Morningstar | Good Medium-Term Growth, but Kupe Depletion Is a Longer-Term Headwind for Genesis
Genesis Energy is a vertically integrated electricity generator and retailer accounting for more than 15% of New Zealand's total electricity output and a fourth of the retail market. It enjoys a strong competitive position, and we rate the firm as having a narrow economic moat based on its position in the oligopolistic New Zealand electricity market. The regulatory environment has been favourable, and the market is dominated by four major electricity companies, providing an attractive landscape supportive of solid cash flow and returns. The firm targets increasing EBITDA to NZD 400 million-430 million in fiscal 2021. Growth should be driven by contributions from recent acquisitions, cost-out initiatives, roll-off of unfavourable gas contracts and higher retail LPG volumes.Genesis Energy Limited is an energy company involved in the generation of electricity, retailing and trading of energy, and the development and procurement of fuel sources. The Company operates through four segments: Customer experience, Energy management, Oil and gas, and Corporate. The Customer experience segment is engaged in supplying of energy (electricity, gas and liquefied petroleum gas (LPG)) and related services to end user customers. The Energy management segment is engaged in the generation and trading of electricity and related products. The segment includes electricity sales to the wholesale electricity market, derivatives entered into to fix the price of electricity, and wholesale gas and coal sales. The Oil and gas segment is engaged in the exploration, development, production and sale of gas, LPG and light oil. The Corporate segment is engaged in new generation investigation and development, fuel management, information systems and property management, among others.
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