Diversity drives strong financial performance for Genesis Power Ltd

27 August 2012

- Net profit after tax up to $90 million
- EBITDAF up $100 million (34%) to $393 million
- Customer base holding firm
- Consents renewal secures future of Huntly Power Station

The fuel and geographic diversity and the balancing of Genesis Power Limited’s (trading as Genesis Energy) generation and retail business was the foundation of a strong financial performance in the year ended 30 June 2012.

The Genesis Energy Board and senior management team are pleased to report that the Company recorded a Net Profit After Tax of $90.25 million compared to a Net Loss After Tax of $16.6 million in 2010/2011. Revenues increased 24 per cent from $1,834 million to $2,270 million and Earnings Before Interest, Income Tax, Depreciation, Amortisation, Fair value changes and other gains and losses (EBITDAF) were up 34 per cent from $292.65 million to $392.65 million.

Higher generation volumes, higher wholesale electricity prices and higher gas sales in both the retail and wholesale markets supported the revenue increase. The gains in EBITDAF reflected the higher wholesale prices and generation volumes, but were offset by higher wholesale electricity purchase costs, transmission and distribution costs and the costs of selling surplus gas contracted as part of “take or pay” arrangements.   The result also featured a strong contribution from the Company’s 31 per cent share of production from the Kupe Oil and Gas Field.

The improved financial performance was achieved against a backdrop of volatile wholesale electricity market conditions over the past year. The early part of the year was characterised by moderate water inflows, but the latter part of the year was characterised by low water inflows and resulting low hydro storage lake levels, before a return to near average storage at the end of the financial year as several large rain events at the beginning of winter impacted both the North and South Islands.

Genesis Energy’s Chairman Dame Jenny Shipley said the strong result endorsed the Company’s strategy to derive the greatest value and efficiency from a geographically and fuel diverse generation fleet that is balanced to customer demand, and to focus on building long term value for the Company by creating value for its customers.

The electricity and gas market for domestic and commercial users has been characterised by intense competition the past few years between suppliers. New Zealand has one of the highest electricity customer churn rates in the world.

Genesis Energy’s Chief Executive Albert Brantley said a significant business target for the Company is to improve retail margins and to grow or at least maintain market share.

“In a year of intense competition for electricity customers, we have held market share in the retail electricity market and experienced only a slight decrease in the retail gas market. We believe our focus on customer service and loyalty driven by product innovation is paying off,” he said.

Genesis Energy’s electricity and gas market shares at 30 June 2012 were 26.6 per cent and 42.7 per cent, respectively.  Market shares for this period are slightly lower than the same period last year (electricity at 26.8 per cent and gas at 43.5 per cent). Total customer churn for the year was 18 per cent. The bottled LPG business continues to grow year on year with an annual customer number increase of 45 per cent.

The health and safety of its people, contractors and customers is Genesis Energy’s first priority. The Total Recordable Injury Frequency Rate decreased 76 per cent to 7.3 from 31.4 the previous year.

Mr Brantley said “while this result is a significant improvement, we will not be satisfied until none of our people are injured at work. We have recently extended Zero Incident Process training for all staff to extend consideration of safe working practices to all the Company’s activities”.

On 27 April 2012, Genesis Energy was granted replacement operating consents for the Huntly Power Station site by the Waikato Regional Council for a further 25 years. No appeals were received against the Council’s decision.

The Company continues to develop a pipeline of future economic generation opportunities and customer innovations that position the Company for growth.

The Company is advancing a range of wind farm options including two potentially significant wind farm sites - Castle Hill in the Wairarapa region and Slopedown in Southland. Resources consents for Castle Hill Wind Farm were announced by independent commissioners on 11 June 2012. Subsequently, the Company appealed certain conditions within the consents to the Environment Court, as have three other parties.

Note: The Annual Results presentation will be webcast 11am on 27 August 2012. The access url is: www.brrmedia.com/event/99447?popup=true

For more information contact:

Richard Gordon
Public Affairs Manager
Genesis Energy
P: 09 580 4782; M: 021 681 305