In what it sees as a pivotal year for the electricity sector and New Zealand’s climate agenda, Genesis Energy says there is significant investment in renewables being made, the Emissions Reduction Plan is due from government and Budget 2022 will allocate capital to the climate response.
Genesis believes it has a key role to play with agreements for wind and geothermal generation, expanding its portfolio into grid-scale solar, and continuing work to ensure back-up generation at Huntly supports the transition.
Reporting its half-year result (a 63% rise in net profit of $84.7m), Genesis said the result underlines the company’s momentum as it invests for future growth in new renewable generation and enhanced customer experiences.
Chief Executive Marc England said Genesis has delivered another strong result while building capability for the future.
“We’re investing in enhanced digital capabilities, new sources of renewable generation, and in maximising the efficiency and output of our assets, all important for future growth as we manage the transition to a sustainable future,” England said.
Genesis undertook three significant investment projects during the period, at Kupe, Tekapo B and the Waikaremoana Power Scheme. Along with its Kupe joint venture partners, a $72m project was completed that restored production capability back to 77 TJs per day, equivalent to about 15% of NZ’s daily natural gas demand.
The joint venture partners are now investigating the potential for drilling another development well to increase recovery from the field.
Work started on stage two of a challenging upgrade of the Tekapo B power station that will future-proof it for decades. The $15m+ project will deliver operational flexibility, reduce running limitations and annual maintenance costs. It follows the completion of a two-year $26.5m project to install a new intake gate at Tekapo A in 2021.
At Piripaua, on the east coast of the North Island, a $7.7m project is underway to overhaul two turbines, one this summer and one next summer.
Genesis is advancing its Future-gen strategy, signing new power purchase agreements for wind and geothermal generation and a joint venture agreement with internationally recognised solar developer, FRV Australia.
It says the focus is now on building the pipeline of development opportunities.
The big power company, 51% owned by the government, is implicitly critical of the Ardern government’s proposal for a pumped hydro scheme at Lake Onslow which could cost more than $4bn. Genesis says its Huntly Power Station is a viable alternative to the Lake Onslow scheme because of its location close to demand, infrastructure already in place, and its accessible workforce.
“Scenario analysis we have undertaken through to 2030 shows the electricity sector will be 96% – 98% renewable by the end of the decade. However, dry year risk and increased renewable intermittency will mean back-up in the form of both peaking capacity and dry-year energy storage will still be required. Biomass through Huntly’s Rankine units could provide a relatively low-cost renewable back-up option out to 2040”.
Commenting on the company’s performance, England points out the retail segment performed well through a combination of strong margins, improved efficiencies and customers feeling supported through lockdown.
Net customer churn fell for a sixth consecutive quarter and was 13.2% in the half.
“In the wholesale segment, the flexibility of our assets continues to support the market during periods of high spot prices. During periods of lower prices, when more renewable generation was available, our portfolio flexed to benefit from lower spot prices”.