Genesis Energy returns to profit

State-owned Genesis Energy returned to profit in the 12 months to the end of June, after the previous year's loss when the company reduced the value of its coal and gas-fuelled generation plants at Huntly.

Genesis today reported a full year net profit of $69 million, following a loss of $136 milliom the year before.

In the latest year underlying earnings rose to $88 million from $82 million, while ebitdaf (earnings before net interest, tax, depreciation, amortisation and financial instruments) was up to $249 million from $202 million.

Operating revenue for the year fell to $1.9 billion from $1.96 billion the year before, largely due to lower retail electricity volumes due to a mild winter in 2010 and lower customer numbers.

Genesis Energy chairman Dame Jenny Shipley said the result was achieved despite a 10 percent increase in the average fuel burn cost, aggressive competition in the retail electricity and gas markets and soft wholesale electricity prices.

A focus on business improvement, efficiency and cost management contributed to an improved result against key targets, she said.

The target of a 1.9 percent return on equity was more than achieved with an actual return of 4.9 percent. Gearing was 27 percent against a target of 31 percent and interest cover was 10.1 percent against a target of 5.7 percent.

Genesis said its thermal generation fell 8 percent to 5761 gigawatt hours (GWh), reflecting lower generation from Huntly Power Station units 1 to 4 and 6.

Coal used for thermal generation was down from 31 petajoules (PJ) to 21.2PJ while gas burn was 32PJ up from 27PJ.

Renewable generation was up 3 percent at 1815GWh for 2009/10 compared to 1770GWh the year before, with significantly higher generation from the Waikaremoana hydro power scheme.

Strong competition in the past 18 months affected electricity and gas customer numbers, with electricity customer numbers down 32,421 at the end of June 2010 compared to a year ago, and gas customers down slightly.

Any decision on the final dividend for the 2009/2010 financial year was deferred until the financial implications of the acquisition of the Tekapo A and B power stations were determined, Genesis said.

Following the ministerial review of the performance of the electricity market, Genesis has been negotiating to buy the Tekapo stations from Meridian Energy.

A limited number of commercial and technical issues remained to be resolved before the acquisition, which would add a further 185 megawatts (MW) of hydro generating capacity to the company's portfolio and would create a significant generating base in the South Island.

In March, commercial operations started from the Kupe oil and gas project, in which Genesis has a 31 percent stake.

Last month the company also said it was going to lodge a resource consent application for the Castle Hill Wind Farm, north of Masterton, which would be able to generate up to 600MW.

"This is a significant step forward for the company in its strategic objective of constructing more renewable electricity generation," Genesis said.