Genesis Energy Ltd. Full Analysis

Overview Key strengths Key risks Solid market position as New Zealand's largest electricity and gas retailer, with modest generation capacity. Intense retail competition. Vertically integrated business model, which provides some natural hedge against volatile market prices. Exposure to volatility in domestic wholesale electricity markets and global commodity prices. Sizable positive free operating cash flow. Limited financial flexibility due to aggressive dividend payouts and ownership structure. 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,

...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 debt-to-EBITDA ratio could improve to 2.6x-2.8x, after operating at close to our downgrade trigger of 3x over the last few years. The improvement will be supported by an expected increase in EBITDA to NZ$410 million-NZ$440 million over the next two to three years as benefits from a roll-off of legacy gas contracts flow in. This is along with fuel cost savings from renewable investments, procurement under power purchase agreements (PPAs) and improvements in plant efficiency....

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