Malcolm Johns: Genesis Chief Executive on its half year net profit increase, need for renewables, and government input

Energy company Genesis almost doubled its half year net profit to 70.3 million dollars after tax.

Wholesale power prices rose dramatically last winter in response to the dry weather.

Shareholders will be happy with that, but its customers might not.

Genesis Chief Executive Malcom Johns talks to Ryan Bridge.

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Episode Transcript

Speaker 1 (00:00):
Right now. Energy company Genesis almost doubled its half your
net profit to seventy point three million dollars after tax.
The wholesale power prices arose dramatically last winter. We all
know this, the winter energy crunched this response to dry weather.
Genesis runs the coal and gas fired Huntley Power Station,
which backs up the hydro dominated National Power Grid when

(00:20):
the lake levels are low. Genesis chief executive Malcolm John's
is with me. Hi, Malcolm gooday?

Speaker 2 (00:26):
How are y? Yeah?

Speaker 1 (00:27):
Really good? Good to have you on the show. Look,
shareholders will, no doubt, including the government, so I guess
all of us in a sense, we'll be happy with
that with that number going up, but perhaps not so
much your customers. How do you view it?

Speaker 2 (00:41):
Well, our customers were largely protected last winter. I mean,
I think it's important to remember that about ninety nine
point nine percent of electricity customers didn't experience the volatility
of July and August because many are on fixed term contracts.
But you would expect in a dry year for Genesis
to produce more electricity. We produced about thirty percent more

(01:05):
electricity last winter than we did the winter before, So
it kind of flows when the lakes are low and
Huntley's turned on to its full capacity. We produce more
electricity and we expect to have more revenue and more
profit as a result.

Speaker 1 (01:17):
How much extra cold did that mean?

Speaker 2 (01:21):
We burnt as a country about eight hundred thousand tons
of coal last winter. And I think it's important to
remember that not only do we have a hydro system
to back up, but we now have one thy four
hundred megawatts of wind. And not only do we had
no rain last winter, but we also had a large
period of wind routs. In fact, the wind dropped out

(01:42):
for about ten days at one point last winter. So
as we build more wind into the system, wind is
going to become more as relevant as hydro is.

Speaker 1 (01:53):
So you're saying to people, because there were a lot
of people listening, he'll think, well, how are you managing
to increase any profit by eighty percent? You said, obviously
you were doing more. You know, you were producing more
through Huntley because there was a shortage in other areas,
but you were your margins increased.

Speaker 2 (02:10):
No, it's a pure result of producing thirty percent more electricity,
and so we sell that that excess electricity onto the
other generators who aren't generating as much themselves because the
lakes are low and the wind.

Speaker 1 (02:24):
Wasn't there the stockpile that you'll need in terms of Huntley,
do you know how much longer we will need coal
at Huntley or is that something that will need to
happen indefinitely And what you're going to look to do
this year, Well, the.

Speaker 2 (02:39):
System will need Huntley generation for probably the next twenty
five years, but not in its current form. So the
generating assets that Huntley can run on multiple fuels, and
what we're focused on in the next three to five
years is fuel transition. So we're heavily involved in standing
up a domestic biomass supply chain which turns into torrified palettes.

(03:02):
We can run torrified palette through Huntley power station and
create a zero carbon cycle as opposed to using coal.
But the reality is without the gas in the system,
and that was the big shock last winter, we had
to use coal because we had no other fuel available,
and until we have bio mass, we'll have to use
coal as a fuel of last resort.

Speaker 1 (03:22):
In other words, you don't see gases are reliable going
forward as a reliable alternative.

Speaker 2 (03:28):
It's very difficult at the moment gas was the chosen
transition fuel. Very difficult to see it that way at
the moment. The structural decline in gas last year called
everybody by surprise, and at the moment we don't have
any publicly announced new gas coming into the market, so
the gas market is likely to remain quite volatile and expensive.

Speaker 1 (03:52):
So even with the government's announcements and the initiatives and
the reversing the oil and gas band, et cetera, that
stuff too far in the future for you to give
you any relief in the new term.

Speaker 2 (04:03):
Well, I think we're at the point now where we
as a company have pivoted to move gas out of
our generation, our baseload generation profile, simply because we don't
see any new activity happening at the moment. So we've
got no proof points to say that gas will be
there in the future, and it's declining at a rapid

(04:24):
rate at the moment.

Speaker 1 (04:25):
Does what does that mean? You mentioned you want to
transition from coal to biofuel at Huntley without getting gas involved,
So does that mean that that process will take longer?
When do you expect that you might be able to
be coal free there?

Speaker 2 (04:40):
We're hoping that we'll have our first meaningful biomass supplies
by twenty twenty eight, and that we'll be running predominantly
on biomass by around two thousand and thirty. In an
extreme dry year, we're possibly still going to have to
use some coal. But to give you a sense, every
year the felled log in New Zealand could generate roughly

(05:02):
a quarter of all New Zealands generate electricity today. So
the forests of New Zealand represent a huge opportunity for
a zero carbon cycle generation option to back up wind
and hydro this idea.

Speaker 1 (05:19):
The labor has been floating actually quite loudly this week
about making the gent tailors reinvest their dividends rather than
giving it to the government. Reinvest the dividends and new generation.
Are you open to that, Well.

Speaker 2 (05:29):
We run a dividend reinvestment program now, so any government
at any stage could tick reinvestment and reinvest all their
dividends in genesis at any point we would funnel that
into building new renewables. So obviously we'd welcome that.

Speaker 1 (05:43):
So it'd be quite an easy thing to do.

Speaker 2 (05:46):
It's just a simple tick on a form and your
dividends go into building new renewables.

Speaker 1 (05:51):
Do we need more renewables built.

Speaker 2 (05:54):
We do. The reality is that we need a substantial amount,
probably in the order of ten to twenty billion over
the next twenty five years worth of new renewables built.
And that's because we're going to electrify more and more
of our lives as we go forward over the next
twenty years. So it's absolutely essential.

Speaker 1 (06:15):
Is it frustrating? Then when you get the form back
from the government and they haven't ticked that box.

Speaker 2 (06:20):
That's a decision for all shareholders to make. What we're
really clear is that anyone who ticks the dividend Reinvestment form,
that money will go into building new renewables.

Speaker 1 (06:31):
Malcolm, thank you very much for your time. Appreciate it.
It's Malcolm John, thank you, Chief executive at Genesis.

Speaker 2 (06:37):
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