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Tekapo purchase knocks $73m off Genesis bottom line

Wednesday 29th June 2011

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Buying the Tekapo A and B hydro power stations is expected to knock $73 million after tax off state-owned Genesis Energy's full year bottom line profit.

The company today said its assets had been revalued to $2.58 billion, about $320 million higher than their anticipated book value at June 30.

The rise was net of a revaluation loss of about $101m against the acquisition costs of the Tekapo power stations, Genesis said.

The net impact on equity was a rise of about $230m, while the net impact on the income statement was a revaluation loss of $73m after tax.

Excluding the $73m revaluation loss, Genesis would expect to comfortably exceed the $40m net profit after tax (npat) financial target in its statement of corporate intent.

Full year earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) to June 30 were expected to be in a range between $280m and $300m, including a contribution from the Tekapo power stations. For the six months to the end of December, ebitdaf was $139.3m.

Acquisition of the Tekapo power stations from Meridian Energy for $821m was completed on June 1.

Genesis public affairs manager Richard Gordon said the $73m revaluation loss on npat applied only for this year.

The Genesis board had decided that because of the work required at the Tekapo stations, there needed to be a readjustment to the value.

"That's just saying that on the day we bought those assets, we recognised that we were going to have to spend at least $101m fixing them," Gordon said.

The purchase price had been set by Treasury, following negotiations between Meridian and Genesis.

Genesis took the view the stations were very good assets to buy. They provided long term commercial benefits to the company that were not reflected in accounting policies and practices.


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