Genesis Energy 2019 Full Year Financial Results
MARKET RELEASE
Date: 28 August 2019
NZX: GNE / ASX: GNE
Genesis delivers earnings of $363 million and announces EV investment
Year ended June 2019 Change year on year
EBITDAF
1
$363 million Up $3 million on FY18 of $360 million
Net Profit $59 million Up $39 million on FY18 of $20 million
Underlying Earnings
2
$67 million Up 16% on FY18 of $57 million
Earnings Per Share 5.84 cents Up 3.87 cps from 1.97 cps
Underlying Earnings Per Share 6.56 cents Up 0.85 cps from 5.71 cps
Final Dividend Per Share 8.6 cents Flat on FY18 of 8.6 cents
Full Year Dividend Per Share 17.05 cents Up 1% on FY18 of 16.9 cents
Free Cash Flow
3
$176 million Down 7% on FY18 of $190 million
A strong retail performance with value defended in the wholesale market
Genesis Energy (GNE) today announced that it delivered EBITDAF for the year of $363 million, up $3 million on
FY18. The prior year’s Net Profit of $20 million has increased to $59 million, with underlying earnings increasing
16 percent to $67 million.
Chief Executive, Marc England, says it has been a year of building momentum for Genesis across the Retail
business, underpinned by a resilient wholesale market performance, to create value for shareholders while
seeking to exceed our customers’ expectations. “Over FY19 we have launched ground-breaking digital energy
services, such as ‘For Dairy’ and our hugely popular Power Shouts, which demonstrate the successful delivery of
the vision we set out for Genesis three years ago.”
Reliable electricity is central to New Zealand’s decarbonisation and this year Genesis’ flexible generation assets
have ensured energy security for all New Zealanders during a period of unplanned and significant natural gas
supply constraints and low hydro inflows.
“Through our Future-gen programme we are committed to supporting New Zealand's transition to a lower
carbon future; offsetting our emissions through local forestry, improving efficiencies across our generation
business and partnering to build a new wind farm in South Taranaki. Today I am pleased to add that Genesis
has taken an investment in car sharing company, Yoogo Share, which will enable us to help customers to reduce
their carbon emissions.”
“The strategic investment of $2 million for a 40 percent stake will provide significant opportunity for Genesis’
business customers, many of whom are on the verge of transitioning pool car fleets to EVs. The Yoogo model,
supported by Genesis, will reduce average running cost per kilometre, avoid unneeded capital expenditure,
lower carbon emissions and enable more flexible transportation for New Zealand businesses and their
employees,” says Marc.
Final dividend and a dividend reinvestment plan
The Genesis Board has declared a final dividend of 8.6 cents per share, which has a record date of 17 October
2019 and will be paid on 31 October 2019. Genesis is pleased to announce the continuation of its dividend
reinvestment plan introduced at the half year FY18 to provide shareholders a cost-effective way to reinvest in
1
Earnings before net finance expense, income tax, depreciation, depletion, amortisation, impairment, fair value changes and other gains
and losses.
2
Net Profit adjusted for non cash fair value adjustments and business acquisition costs.
3
Free Cash Flow is EBITDAF, less finance expense, cash taxes paid and stay in business capital expenditure.
Genesis’ growth strategy. Shareholders will have until 18 October 2019 to opt into the dividend reinvestment
plan.
FY2020 guidance
EBITDAF guidance for the full year ended 30 June 2020 is in a range of between $360 million to $380 million.
This is subject to hydrological conditions, any material events, one-off expenses or other
unforeseen circumstances. Capital expenditure guidance for FY20 is up to $100 million.
Further information on the company’s operations and financing can be found in the investor presentation of
the full year results at nzx.com/markets/NZSX/securities/GNE and www.genesisenergy.co.nz/presentations.
ENDS
For media enquiries, please contact:
Emma-Kate Greer
Group Manager Corporate Relations
Genesis Energy
M: 027 655 4499
For investor relations enquiries, please contact:
Cameron Parker
Investor Relations Manager
Genesis Energy
P: 09 951 9311
M: 021 241 3150
Yoogo Share
The New Zealand transport sector represents 20% of the country’s greenhouse gas emissions. Partnering with
Yoogo Share enables a differentiated and complementary solution to help businesses further reduce their
energ y costs and carbon emissions. Genesis brings customer and brand reach to complement Yoogo Share’s
experience in EV fleet management and charging infrastructure.
About Genesis Energy
Genesis Energy (NZX: GNE, ASX: GNE) is a diversified New Zealand energy company. Genesis sells electricity,
reticulated natural gas and LPG through its retail brands of Genesis Energy and Energy Online and is New
Zealand’s largest energy retailer with approximately 500,000 customers. The Company generates electricity
from a diverse portfolio of thermal and renewable generation assets located in different parts of the country.
Genesis also has a 46% interest i n the Kupe Joint Venture, which owns the Kupe Oil and Gas Field offshore of
Taranaki, New Zealand. Genesis had revenue of $NZ2.7 billion during the 12 months ended 30 June 2019. More
information can be found at www.genesisenergy.co.nz
---
FY19 Full Year
Results Presentation
28 August 2019
G E N E S I S E N E R G Y L I M I T E D
Marc England –CHIEF EXECUTIVE OFFICER
Chris Jewell –CHIEF FINANCIAL OFFICER
Disclaimer
This presentation has been prepared by Genesis Energy Limited (‘Genesis Energy’) for information purposes only. The information in
this presentation is of a general nature and does not purport to be complete nor does it contain all the information requiredfor an
investor to evaluate an investment. This presentation may contain projections or forward-looking statements regarding a variety of
items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may
differ materially from those stated in any forward-looking statement based on a number of important factors and risks.
Although management may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any
of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the
forward-looking statements will be realised. EBITDAF, underlying profit and free cash flow are non-GAAP (generally accepted
accounting practice) measures. While all reasonable care has been taken in compiling this presentation, to the maximum extent
permitted by law Genesis Energy accepts no responsibility for any errors or omissions and no representation is made as to the
accuracy, completeness or reliability of the information. This presentation does not constitute investment advice.
Genesis Energy Limited FY19 Full Year Result Presentation 2.
AGENDA
Genesis Energy Limited FY19 Full Year Result Presentation 3.
1
Year in Review
2
Financial Performance and Guidance
3
Strategy Update and Outlook
4
Supplementary Information
1. Year in Review
Genesis Energy Limited FY19 Full Year Result Presentation 4.
Results at a glance
Genesis Energy Limited FY19 Full Year Result Presentation 5.
1
Both gross and net churn is expressed on the basis of a 12 month rolling average.
2
Installation Connection Point (ICP), a connection point that is both occupied and has not been disconnected.
