Genesis Energy Ltd.

The stable outlook on Genesis Energy reflects our expectations that the company will continue to generate sizable positive free cash flow and maintain a ratio of debt to EBITDA of 2.4x-2.8x on a normalized basis over the next few years. We expect Genesis Energy to maintain some headroom in its metrics to manage any risks associated with volatile market conditions and have the balance sheet capacity to cater to any growth. This would also influence the company's dividend reinvestment plan (DRP) in the next few years. We have not factored in any impact from the ongoing strategic review of the company's interest in Kupe. We could consider lowering the rating if Genesis Energy's debt-to-EBITDA ratio were to remain more than

...We expect Genesis Energy Ltd. to maintain its strong position as New Zealand's largest electricity and gas retailer. As one of the four large vertically integrated players in New Zealand, Genesis Energy benefits from a generation share of about 16% and retail share of about 22% in the country. That said, retail competition remains high, limiting prospects for increases in retail tariffs. Genesis Energy's direction in the next three to five years will depend on the ongoing strategic review of its stake in the Kupe oilfield joint venture and future build strategy. Genesis Energy can opt to sell its 46% stake in Kupe, invest in Kupe's future exploration, or maintain status quo without exposure to any exploration risks. Assuming no change of stake in Kupe and factoring in the benefit from legacy gas contracts rolling off from January 2021, we estimate the debt-to-EBITDA ratio will improve to 2.7x-2.8x in the fiscal year ending June 30, 2021 and 2.4x-2.6x in subsequent years. Post completion...

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