Friday 11th March 2011 |
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Standard & Poor's has affirmed its BBB-plus long-term rating of state-owned Genesis Power Ltd but has revised the outlook on the rating to negative from stable, citing an asset reshuffle of energy assets by the Government.
Under reforms promoted by Energy Minister Gerry Brownlee, ownership of Tekapo A and B power stations moves from Meridian Energy to Genesis Energy. The reforms are designed to improve competition in the electricity market.
"The outlook revision reflects the increasing challenges facing the company's underlying business and our view that the company's financial flexibility may weaken because of its uncertain funding strategy for the proposed acquisition of the Tekapo assets," Standard & Poor's credit analyst Alicia Low said.
The rating company listed Genesis Energy's business challenges as exposure to the Kupe oil and gas field, vulnerability to oil price volatilities, and a weakening competitive position and said they have not been appropriately mitigated by a more conservative financial profile and dividend policy.
"Consequently, we consider the company as having limited financial headroom to withstand any unforseen adverse business conditions."
Genesis Energy has reported that first half net profit tumbled to $17 million, compared to $64.5 million a year earlier.
The lower result was due to a range of factors including lower wholesale electricity margins, increased depreciation, depletion and amortisation charges related to the company's 31 percent interest in the Kupe oil and gas field, unfavourable fair value changes in derivatives, and higher borrowing expenses, Genesis said today.
Genesis' generation facilities include the thermal power station at Huntly, hydro schemes at Waikaremoana and Tongariro, and a wind farm in the Wairarapa.
NZPA
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