3
Netback is defined as Retail EBITDAF by fuel type plus respective fuel purchase cost divided by total fuel sales volumes, statedin native fuel units and excluding
corporate allocation costs.
345
335
333
360
363
FY15FY16FY17FY18FY19
$ MILLIONS
EBITDAF
Earnings growth
—EBITDAF growth of $3m, and continuedgrowth in FY19 dividends translating to a 6.6% gross yield
1
1
Gross yield based on closing share price as at 27 August 2019, $3.37
Genesis Energy Limited FY19 Full Year Result Presentation 6.
GROSS DIVIDEND YIELD COMPARISON WITH PEERS AND LONG-TERM BOND YIELDS
Source: Bloomberg
Leading 6.6%
gross yield
0%
2%
4%
6%
8%
10%
12%
14%
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
GenesisMeridianMercury
ContactUS 10 Yr Govt BondsNZ 10 Yr Govt Bonds
50K UNIQUE ENERGY IQ USERS PER WEEK, 100K USERS PER MONTH(ROLLING 3 MONTH AVG)
Genesis Energy Limited FY19 Full Year Result Presentation 7.
2
Customer Lifetime Value is the margin for each customer, discounted over its expected tenure.
RESIDENTIAL CUSTOMER LIFE VALUE INDEX
2
(CLV) UP3%, RESIDENTIAL ICP NUMBERS UP 0.5%
CLV up
3%
Knowledge
Advice
Action
1
Energy Management Connection: An IoT device deployed to a home or business with the specific aim of
providing a customer with insights on how to optimise the way they use energy. Electricity Insights, Bottle
Gas Monitoring and Electricity Monitoringare all products that use devices that fall within this definition.
~2,000 Energy
Management
Connections
1
deployed
A customer focused strategy coming to life
—Investment in loyalty, brand, products and innovation is driving value, CLV up 3%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Weekly Unique EIQ Users
97%
98%
99%
100%
101%
102%
103%
104%
-
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
CLV Index (LHS)
$117
$112
$116
$100
$110
$120
$130
2,000
2,500
3,000
3,500
FY17FY18FY19
Sales Volume (GWh)
Sales VolumeNetback
$10.8
$10.7
$11.4
$8.0
$9.0
$10.0
$11.0
$12.0
1,000
1,500
2,000
2,500
3,000
FY17FY18FY19
Sales Volume (GJ)
Sales VolumeNetback
$745
$765
$600
$700
$800
$900
$1,000
12,000
13,000
14,000
15,000
16,000
FY17FY18FY19
Sales Volume (t)
Sales VolumeNetback
4%
5%
6%
7%
8%
9%
10%
11%
12%
102,000
104,000
106,000
108,000
110,000
112,000
114,000
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Customers > 1 FuelDual Fuel Churn (RHS)
Residential customers are increasingly engaged and loyal
—Increased value fromour residential customer base through loyalty, gross churn down 3.8ppt
RESIDENTIAL GAS SALES VOLUMES (GJ) & NETBACK ($/GJ)
RESIDENTIAL ELECTRICITY SALES VOLUMES (GWh) & NETBACK
1
($/MWh)
RESIDENTIAL LPG SALES VOLUMES (t) & NETBACK ($/t)
1
Netback is defined as Retail EBITDAF by fuel type plus respective fuel purchase cost divided by total fuel sales volumes, stated in native fuel units and excluding corporate allocation costs.
2
Residential LPG & Electricity Netbacks (FY18) have been normalised to account for one-off accounting adjustments and Nova management fees relating to acquisition.
3
Gross churn is defined as customers who instigated a trader switch or home move, whilst net churn is post home move save and retentions.
Genesis Energy Limited FY19 Full Year Result Presentation 8.
RESIDENTIAL CUSTOMER GROSS
2
CHURN DOWN 3.8 ppt, NET CHURN DOWN 2.4 ppt (ROLLING 12
MONTH AVG)
RESIDENTIAL DUAL FUEL CUSTOMERS UP 6.1%, CHURN DOWN TO 7.8% (ROLLING 12 MONTH AVG)
Volume/value
mix
Volume/value
mix
Volume/value
mix
20.1%
18.8%
17.0%
16.4%
32.8%
31.4%
29.0%
27.7%
0%
10%
20%
30%
40%
1HFY182HFY181HFY192HFY19
Net ChurnGross Churn
25% of residential
customers now
choose dual fuel
Dual fuel churn
down to 7.8%
2
2
$89
$88
$94
$50
$70
$90
$110
2,000
2,500
3,000
3,500
FY17FY18FY19
Sales Volume (GWh)
Sales VolumeNetback
Growing business customer volume with targeted propositions
—Focus remains on volume, but not at the expense of value, business sales volume up 7.8%
BUSINESS GAS SALES VOLUMES (GJ) & NETBACK ($/GJ)
BUSINESS ELECTRICITY SALES VOLUMES (GWh) & NETBACK ($/MWh)
BUSINESS LPG SALES VOLUMES (t) & NETBACK ($/t)
Volume/value
mix
Volume/value
mix
Volume/value
mix
1
Netback is defined as Retail EBITDAF by fuel type plus respective fuel purchase cost divided by total fuel sales volumes, stated in native fuel units and excluding corporate allocation costs.
Genesis Energy Limited FY19 Full Year Result Presentation 9.
BUSINESSDUAL FUEL CUSTOMERS UP 25%, CHURN DOWN TO 7.9% (ROLLING 12 MONTH AVG)
$7.8
$7.6
$8.0
$6.0
$7.0
$8.0
$9.0
$10.0
3,000
4,000
5,000
6,000
FY17FY18FY19
Sales Volume (GJ)
Sales VolumeNetback
$754
$882
$600
$700
$800
$900
$1,000
20,000
21,000
22,000
23,000
24,000
FY17FY18FY19
Sales Volume (t)
Sales VolumeNetback
-
1,000
2,000
3,000
4,000
5,000
FY18FY19
GWh
Elec (GWh)Gas (GWhe)LPG (GWhe)
BUSINESS SALES VOLUME UP 7.8% ON A GWh EQUIVALENT BASIS
Electricity +5.4%
Gas +12.4%
LPG +9.5%
4%
5%
6%
7%
8%
9%
10%
11%
12%
2,000
3,000
4,000
5,000
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Customers > 1 FuelDual Fuel Churn (RHS)
11% of business customers on
dual fuel presents further
growth opportunity
Dual fuel churn
down to 7.9%
0
20
40
60
80
100
120
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Assisted interactions
Thousands
Phone (FY19)Phone (FY18)
52%
44%
40%
30%
14%
13%
14%
12%
34%
43%
47%
58%
FY16
FY17
FY18
FY19
PhoneWebChatEmailDigital
45%
52%
56%
75%
40%
45%
50%
55%
60%
65%
70%
75%
80%
FY16FY17FY18FY19
Digital initiatives driving down cost to serve
—Cost to serve is down 7% to $141 per connection (ICP
1
)
DIGITAL INTERACTIONS UP 24 ppt SINCEFY16
30ppt INCREASE IN CUSTOMERE-BILL ADOPTION SINCE FY16
Genesis Energy Limited FY19 Full Year Result Presentation 10.
