Genesis Energy's Shipley stonewalls on Mainzeal involvement

Former prime minister Dame Jenny Shipley (pictured) stonewalled questions about her suitability to remain chairwoman of state-owned power company Genesis Energy after resigning her chairmanship of Mainzeal companies just before the country's largest construction group went into receivership.

In her first public appearance since the February 6 Mainzeal receivership, Dame Jenny was fielding questions at the six-month result briefing for Genesis, which turned in a solid 85 percent increase in net profit of $71 million and returned to paying dividends after two years.

The pressure on Dame Jenny comes as the government considers Genesis for partial privatisation later this year and the flawed governance of another state-owned company, coal miner Solid Energy, is under the spotlight as a newly appointed board enters talks with its banks and Treasury over a capital restructuring.

Solid Energy, which was to have been partially privatised but is now on the too-sick list for consideration, was chaired by John Palmer, the chairman of another government-controlled company Air New Zealand at a time when it pursued multiple non-coal investments that Prime Minister John Key yesterday declared had been "worthless".

"I am always here at the behest of the shareholder," said Dame Jenny, when asked if she expected to lead the company into a public share float, perhaps as early as November this year.

"I have always been judged by results in my career and I will be in the future," she said after repeated questioning which she attempted to avoid.

Asked whether she would consider stepping down, she said: "This company has gone from being a good company to an excellent company. I ask that people judge the performance of this company on its results."

In a presentation to journalists, Genesis chief financial officer Andrew Donaldson drew attention to Genesis's increasing ability to deliver consistent earnings, irrespective of dry hydro years or prolonged periods of low wholesale prices.

"Ebitdaf [operating earnings] is becoming more consistent year to year and half year to half year," he said.

Reflecting this, Genesis has adopted a dividend policy intended to distribute equal shares of net earnings in each half of the financial year, meaning the target is $114 million in total dividends this year, a gross rate of return of around 7.8 percent on assets valued at $2.05 billion, or a net 5.5 percent return.

CEO Albert Brantley had little joy for Solid Energy, which is already suffering low world coal prices and can expect Genesis's demand for coal for its gas and coal-fired units at the Huntly power station to keep on falling.

Genesis took one of its four 250 Megawatt Huntly units out of service in December last year, has plans to mothball another late next year and has reduced coal stockpiles by a third to one million tonnes in the latest half year.

The company is talking to Solid Energy about "re-profiling" its coal needs from the Rotowaro mine, as it seeks to stretch existing contract obligations into the future.

While Mr Brantley agrees an over-supply of generation capacity and weak electricity demand growth is likely to keep customer tariffs from rising in the short to medium term, but urges against complacency.

Drought conditions in much of the country are pushing up wholesale spot market electricity prices. Responses to over-supply that reduced the availability of thermal – gas or coal-fired – power stations could also add to price volatility in dry years, he warns.

Rather than a glut of generation capacity, there was "sufficient capacity for most foreseeable situations", Mr Brantley says.

After Dame Jenny walked from her Mainzeal position, questions were asked about her suitability to remain as chairman of Genesis, given it is a state owned enterprise, and likely to be publicly listed soon.

In a poll conducted last week, 64% of NBR ONLINE said they were uncomfortable with her retaining her Genesis chairmanship.

After Mainzeal's collapse, the directors, including Dame Jenny, said they were aware of the company's financial position and tried to salvage it, but blamed the failure on credit problems.

(BusinessDesk)