Genesis Power expands its services in push for profit

By Nick Stride

Friday 20th October 2000

Murray Jackson

State-owned Genesis Power has expanded into telecommunications and the internet in a drive to improve its return on investment.

The country's third-largest generator posted a $48.2 million maiden-year profit after adjustments for a balance sheet reset but failed to cover its cost of capital.

Chief executive Murray Jackson said improvements in how efficiently Genesis used its generation capacity would boost the return on capital over time.

In the meantime, it was guaranteeing the country's supply security by providing standby generation from the 1000MW Huntly station, at no charge, even though its statement of corporate intent said it should act as a fully commercial entity.

Genesis is offering its customers cheap international phone calls through strategic partner Net Tel.

Net Tel, in association with France Telecom and US carrier Sprint, offers calls at half the normal published rates.

Genesis' internet service provider, Infogen, also has billing and power-management features. Finance general manager Steve Rudd said it provided Genesis with synergies in billing and direct payments and reduced transaction costs. It offered various deals to customers at lower prices made possible by aggregating their purchasing power.

The SOE paid the government a $7 million final dividend, taking the year's total to $11.4 million.

Mr Jackson said a decision would be taken in "a couple of weeks" on whether to build a new 400MW gas-fired station at Huntly.

Transpower projections showed North Island electricity demand would exceed generation capacity by 2005. Mr Jackson said such a plant would cost about $360 million and take two years to build.

But the waiting time for engines was two-and-a-half years and resource consents would also have to be obtained.

Natural Gas Corporation and TrustPower have also said they are looking at building new thermal plants. Meridian Energy's Manapouri tailrace project is expected to provide an additional 150-160MW.

Genesis has 15% of the generation market and 10% of the retail market and has been writing hedge contracts for players long on customers and short on generation capacity.

Genesis gained 24,000 customers over the year and lost 12,000, ending with 172,000, up 12,000 on 1999.

It claimed a customer satisfaction rating of 85%, well above the 63% Meridian chief executive Keith Turner trumpeted in a letter to The National Business Review last week.

Mr Jackson said some power retailers were reported to be "slamming" - taking over consumers' accounts without their consent - to boost headcounts.

He said Genesis' joint ventures and bundling activities meant it did not have to reach the 300,000 to 400,000 customer count regarded by some in the industry as being critical mass. But he predicted the industry would eventually settle down with only three or four large retailers.

The company was looking at offering gas supply to customers, perhaps in conjunction with one of the existing gas companies.

The climb in spot electricity prices, from under $20 a MW hour to over $40, had been driven by a dry winter and the loss of Contact Energy's Otahuhu station.

Genesis' exposure to the spot price was about 10% and never exceeded 20%, Mr Jackson said.

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