CONTINUED IMPROVEMENT IN COST TO SERVE PER ICP
1
, DOWN 7%
ASSISTED PHONE INTERACTIONS DOWN 23% IN 12 MONTHS
E-bill adoption
up 30 ppt
YoY Phone
interactions
down 23%
$161
$160
$151
$141
$110
$120
$130
$140
$150
$160
$170
FY16FY17FY18FY19
Cost to Serve per ICP
Cost to Serve per ICP down
7% on FY18 and 13% on FY16
1
Installation Connection Point (ICP), a connection point that is both occupied and has not been disconnected.
0%
20%
40%
60%
80%
100%
120%
140%
160%
$0
$100
$200
$300
$400
$500
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-
19
Jun-19
Otahuhu (OTA2201)
HVDC outage
Low storage
U5 outage
Low storage
Gas shortages (GS)
GS
GS
GS
0
50
100
150
200
250
300
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
GWh
Backup Other Retailers & Spot Customers
Backup Swaption Partners
Genesis Customers (Unit 5 Gas/Planned Outages)
Genesis Customers
20%
40%
60%
80%
100%
120%
140%
20%
40%
60%
80%
100%
120%
140%
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
National Storage BandNI Storage as % of AverageSI Storage as % of Average
Wholesale portfolio defended value in a volatile wholesale market
—A resilient result, enabled by managing through gas supply constraints and water shortages
Genesis Energy Limited FY19 Full Year Result Presentation 11.
SHORTAGE OF BOTH GAS AND WATER DRIVES WHOLESALE PRICE VOLATILITY, GWAP
1
OF $143 MWh
ABNORMAL HYDRO STORAGE EXISTED ACROSS BOTH ISLANDS FOR OVER 80% OF THE YEAR
GAS OUTAGESEXISTED FOR 50% OF YEAR CREATING EXACERBATING FUELSHORTAGES
RANKINES PROVIDE BACKUP FOR GAS & HYDRO SHORTAGES, OUTPUT UP 54% to 1,599 GWh, 342 GWh
DEDICATED TO SWAPTIONS
1
GWAP is the average price received for generation, $/MWh.
0
50
100
150
200
250
300
Jul18
Aug18
Sep18
Oct18
Nov18
Dec18
Jan19
Feb19
Mar19
Apr19
May19
Jun19
Thousands
GJ/day
Thousands
Pohokura Gas DeliveriesMethanex Demand
Pohokura annual gas
deliveries down
approx. 15-20%
Low national storage
Low North Island storage
Elevated fuel and wholesale electricity prices
—Tighter gas fuel supply is putting upward pressure on prices
Genesis Energy Limited FY19 Full Year Result Presentation 12.
RECORD KUPE GAS PRODUCTION (25.7 PJ), LPG YIELD UP AND OIL PRODUCTION IN DECLINE
RECORD ANNUAL GWAP, FY19 UP $51/MWh to $143/MWh
THERMAL FUEL COSTS UP 10%, PORTFOLIO FUEL COSTS UP $5/MWh TO $43/MWh
THERMAL AND RENEWABLE GENERATION CONSTRAINED, TOTAL GENERATION DOWN 4% TO 6,821 GWh
$75
$64
$61
$92
$143
$-
$20
$40
$60
$80
$100
$120
$140
$160
FY15FY16FY17FY18FY19
Genesis GWAP ($/MWh)
4,049
4,043
3,268
4,049
3,987
2,649
2,678
3,154
3,056
2,834
-
1,000
2,000
3,000
4,000
5,000
FY15FY16FY17FY18FY19
Generation (GWh)
Thermal GenerationRenewable Generation
$61
$62
$64
$67
$74
$37
$37
$33
$38
$43
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
FY15FY16FY17FY18FY19
Fuel Cost ($/MWh)
Thermal Fuel CostPortfolio Fuel Cost
24.3
24.0
24.3
25.5
25.7
8.8
7.5
6.7
6.3
5.6
5.1
4.5
4.1
4.9
5.4
0
5
10
15
20
25
30
FY15FY16FY17FY18FY19
Field production (PJe)
GasOilLPG
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Production (Genesis Share, PJe)
GasOilLPG
Strong asset management underpins stable earnings
—Key outages, on time and on budget, with Forced Outage Factor down to 0.3%
Genesis Energy Limited FY19 Full Year Result Presentation 13.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Forced Outage Factor (FOF) %
Equipment Availability Factor (EAF) %
Monthly EAFMonthly FOF
HIGH PLANT RELIABILITY, WITH UNIT 5 MAINTENANCE & RANKINE RECERTIFICATION DELIVERED
RECORD KUPE PRODUCTION NOTWITHSTANDING PLANNED MAINTENANCE (GENESIS SHARE, PJe)
Planned Maintenance
at Kupe (coincided with
Unit 5 Outage)
Unit 5
Outage
Kupe operated at
95% of Agreed Plant
Capacity
Rankine Outages
& Recertification
KUPE AND GENERATION ASSET CAPITAL EXPENDITURE PROFILE
1
HUNTLY’S U5 OPERATING FLEXIBILITY IS PROVEN WITH THE FY19 PLANNED OUTAGE USED TO UPGRADE
THE GAS TURBINE
$0
$10
$20
$30
$40
$50
$60
$70
FY15FY16FY17FY18FY19FY20fct
GenerationKupe
0
10
20
30
40
50
FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19
U5 Startup Frequency
U5’s GT upgrade delivers an
additional 2 MW in output
and $800k/year in fuel
efficiency savings
1
FY20 forecast includes Genesis share of the Kupe Inlet Compression Project.
2. Financial Performance
Genesis Energy Limited FY19 Full Year Result Presentation 14.
360
20
57
303
331
190
80
16.9 cps
1,183
363
59
67
302
301
176
89
17.05 cps
1,186
EBITDAFNPATUnderlying
Earnings
Controllable
Operating Expenses
Operating CashflowFree Cash FlowCapital ExpenditureDividendNet Debt
$ MILLIONS
FY18FY19
5
2
3
5
—EBITDAF up $3m to $363m, underlying earnings up 16% to $67m, with operating costs down $1m
FY19 financial highlights
+ 1%
+ 201%
+ 16%
-0%
+ 11%-7%+ 1%
+ 0%
1
Comparable FY18 financials have been restated in line with General information and significant matter included in Genesis’ financial statements, accounting for the adoption of NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue
from Contracts with Customers. No other comparable periods have been adjusted.
