million on development expenditure at Kupe.


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