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FIRST CUT: Genesis Energy first-half earnings fall 11% as wholesale electricity market weighs

Tuesday 28th February 2017

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Genesis Energy, the country's biggest electricity retailer, posted an 11 percent decline in first-half earnings as cheap oil and a wet spring kept wholesale prices low, offsetting better margins on the retail side of the business. 

Earnings before interest, tax, depreciation, amortisation and fair value movements (ebitdaf), a favoured measure of power companies, fell to $155.7 million in the six months ended Dec. 31 from $175.5 million a year earlier, the Auckland-based company said in a statement. Revenue shrank 7.3 percent to $965.3 million, largely from wet weather keeping hydro-lakes full, while at the same time demand was relatively flat. Net profit increased 4.2 percent to $37.4 million due to a turnaround in the fair value of interest rate swaps. 

Genesis bought New Zealand Oil & Gas's stake in the Kupe gas and oil field as part of a broader strategy to generate short-term revenue gains and ultimately lead to a more efficient business. That acquisition is seen helping the company generate ebitdaf of between $320 million and $330 million in the year ending June 30, compared to a previous forecast of $305 million to $325 million. At the time of the purchase, Genesis said it would add $15 million to earnings. 

"The company's transformation continues to accelerate and the business performed well against a backdrop of unfavourable market conditions, which have been well-signalled to the market," chair Jenny Shipley said. 

Genesis's retail business fared better, even as electricity customer numbers shrank, with earnings up 10 percent to $62.7 million as the power company cut costs and spent less trying to acquire new customers. 

The board declared an interim dividend of 8.2 cents per share, payable on April 13 with a March 30 record date. That was unchanged from a year earlier. 

The shares last traded at $2.13, and have gained 22 percent over the past 12 months. 

 

BusinessDesk.co.nz



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