2
Controllable operating expenses refers to employee benefits plus other operating expenses.
3
Free cash flow represents EBITDAF less cash tax paid, net interest costs and stay in business capital expenditure.
4
Capital expenditure of $89m differs from the $90.7m stated in the financial statements due to exclusion of accounting adjustments for Huntly U5’s long-term service contract.
5
Net Debt and dividends is shown on a separate scale to other financial comparisons.
-9%
Genesis Energy Limited FY19 Full Year Result Presentation 15.
1
4
Dividends
—Afinal dividend of 8.6 cps declared, resulting in a full year dividend of 17.05 cps, representing a 6.6% gross yield
1
FY15 TO FY19 DIVIDEND CENTS PER SHARE& PAY-OUT HISTORY & NORMALISED VIEW
16.0
16.4
16.6
16.9
17.05
78%
87%
89%
89%
99%
-10%
10%
30%
50%
70%
90%
110%
130%
0
FY15FY16FY17FY18FY19
Dividends (CPS)% of Free Cash Flow
1
Gross yield based on closing share price as at 27 August 2019, $3.37.
2
Free cash flow represents EBITDAF less tax paid, net interest and stay in business capital expenditure.
3
Large one-off items include Tekapo intake gate and planned maintenance on Huntly U5.
2
Genesis Energy Limited FY19 Full Year Result Presentation 16.
•Normalised for ‘one-off
3
’ levels of SIB capex, pay-out ratio
is 94% of Free Cash Flow. An unadjusted pay-out ratio as
percentage of free cash flow
2
is 99%.
•A final dividend of 8.6 cps, 80% imputed, will have a
record date of 17 October 2019, payable to shareholders
on 31 October 2019.
•Supplementary dividend of 1.2141 cps payable to
non-resident shareholders.
•The Dividend Reinvestment Plan (DRP) continues to be
offered at 2.5% discount, with an opt-in cut off date as at
18 October 2019. DRP pricing will be notified to
shareholders on 23 October 2019.
•Dividends have increased 6.6% from FY15 to FY19,
relative to a CPI increase of 5.4% over the same period.
94%
FY18 to FY19 EBITDAF
$ MILLIONS
—EBITDAF growth of $3mto $363m, dueto a standout Retailperformance, resilientWholesale result, and a stable Kupe outcome
FY19 EBITDAF
Genesis Energy Limited FY19 Full Year Result Presentation 17.
360
363
13
0
7
3
FY18 EBITDAFRetailWholesaleKupeCorporateFY19 EBITDAF
Higher Lower
—A standout Retail performance, resilient Wholesale result and a stable Kupe outcome
Segment EBITDAF
FY18 TO FY19 KUPE EBITDAF
FY18 TO FY19 RETAIL EBITDAF
FY18 TO FY19 WHOLESALE EBITDAF
Genesis Energy Limited FY19 Full Year Result Presentation 18.
•Retail:Growth in LPG and Business segments and reduced cost to serve
across residential customers, offset by lower residential consumption
due to warmer weather.
•Wholesale: A strong trading result to defend against rising fuel prices
and low North Island hydro storage and planned Unit 5 outage. GWAP
up $51/MWh to $143/MWh however total generation volume down
284 GWh.
•Kupe:Operating efficiency gains offset by the naturally declining oil
yield and increasing emissions costs.
•Corporate:Costs increased by $3m due to reduced capitalisation of
technology projects, increased software costs and reduced allocations.
5
6
6
3
110
123
FY18 EBITDAFLPG Growth:
Residential & B2B
Business GrowthResidential OpexResidential
Consumption
FY19 EBITDAF
Higher Lower
178
186
178
7
38
26
18
2
FY18 EBITDAF
- Actual
Emissions
Adjustment
FY18 EBITDAF
- Adjusted
Trading Result Thermal Fuel
Prices
Hydro Inflow
Impact
Operating
Expenses &
Other
FY19 EBITDAF
- Actual
Higher Lower
115
108
109
5
1
7
1
2
3
FY18
EBITDAF -
Actual
Emissions
Adjustment
FY18
EBITDAF -
Adjusted
JV
Operating
Costs
LPGGasOilNet
Emissions
Costs
FY19
EBITDAF -
Actual
HigherLower
1
This adjustment is the result of a change in treatment between Wholesale and Kupe segments.
1
1
FY18 TO FY19 UNDERLYING EARNINGS
NPAT & Underlying Earnings
—$39m increase in NPAT and 16% increase in underlying earnings
$ MILLIONS
Genesis Energy Limited FY19 Full Year Result Presentation 19.
FY18 TO FY19 NPAT
$ MILLIONS
•Depreciation and amortisation costs down driven by
changes in asset valuations in FY18, offset by recent
investment in Retail.
•Positive fair value adjustment of $35m due to the
difference between FY19 and FY18 Huntly Rankine
valuation, offset by higher forward prices impacting
the value of financial contracts.
•Finance costs down $1m due to the July 2018
restructuring of $240m in capital bonds, at a
reduced coupon rate of 4.65%
•Other gains and losses refers to the unrealised gain
in fair value of carbon units held for trading.
20
59
3
9
35
1
8
16
FY18 NPATChange in
EBITDAF
Depreciation
(DDA)
Fair Value
Adjustments &
Impairment
Finance CostsOther Gains &
Losses
Income Tax
Expense
FY19 NPAT
Higher Lower
57
67
3
1
9
4
FY18 Underlying
Earnings
Change in
EBITDAF
Finance CostsDepreciation
(DDA)
Adjusted Tax
Expense & Other
Movements
FY19 Underlying
Earnings
Higher Lower
303
302
4
3
2
7
FY18 Operating
Expenses
Bad DebtsMarketing &
Communications
OtherEmployee
Expenses
FY19 Operating
Expenses
Lower Higher
285
278
284
303
302
FY15FY16FY17FY18FY19
$ MILLIONS
FY15 TO FY19 CONTROLLABLE OPERATING EXPENSES
1
FY18 TO FY19 CONTROLLABLE OPERATING EXPENSE BRIDGE
Controllable operating expenses
—Controllable operatingexpenses down $1m on the prior year
$ MILLIONS
Genesis Energy Limited FY19 Full Year Result Presentation 20.
1
Controllable operating expenses refers to employee benefits plus other operating expenses.
•Operating expenses down to $301.6m,
following a period of investment (FY18,
$302.8m).
•Bad debts down $4m on FY18.
•Improved loyalty and brand performance
enabling reduced marketing costs.
•Technology teams have spent less time on
capital projects resulting in lower employee
capitalisation rates.
