Genesis Energy Profits Rise as Customers Face Further Price Hikes | RNZ News
- Genesis Energy, New Zealand’s largest electricity retailer, is navigating a complex landscape of rising customer bills alongside a significant surge in profitability.
- The improved financial results, detailed in a company statement released on Monday, are largely attributed to increased hydro-generation capacity across the country.
- To capitalize on this momentum and accelerate its transition to renewable energy sources, Genesis Energy is undertaking a $400 million capital raise.
Genesis Energy, New Zealand’s largest electricity retailer, is navigating a complex landscape of rising customer bills alongside a significant surge in profitability. The company announced a net profit of $95 million, a substantial increase from the $70 million reported during the same period last year, fueled by favorable hydro conditions and reduced reliance on more expensive fossil fuels. However, this positive financial performance is juxtaposed with impending price increases for many of its customers, and uncertainty about further rises throughout .
The improved financial results, detailed in a company statement released on , are largely attributed to increased hydro-generation capacity across the country. This allowed Genesis Energy to procure cheaper electricity on the wholesale market, strategically divert gas supplies to industrial users, and curtail the use of coal and gas-fired generation at its Huntly power station. These operational efficiencies contributed to record operating earnings, with EBITDAF reaching $303 million compared to $217 million the previous year.
To capitalize on this momentum and accelerate its transition to renewable energy sources, Genesis Energy is undertaking a $400 million capital raise. The plan involves a $100 million share sale to new investors and a $300 million renounceable rights offer for existing shareholders. Notably, the New Zealand government, which holds a 51% stake in the company, has committed to invest up to $198 million to maintain its ownership position. Finance Minister Nicola Willis stated that these investments will “directly contribute to enhancing energy security, including through enabling Genesis to bring more flexible capacity to the market which can be used to address dry-year risk.”
Despite the positive outlook for the company’s long-term investments in renewable generation and “firming” capacity – such as battery storage and flexible thermal backup – customers are facing immediate financial pressures. Genesis Energy has informed customers that electricity prices will increase at the end of . While Chief Executive Malcolm Johns initially indicated to Newstalk ZB that there were no “plans in the immediate future” for further price increases, this statement was quickly qualified by Chief Revenue Officer Stephen England-Hall.
England-Hall clarified that Johns’ comments referred to increases beyond those already communicated to customers, with some receiving notices of price hikes as recently as . He further stated that he could not guarantee there would be no additional price increases in . The impact of these increases will vary among customers, with the majority experiencing a rise of between 10 and 20 percent in their electricity bills, while some face increases as high as 30 percent.
England-Hall attributed the price increases to broader inflationary pressures, stating that the company had been attempting to absorb these costs for some time. “Over the last few years we’ve had price increases that we’ve tried to hold… Since , price increases have tried to be managed relatively efficiently and effectively, we’ve tried to not pass through full inflation costs to customers because we know that things have been challenging.”
Despite the price increases, England-Hall asserted that Genesis Energy remains a competitive offering in the New Zealand electricity market. He stated that data suggests the company is positioned in the middle of the market, with some providers offering cheaper rates and others charging more. “I do believe we are a fair proposition,” he said.
The situation highlights the delicate balance Genesis Energy faces: delivering strong financial results to shareholders while navigating a challenging economic environment and managing customer affordability. The company’s ability to successfully execute its capital raise and transition to renewable energy sources will be crucial in mitigating future price volatility and ensuring long-term energy security for New Zealand.