Sharp drop in Genesis Energy profit

JAMES WEIR
Last updated 10:00 12/02/2014

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Genesis Energy, due for partial sale by the Government this year, has reported a sharply reduced interim operating profit.

The $150.5 million result for the six months to December 31 comes after lower revenues from generation and a big hit on ending an imported-coal contract.

The stated-owned power company made an operating profit of $195.9m in the previous December half year.

The latest half-year profits also got a boost from higher profits from Genesis' investment in the Kupe gas field - Genesis holds 31 per cent of the Kupe joint venture.

Bottom line after-tax profits were just $19.7 million, down from $70.8m in the previous half year, mainly due to the lower operating profits, but also a drop in the fair value of derivatives and higher depreciation.

The lower Ebitdaf operating profit reflected significant non-recurring items of $21.5m, including about $19.2m associated with termination of the supply contract for imported coal for Huntly.

Despite the much lower profits, Genesis still declared an interim dividend of $64m up from $57m in the same period a year ago.

Genesis Energy chairwoman Dame Jenny Shipley said that while external operating conditions were "challenging", the company was able to benefit from its strong retail market presence and investment in the Kupe gas field.

The company had held its market share in electricity and gas retailing, despite intense competition, particularly from smaller retailers, and had grown customer accounts by 2 per cent she said.

Genesis Energy's share of production from Kupe was up significantly year on year due to the planned outage that was taken in the previous period.

The company's share of gas sales of 3.5PJ was up 31 per cent, oil production was up 17 per cent and LPG sales were 40 per cent higher than last year.

Kupe Ebitdaf operating profits of $55.1m were 38 per cent higher than last year's $34.2m, reflecting the year-on-year increases in production volumes.

Work on the Tekapo Canal remediation project continued during the half year and into 2014. Genesis' Tekapo A and B hydro stations were out of service but the remediation project was on schedule to be completed by early next month.

Genesis Energy's total revenue of $973m for the half year was down 6 per cent on the $1,031m last year.

That reflected both lower retail electricity revenue due to above-average temperatures, that meant lower consumer demand, and lower wholesale electricity revenue due to higher hydro storage levels which reduced wholesale electricity prices.

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Retail gas revenue of $74.9m was up on last year ($68.7m) due to higher numbers of gas customers (up 4 per cent), higher total retail gas volumes (30 per cent) and increased tariffs.

- Fairfax Media

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