Capital expenditure
—Increased capex levels reflect a period of significant plant investment in Wholesale, reduced expenditure
in Retail
FY15 TO FY19 CAPITAL EXPENDITURE
1
•$23m Tekapo safety upgrade to install intake gate
project commenced in FY19.
•Stay in business capex (SIB) was $65m. Significant
projects included:
₋Huntly U5 planned maintenance, Rankine Unit 1
recertification, Tekapo intake gate and runner
replacement, Tuai generator refurbishment,
Rangipo fire protection upgrades.
•Other capex includes ($24m):
₋Huntly U5 performance upgrade, Kupe Inlet
Compression Project feasibility, LPG depot
expansions, customer marketing automation and
CRM system initiatives.
1
Capital expenditure excludes M&A activities.
2
Capital expenditure of $89m differs from the $90.7m stated in the financial statements due to exclusion of accounting adjustments for Huntly U5’s long-term service contract.
22
47
19
14
15
13
7
9
13
3
5
3
FY15FY16FY17FY18FY19
WholesaleCustomerLPG Operations
KupeTechnology & DigitalCorporate
$ MILLIONS
44
40
47
80
89
Genesis Energy Limited FY19 Full Year Result Presentation 21.
2
FY15 TO FY19 NET DEBT AND NET DEBT/EBITDAF RATIO
1
905
833
1,212
1,183
1,186
2.5
2.6
3.3
3.0
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
200
400
600
800
1000
1200
FY15FY16FY17FY18FY19
Net debtNet debt/EBITDAFTarget debt ratio band (2.4 to 3.0)
Capital structure
—Net Debt/EBITDAF flat at 3.0 and net debt flat at $1,186m
•S&P reaffirmed BBB+ credit rating in January 2019.
•$240m of Capital Bonds maturing in FY 2049 were issued
on 16 July 2018 at a coupon rate of 4.65%. $200m of
existing Capital Bonds with a coupon rate of 6.19% were
redeemed at the same time.
•Dividend reinvestment plan (DRP) in place since the FY18
interim dividend with 30% of holders currently
participating, representing 26% of all shares, and $60
million raised to date.
•Average debt tenor has increased slightly to 11.9 years,
from 11.4 years.
•Coal and carbon inventories have increased by $54m year
on year. Normalising for this, Net Debt/EBITDAF is 2.8.
1
Standard and Poor’s make a number of adjustments to Net Debt and EBITDAF for the purpose
of calculating credit metrics. The most significant of these is the 50% equity treatment
attributed to the Capital Bonds.
Genesis Energy Limited FY19 Full Year Result Presentation 22.
FY20 Guidance
—Guidance for FY20 EBITDAF is$360 million to $380 million
Genesis Energy Limited FY19 Full Year Result Presentation 23.
•FY20 EBITDAF guidance is $360 million to $380 million subject to normal hydrological conditions, any
material events, one-off expenses or other unforeseen circumstances. Key assumptions include:
•IFRS 16 adoption -positive impact of $7 million
•Return to normal hydrology and gas supply conditions
•Beach Energy has confirmed a 30 day statutory shutdown of Kupe –negative impact of $10 million
•Kupe production has come off plateau and will not return to 77 TJ/day until the Inlet Compression Project is
delivered in mid-2021. FY20 forecast gas production is 24 PJ (7% lower than FY19)
•FY20 capital expenditure guidance of up to $100 million
•Long-run outlook for stay in business capital expenditure is $50 million to $70 million
•Capital is elevated for FY20 due partly to:
•One off safety upgrades to install a new intake gate structure at Tekapo to mitigate seismic risk; and
•commencement of the Kupe Inlet Compression Project, Genesis capex share is ~$30 million over FY20/21
•We continue to target the strategic goal of $400+ million EBITDAF by FY21 and our current expectation is
$400 million to $420 million
3. Strategy Update and Outlook
Genesis Energy Limited FY19 Full Year Result Presentation 24.
Our VISION: to be customers’ first choice for energy management
Our PURPOSE: to reimagine energy to put control in our customers’ hands
PERFORMING
TRANSFORMING
Increase # of customers using
energy management tools and
increase digital interactions
Grow our earnings and deliver top
quartile shareholder returns
Be #1 or #2 in every
product market
Energise our people and improve
engagement
Keep our people
healthy and safe
Maximise the value of our assets,
products and businesses
Embrace diversity
of thought
Employees are engaged advocates for
our brands and products
Move toward a lower
carbon future
Be New Zealand’s most
loved brand
Our STRATEGY: to maximise value through our market position
Wholesale Market
Maximising value from our Generation & Fuels
Portfolio as we transition to a lower carbon future
Retail Market
Engaging customers through loyalty as we innovate
to a data-driven future
Genesis Energy Limited FY19 Full Year Result Presentation 25.
We’re performing while transforming
363
7
400
10 -12
15 -30
10 -15
10 -20
420
FY19 EBITDAFIFRS16 ImpactKupe Production
Decline
Retail GrowthOptimisationGas Supply
Agreements roll-off
FY21 Target
Our pathway to FY21
—Driven by targeted retail growth, optimisation and roll-off of legacy contracts, offset by the decline in Kupe
production
Genesis Energy Limited FY19 Full Year Result Presentation 26.
Residential Value Growth
B2B Growth
LPG Growth
1
Retail growth represents gross margin improvements in the Retail segment through volume and value growth, based on the three keyareas identified above.
2
Optimisation represents value creation from reduced operating expenses, enhanced wholesale revenues through improved plant and fuel efficiency and return to normal fuel and operating conditions.
1
2
As reported in Nov-18
(20 –30)
(10 –15)
(17 –27)--
$MILLIONS
Genesis Energy Limited FY19 Full Year Result Presentation 27.
Kupe production
KUPE PRODUCTION DECLINE
1
HAS COMMENCED EARLIER
THEN EXPECTED DUE TO HIGHER RECENT EXTRACTION
LEVELS
—Early onset of decline due to record production driven by gas market shortages and field outages
•Kupe production has come off plateau,
market notified on 2 August 2019. This
is in line with JV Operator reservoir
modelling.
•Maximum production is expected to
reduce at a rate of between 1.2% and
1.5% per month until the Inlet
Compression Project is completed in
mid-winter 2021.
•FY20 forecast gas production is 24 PJ,
taking into account the 30 day outage.
•The actual rate of decline is likely to
vary based on overall production and
other factors and will be visible on
OATIS as it occurs.
1
Decline in daily production is Genesis modelling of possible outcomes using 1.2% and 1.5% monthly from 77 TJ/day.
0
10
20
30
40
50
60
70
80
90
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
TJ / day
FY20 Production Forecast (24 PJ)Daily Max Decline @ 1.2%Daily Max Decline @ 1.5%
Planned 30 day outage
in November 2019
Declinereduces daily max and
annual production in FY21
Inlet Compression Project
complete mid-2021
Genesis invests in EV car share business
—40% stake in Yoogo Share, New Zealand’s onlyfully electric car sharing business, to support businesses to decarbonise
•The NZ transport sector represents around 20% of the country’s
greenhouse gas emissions.
