Lights flicker for Genesis
Genesis Energy, gearing up for a partial share sale by the Government, has posted a big drop in both operating and bottom-line profits, while its household customers are using less electricity.
Genesis said it was a "challenging" half-year, after reporting that operating profits were down 23 per cent to $150.5 million in the six months to December.
Warmer winter weather than normal cut consumer demand for power, and above average hydro lake levels kept wholesale power prices low, leaving its revenues down 6 per cent.
Bottom-line after-tax profits were just $19.7m, down more than 70 per cent 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 company also suffered a one-off hit of nearly $20m after ending a supply contract for imported coal for its Huntly plant.
Genesis, the last of the big state-owned power companies to go on the sharemarket, is likely to be partly sold to investors in the first half of the year.
Analysts expect the shares to be sold cheaply, given the poor share performance of both Mighty River Power (MRP) and Meridian. Since listing in May at $2.62, MRP shares have slumped to $1.98.
Meridian started at $1.08 in October and is down to $1.01.5.
Genesis spent $2.4m on the potential initial public offering during the half-year.
Announcing its half-year results yesterday, Genesis said its customers' household electricity use was down 5 per cent on the same period last year. Part of that reflected warmer winter weather, but it appeared people were becoming more aware of how much power they used and were using more energy-efficient appliances.
"I don't know if the 6 per cent is a long-term event," chief executive Albert Brantley said.
Genesis pointed out that total electricity sales were up 3 per cent in the half-year.
It sold more electricity to industrial and commercial customers.
The weather was warmer than usual in August and September, accounting for some of the drop in power use by households.
There was also a trend to using more efficient fridges, washing machines and the like, which may use half the power of old models. New televisions were also more efficient.
More homes were better insulated, also reducing demand, while more households were installing solar panels. There was also more awareness of power use after price rises in recent years.
Genesis said it saw a sharp lift in the number of customers switching to other suppliers towards the end of the half-year, but that 3 percentage point rise only took it back to the industry average for switching.
"Retail electricity and gas markets have remained very competitive," Brantley said.
Meanwhile, an analyst, who declined to be named, said the operating profit was down 23 per cent, but that was because power companies tended to have some periods better than others, "depending on what's happening in the wholesale electricity market".
"There are always swings and roundabouts," he said, with the operating profit showing "reasonably resilient" returns given low wholesale market prices.
Genesis bumped up its interim dividend to $64m compared with $57m in the previous half-year, despite the lower operating profits.
That sent a signal that Genesis was "reasonably comfortable" with the outlook for profits.
"So the dividend is more than sustainable on that long-term basis," the analyst said.