New Zealand's Energy Genesis

One of the world’s lowest carbon dioxide emitting countries, New Zealand has a unique energy sector with 70% of energy derived from renewable energy sources such as hydropower, geothermal power and wind energy. New Zealand is faced with a geographical imbalance between electricity consumption and production as most electricity generation is located on the South Island whilst the demand is concentrated on the North Island. Electricity demand has grown in New Zealand by around 1.2% yearly since 1980 whilst energy supply has grown by 1.1% yearly in the same period. A significant opportunity for a strong business is the fact that New Zealand has one of the highest electricity customer churn rates in the world.

Genesis Energy is currently New Zealand’s largest state-owned electricity and natural gas retailer. Genesis Energy owns and operates a diverse portfolio of assets that includes hydroelectric, thermal and wind generation. The New Zealand government is readying a partial initial public offering of 49% of Genesis Energy on New Zealand’s stock exchange NZX. Investor interest should be piqued by its strong fundamentals:

·         27% market share of electricity retail nationwide;

·         43% market share for natural gas retail;

·         Produces 16% of New Zealand’s electricity – 3^rd largest producer in New Zealand;

·         Serves approximately 670,000 customers – 16% of the entire population – bearing in mind that New Zealand’s electricity sector suffers from high customer attrition rates;

Furthermore, investors should be keen on the company given its recent strong financial performance with NZ$90.25 million profit last year and revenue growth of 34% on the previous year.

Genesis Energy's Tokaanu Power Station

Looking forwards, Genesis Energy will capture more of the electricity production and generation market in New Zealand, particularly with an injection of private capital as well as continued government support. The expected higher wholesale electricity prices in New Zealand will also help maintain profitability. Future developments in Genesis Energy’s pipeline include a wind farm at Castle Hill near Masterton which has potential generation of over 2000 GWh per year, Rodney gas-fired Power Station near Kaukapakapa which could produce 480 MW per year, Slopedown Wind farm by Wyndham, hydropower plants by Lake Tekapo which could generate 960 GWh of electricity per year, and a 50:50 joint venture between Genesis and Contact Energy to develop LNG assets in Gasbridge. In addition, the company engages in the exploration and development of petroleum through its 31% joint venture interest in Kupe oil and gas project. Genesis Energy also holds flexible supply contracts for 100% of the Kupe gas.

With a bright future supported by strong capital investments, government support, strong revenue generation for a country of New Zealand’s size, this is a good investment choice to diversify an Asia-Pacific focused portfolio. Additionally, Genesis Energy has a dividend policy that intends to pay shareholders each year despite any economic downturn. Buy into the New Zealand energy genesis now!