•There is a groundswell of activity from business and government to
support NZ’s emissions reduction targets
•Partnering with Yoogo Share enables a differentiated and
complementary solution to help businesses further reduce their
energy costs and carbon emissions.
•Genesis brings customer and brand reach to complement Yoogo
Share’s experience in EV fleet management and charging
infrastructure.
•Established charging network provides a platform to further EV
understanding and inform future proposition development.
•With 200 tonnes of CO2 already saved by Yoogo Share customers, and
car sharing forecast for significant growth, Genesis is optimistic about
what this new partnership will deliver for Shareholders
Genesis Energy Limited FY19 Full Year Result Presentation 28.
Power Zone image is concept design only
Genesis has invested $2 million for a 40% share in
Yoogo Share, an EV car sharing service provider
targeting business pool car fleets.
Enabling a more sustainable future
50%
of heavy
vehicle fleet
by 2025
100%
light vehicle
by 2020
450 GWh
per annum
from 2021
250,000
carbon
offset
1,000
schools
engaged
School-gen
Trust
established
As kaitiaki of the natural
resources we use when producing
electricity, iwi relationships are
valued and highly significant to
Genesis
The primary objective is to
produce a stable supply of
forestry generated New Zealand
Unit (NZU) carbon credits
143%
increase
since 2011
714
Whio pairs
protected
4. Supplementary Information
Genesis Energy Limited FY19 Full Year Result Presentation 30.
‘For Dairy’, developed with farmers for farmers.......With You. For You.
Balance SheetFY19
($m)
FY18
($m)
Variance
Cash and Cash Equivalents61.949.3
Other Current Assets416.4339.4
Non-Current Assets4,154.23,838.8
Total Assets4,632.54,227.5+9.6%
Total Borrowings1,289.81,255.4
Other Liabilities1,191.91,015.7
Total Equity2,150.81,956.4+9.9%
AdjustedNet Debt1,186.21,182.9
Gearing per bank Covenants30.6%32.5%
EBITDAF InterestCover6.5x6.4x
Net Debt/EBITDAF
2
3.0x3.0x
Income StatementFY19
($m)
FY18
($m)
Variance
Revenue2,700.72,302.5+17.3%
Total Operating Expenses(2,337.3)(1,942.1)+20.3%
EBITDAF363.4360.4+0.8%
Depreciation, Depletion & Amortisation(196.5)(205.7)
Impairment of Non-Current Assets(7.0)(0.4)
Revaluation of Generation Assets4.6(48.8)
FairValue Change(15.2)(3.1)
Share of Associate(0.2)-
Other Gains (Losses)7.3(0.7)
Earnings Before Interest & Tax156.4101.7+53.8%
Interest(73.3)(74.3)
Tax(23.9)(7.7)
Net Profit After Tax59.219.7+200.5%
Earnings Per Share (cps)5.841.97
Stay inBusiness Capital Expenditure64.650.8+27.5%
Free Cash Flow (FCF)
1
175.7189.8(7.4%)
Dividends Per Share (cps)17.0516.9+0.9%
Dividends Declared as a % ofFCF99.0%89.4%+10.4 ppt
Cash Flow SummaryFY19
($m)
FY18
($m)
Variance
($m)
Net Operating Cash Flow301.4330.6
Net Investing Cash Flow(92.7)(82.2)
Net FinancingCash Flow(196.1)(226.9)
Net Increase (Decrease)in Cash12.621.5(41.4%)
Financial statements
1
Free cash flow (FCF) represents EBITDAF less cash tax paid, net interest and stay in business capital expenditure. This is a change in methodology from FY17 with tax paid replacing an adjusted tax calculation. All historical
information has been restated to the new measure.
2
Standard and Poor’s make a number of adjustments to Net Debt and EBITDAF for the purpose of calculating credit metrics. The most significant of these is the 50% equity treatment attributed to the Capital Bonds.
Genesis Energy Limited FY19 Full Year Result Presentation 31.
Debt InformationFY19
($m)
FY18
($m)
Variance
Total Debt$1,289.81,255.4
Cash and Cash Equivalents$ 61.949.3
Headline Net Debt$1,227.91,206.1+1.8%
USPPFX and FV Adjustments$41.723.2
AdjustedNet Debt
1
$1,186.21,182.9+0.3%
Headline Gearing37.5%39.1%(1.6 ppts)
AdjustedGearing36.7%38.6%(1.9 ppts)
Covenant Gearing30.6%32.5%(1.8 ppts)
Net Debt/EBITDAF
2
3.0x3.0x
Interest Cover6.5x6.4x
Average InterestRate5.8%5.8%
Average Debt Tenure11.9 yrs11.4 yrs
1
Net debt has been adjusted for foreign currency translation and fair value movements
related to USD denominated borrowings which have been fully hedged with cross
currency swaps.
2
Standard and Poor’s make a number of adjustments to Net Debt and EBITDAF for the
purpose of calculating credit metrics. The most significant of these is the 50% equity
treatment attributed to the Capital Bonds.
GENESIS DEBT PROFILE
Diversified funding profile
The $240m of Capital Bonds maturing in FY 2049 were issued on 16 July 2018 following a successful
capital raising in June 2018. $200m of existing Capital Bonds were redeemed at the same time.
Genesis Energy Limited FY19 Full Year Result Presentation 32.
$0
$50
$100
$150
$200
$250
$300
FY20FY21FY22FY23FY24FY25FY26FY27FY47FY49
$m
Retailable BondsWholesale DomesticDrawn Bank
Undrawn BankCapital BondsUSPP
Retail Key InformationFY19FY18Variance
EBITDAF ($ millions)122.5109.7+11.7%
Customers with > 1 Fuel117,138109,710+6.8%
ElectricityOnly Customers328,415341,546
Gas Only Customers16,54917,823
LPG Only Customers34,18135,124
Total Customers496,283504,203(1.6%)
Total Electricity, Gas & LPG ICP’s675,056672,240+0.4%
VolumeWeighted Average Electricity
Selling Price –Resi ($/MWh)
$255.82$252.26+1.4%
VolumeWeighted Average Electricity
Selling Price –SME ($/MWh)
$221.17$216.66+2.1%
VolumeWeighted Average Electricity
Selling Price –C&I ($/MWh)
$128.71$121.46+6.0%
Volume WeightedAverage Gas Selling
Price –($/GJ)
$18.97$19.45(2.5%)
Volume WeightedAverage LPG Selling
Price –($/t)
$1,807.7$1,773.3(1.9%)
Retail Cost to Serve per ICP140.62151.38(7.1%)
Operational metrics
Genesis Energy Limited FY19 Full Year Result Presentation 33.
