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Genesis underlying profit falls, operating result up

Friday 26th August 2011

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Genesis Energy says its full year operating result rose 18 percent, despite challenging market conditions.

The state-owned energy company entered a new era in June when it bought the Tekapo A and B hydro stations from Meridian Energy.

Genesis today reported earnings before net finance expense, tax, depreciation, amortisation, fair value changes and other gains (ebitdaf), which it called its operating result, rose to $293 million in the year to June 30 from $249 million the year before.

The result benefited from reduced operating costs and improved retail prices and a full year's contribution from the Kupe oil and gas project.

Underlying profits fell 28 percent from a year earlier to $63.5m, after backing out the effects of revaluation, a write-down in the fair value of instruments and one-off charges.

Net profit fell from $69.3m to a loss of $16.6m in the latest year, while revenue dropped 3 percent to $1.83b, reflecting lower wholesale electricity prices and reduced electricity sales to industry.

Genesis chairwoman Dame Jenny Shipley said market conditions had been challenging.

Warm and wet weather suppressed demand for power produced by Genesis' thermal generation assets, and the company faced fierce competition for electricity and gas customers, she said.

Total customer numbers rose 3 percent to 661,500, on the back of customer gains in the South Island -- where subscribers rose to 42,500 at the end of June from 16,000 at the start of the financial year.

Buying the Tekapo assets would help with the Genesis strategy of increasing its lower-cost renewable asset base and expanding its presence in the South Island, Genesis chief executive Albert Brantley said.

A revaluation of generation assets as at June 30 saw a net increase of $297m to $2.6b, despite the Tekapo assets decrease of $96.8m against the $821m acquisition valuation.

The company made the adjustment against Tekapo because it considered the cost of Tekapo remedial work, including capital expenditure associated with canal repairs planned for the 2013 financial year, and the costs of the related generation outages was greater than the contingency provided in the acquisition price.

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