Financial targets remain on track at Genesis Energy

17 February 2011

Genesis Energy is on track to meet its financial targets set out in its Statement of Corporate Intent (SCI).

Genesis Energy Chairman, Dame Jenny Shipley, DNZM, said that while there are a range of operating and financial scenarios that might eventuate during the 2010/2011 financial year, at this stage the Company expects to meet the financial targets in its SCI, including a net profit after tax (NPAT) of approximately $40 million for the period covering 2010/2011.

Return on equity for the first six month period ending 31 December 2010 was 1.2% compared to the SCI target of 1.5%. This reflected unfavourable fair value movements over the period and a larger loss after tax than was planned in the second quarter 2010/2011 due to lower revenue from Kupe.

Adjusted return on equity (after adding back the fair value movements) was 2% for the first half compared to the SCI target of 1.9%. The return on capital employed was 3.3% for the first half compared to the SCI target of 3.2%.

The Company’s Earnings Before Interest, Tax, Depreciation, Amortisation, Financial instruments and other gains and losses (EBITDAF) at $139.3 million in the first half of 2010/2011 was $4 million above the same period last year. This result benefited from lower operating costs and Kupe oil and gas field operations. Revenue was largely unchanged at $948.6 million, down just 1.3%.

NPAT for the six months to 31 December 2010, was $17 million compared to $64.5 million in the same period in 2009. NPAT was lower due to a range of factors including lower wholesale electricity margins, increased Depreciation, Depletion and Amortisation charges related to the Company’s 31% interest in the Kupe oil and gas field, unfavourable fair value changes in derivatives and higher borrowing expenses (as less interest was capitalised following the commissioning of the Kupe oil and gas field).

Dame Jenny said the Board has not declared a final dividend in respect of the 2009/2010 financial year and the interim dividend in respect of the 2010/2011 financial year due to the funding requirements for the proposed acquisition of the Tekapo A and B power stations.

Genesis Energy Chief Executive Albert Brantley said while the Company’s generation business was impacted by the variable wholesale market, its retail business achieved its customer acquisition targets in the South Island, despite fierce competition. High hydro lake levels at the start of the second quarter reduced the wholesale electricity price in October 2010 and resulted in extremely low coal consumption at Huntly Power Station in that month.

Wholesale prices increased through November and December 2010 with low inflows and forecasts of a dry summer. However, sudden high inflows late in December resulted in high lake levels and low spot prices by the end of December 2010.

Generation output in the six months to 31 December 2010 was down 384GWh at 3,535GWh, compared to the same period last year. Thermal generation at 2,415 GWh was down 14% and renewable generation volume at 1,120 GWh was up 1% on the first half period last year. The average price received for generation output in the six months to 31 December 2010 was $61.20/MWh compared with $50.52/MWh for the same period in 2009.

Genesis Energy successfully met its six month customer acquisition targets in the South Island and by 31 December 2010 had a total of 30,089 electricity and LPG customers in the South Island.

The total number of electricity customers is steady, down 1% at 543,800 compared to 549,000 in the same period last year. Gas customer numbers are up 3% at 110,900 compared to 107,500 at 31 December 2009. LPG customers are also up by 2,700 at 3,400 in the second quarter compared to 700 last year.

ENDS

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