Retail Key InformationFY18FY19Variance
Customer Electricity Sales (GWh)6,0675,980+1.5%
Customer Gas Sales (PJ)8.27.5+9.3%
Customer LPG Sales (tonnes)38,50735,005+10.0%
Electricity Netback ($/MWh)$104.93$100.28+4.6%
Gas Netback ($/GJ)$9.10$8.67+5.0%
LPG Netback ($/t)$835.95$767.47+8.9%
Retail Netback
1
by Segment & FuelFY17FY18FY19
Residential -Electricity ($/MWh)$117.4$111.9$116.3
Residential -Gas ($/GJ)$10.8$10.7$11.4
Residential -LPG ($/tonne)N/A$788.2$765.3
SME -Electricity ($/MWh)$101.8$100.9$105.9
SME -Gas ($/GJ)$9.1$9.2$9.6
SME -LPG ($/tonne)N/A$821.5$997.5
C&I -Electricity ($/MWh)$78.1$80.1$87.3
C&I -Gas ($/GJ)$7.2$6.9$7.2
C&I -LPG ($/tonne)N/A$590.3$769.3
1
Historical netbacks have been restated since FY18 Results to excluded corporate allocated costs (refer to definition
on pages 8 & 9).
Operational metrics
Genesis Energy Limited FY19 Full Year Result Presentation 34.
WholesaleKey InformationFY19FY18Variance
EBITDAF ($ millions)177.6178.0(0.2%)
Renewable Generation (GWh)2,8343,056(7.3%)
Thermal Generation (GWh)3,9874,049(1.5%)
Total Generation (GWh)6,8217,105(4.0%)
GWAP ($/MWh)$143.42$91.59+56.6%
Electricity Purchases –Retail (GWh)6,3956,298+1.5%
LWAP ($/MWh)$139.01$92.08+51.0%
LWAP/GWAP Ratio97%101%(4 ppts)
Electricity CFD Purchases (GWh)2,2552,023+11.4%
Electricity CFD Sales (GWh)2,4752,711(8.7%)
Coal/GasMix (Rankines only)88/1263/37
Gas Used in Internal Generation (PJ)20.226.7(24.3%)
Coal Used in Internal Generation (PJ)15.97.6+109.2%
Weighted Average Gas Burn Cost ($/GJ)$8.69$8.02+8.4%
Weighted Average Coal Burn Cost ($/GJ)$6.33$5.44+16.3%
Weighted AverageThermal Fuel Cost
($/MWh)
$73.78$66.53+10.9%
Weighted AveragePortfolio Fuel Cost
($/MWh)
$43.13$37.91+13.8%
1
FY19 remaining reserves include FY18 production of 36.7 PJe, and represent a 1% increase in
total reserves in FY19 (4.6 PJe).
KupeKey InformationFY19FY18Variance
EBITDAF ($m)108.8115.3(5.6%)
Field Production (PJ)25.725.5+0.8%
Genesis Gas Sales (PJ)11.412.1(5.8%)
Genesis Oil Sales (kbbl)441533(17.3%)
Genesis LPG Sales (kt)50.746.1+10.0%
Oil Production Yield (bbl/TJ)40.045.3(11.7%)
LPG Production Yield (t/TJ)4.33.9+10.3%
Remaining Kupe Reserves (2P, PJe)
1
319.0351.1+4.6PJe
AverageBrent Crude Oil (USD/bbl)$69$64+7.8%
Realised Oil Price(NZD/bbl)$88$80+10.0%
---
GENESIS ENERGY LIMITED
annual report 2019 /
With you. For you.
te pūrongo ā-tau 2019
Chairman's
letter
2
Independent
auditor’s report
59
Chief Executive's
letter
3
Results
at a glance
4
Reimagining energy
with and for
our customers
6
Electricity generation
- resilience shines
in tough conditions
10
Enabling innovation
through our people
14
Sustainability
17
Yo u r
Board of Directors
20
Consolidated
financial statements
24
Corporate
governance
62
Director and Executive
employee remuneration
64
Statutory
disclosures
68
Yo u r
Executive team
22
Introducing the
Genesis School-gen Trust
19
3
GENESIS ANNUAL REPORT 2019
2
GENESIS ANNUAL REPORT 2019
Dear Shareholders,
It was a privilege to take over from
Dame Jenny Shipley as the Chairman
of Genesis in October 2018. Along with
my fellow Directors and our Genesis
team, I would like to thank you for your
support of Genesis over the past year.
Genesis has a simple purpose:
To reimagine energy to put control
in our customers' hands.
This purpose guides the strategic
choices that we make and, in particular,
over the year we have focused our
attention on providing increased
transparency to our customers, to
enable them to make more informed
choices about their own electricity use
and energy related carbon footprint.
We believe this transparency is key
to supporting our ambition for a
sustainable low-carbon future.
Financial results
Over the year, Genesis has defended
value with our flexible generation assets
helping to ensure reliable, affordable
and low-carbon electricity prevails.
This flexibility also enabled Genesis
to ensure energy security for all
New Zealanders during a period of
unplanned and significant natural
gas supply constraints and low hydro
catchment inflows in the first half of
FY19.
Our focus on optimising our generation
assets, as well as enhancing the
customer experience, enabled Genesis
to continue to perform well during FY19
with year-end EBITDAF¹ in line with
market guidance at $363 million.
Your Company has delivered a free cash
flow³ of $176 million, down on FY18
due to higher, but necessary, capital
expenditure. Operating costs⁴ were
down $1.2 million on FY18, reflecting
the Company's strong financial
disciplines. A dividend of 17.05 cents
per share will be paid for the full year,
up 1 per cent on FY18, representing a
gross yield of 6.4 per cent⁵.
Genesis’ focus on yield plus growth is
delivering value to shareholders, with
a 12-month total shareholder return for
FY19 of 51 per cent, which is above the
market (NZX) average of 17 per cent.
Strong corporate governance
Good governance matters. Our
governance practices support and
enable our operations, encourage and
monitor good conduct and a great
culture, and support effective risk
management and compliance.
During the year we welcomed
Catherine Drayton and James Moulder
to the Board and farewelled Dame
Jenny Shipley and Mark Cross.
Catherine and James both bring
extensive industry and governance
experience to your Company and
add to the skills we need as a Board
to effectively fulfill our roles and
responsibilities and govern in our
dynamic environment. Both James
and Catherine have been appointed
as members of the Audit and Risk
Committee.
From the
Chairman
From the
Chief
Executive
Dear Shareholders,
This year has been a year of building
momentum, from Genesis' flexible
generation fleet, to our new products
and services. Genesis people have
created value for shareholders and
for New Zealand through innovation,
creativity and hard work.
Ground-breaking digital energy
services, such as For Dairy and
our hugely popular Power Shouts,
demonstrate successful delivery of
the vision we set out for Genesis three
years ago to reimagine energy and
be customers' first choice for energy
management.
Electricity generation – resilience
in tough conditions
The Company’s resilience has shone
through across a year of major fuel
constraints. Retailers across the market
turned to Genesis' supply from our
diversified fuels portfolio. Combined
with a well-balanced spread of fuel
contracts, we have been able to offset
higher fuel costs to support stable
growing earnings.
Powering New Zealand toward a
sustainable future
Genesis is committed to supporting
New Zealand's transition to a more
renewable energy future. We are
partnering with Tilt Renewables on a
new wind farm in South Taranaki, which
will enable 250,000 tonnes of carbon to
be removed from the system each year.
We are working hard to operate more
sustainably. This includes offsetting
our emissions through local forestry
and improving efficiencies across our
power generation business. We are also
actively exploring energy technologies
that could play a role in New Zealand’s
low-carbon future, such as hydrogen.
Our School-gen programme and the
Genesis School-gen Trust are preparing
students for the future of work by
helping them engage with science and
technology. School-gen is an important
part of the Genesis partnership with
Emirates Team New Zealand. Together,
we will deliver valuable educational
resources into schools nationwide
in the lead up to, and during, the
America’s Cup in 2021.
Leading in retail markets
We have enabled strong earnings
growth in retail markets by focusing on
engaging customers through innovative
products that reward loyal customers.
Genesis customers want efficient,
easy-to-use energy services they can
access via an app, online or over the
phone. They also want to see that
we understand and reward them for
choosing and staying with Genesis.
In a New Zealand first, we launched
For Dairy, a plan specifically designed
with and for New Zealand dairy farmers
to give them greater control over and
value from their energy use.
Your Board spent considerable time this
year ensuring best practice governance
was applied to meet all stakeholder
expectations. Significant governance
activities undertaken during the year
include:
>a r
efresh of Board and standing
committee charters and policies
comprising the Company's Corporate
Governance Policy Framework,
including ensuring the framework is
consistent with the recently updated
NZX listing rules;
>a r
eview of the outcomes of the
conduct-related Australian Prudential
Regulation Authority (APRA) review
into the Commonwealth Bank
of Australia and the Hayne Royal
Commission review of Australian
banks; and
>close oversight of important
regulatory review and consultation
processes, including the Electricity
Price Review and the Interim Climate
Change Commission report.
Your Board is committed to our vision:
To be customers' first choice
for energy management
We have ambitions for Genesis and are
proud to serve our shareholders as we
work with management to reimagine
energy.
Thank you again for your support of
Genesis and our great team of people.
Ngā mihi,
Barbara Chapman CNZM
Chairman
Almost 150,000 customers took part
in our fifth Power Shout in May 2019,
choosing the hours of free power that
suited them. As a result customers are
choosing us and staying with us, with
net churn dropping from 19 to 16 per
cent.
Enabling innovation through our
people
At Genesis, we recognise that
innovation and delivering for customers
is everyone’s job. We are actively
building our culture to encourage and
empower every employee to try new
things and enhance our processes,
products and services.
We are seeing higher internal
alignment with our customers, greater
empowerment within teams, faster
execution, stronger customer offerings
and a rich flow of ideas feeding the
pipeline of products and services to
come.
On behalf of the Executive team, I
would like to thank you for your support
and interest in the Company over the
last 12 months. As our business and the
market evolve, it is also important to
keep evolving as an Executive team,
so you will note I have refined and
refreshed the team’s responsibilities for
FY20, which will broaden the team’s
experience and ensure we are fit for
the road ahead. We look forward to
continuing to perform strongly as we
transform Genesis to deliver for you,
our shareholders and our customers.
Ngā mihi,
Marc England
Chief Executive
Overall EBITDAF¹ for the year
increased to $363 million. The
prior year NPAT² of $20 million
has increased to $59 million, with
underlying earnings increasing 16 per
cent to $67 million.
The approach is working. Our employee
engagement score is now:
per cent, up a substantial
12 points on 2018.
1. EBITDAF: Earnings before Interest, Tax,
Depreciation, Amortisation and Fair Value
Adjustments.
2. NPAT: Net Profit After Tax.
3. Free cash flow: EBITDAF less cash tax paid,
net interest costs and stay in business capital
expenditure.
4. Operating costs: employee benefits plus other
operating expenses.
5. Gross yield based on closing share price as at
30 June 2019, $3.47.
Mai i te Manahautū
Ngā Tirohanga a te
Heamana
FROM THE CHAIRMANFROM THE CHIEF EXECUTIVE
customers are now
logging into their
Genesis Energy IQ
apps every week.
,
5
GENESIS ANNUAL REPORT 2019
4
GENESIS ANNUAL REPORT 2019
Results at
a glance
Results at
a glance
44
GENESIS ANNUAL REPORT 2019
Over FY19 our customer-
led strategy delivered
meaningful growth, while
our flexible wholesale
fuel portfolio successfully
defended value in the face
of unprecedented fuel
shortages.
EBITDAF performed well
in the circumstances,
with NPAT well ahead
of last year due to better
underlying performance and
higher futures prices in the
wholesale market driving
some asset revaluations.
It is great to see our
integrated portfolio
continuing to deliver on our
investment proposition of
a strong yield plus growth,
delivered through stable
growing earnings and
steadily growing dividends.
CHIEF FINANCIAL
OFFICER
Chris Jewell
Chief Financial Officer in FY19
Ngā tīpakotanga
RESULTS AT A GLANCE
Chief Financial Officer
& Executive General Manager Strategy
in FY20
EBITDAF
FY18 $360m
net profit after tax
(NPAT)
FY18 $20m
total dividend
relating to FY19 result
FY18 16.9cps
cps
revenue
FY18 $2.3b
controllable
operating expenses
$
FY18 303m
free cash flow
FY18 $190m
$
net debt²
FY18 $1,183m
1. Cents per share
2. USPP translated using CCIRS fixed rate
underlying
earnings
FY18 $57m
¹
7
GENESIS ANNUAL REPORT 2019
6
GENESIS ANNUAL REPORT 2019
We’re delivering products
and services that give our
customers the knowledge
and advice they need to get
the most from their energy.
Over the past 12 months
we have powered ahead in
helping New Zealand homes
and businesses engage with
energy management.
Approximately 100,000 residential
and business customers are now using
Genesis’ Energy IQ app every month
for updates on their energy use. The
app provides weather-based daily and
weekly electricity forecasts, gives usage
break-downs and shares more routine
billing updates. Additionally, 100,000
customers with smart meters have
now completed home profiles, letting
them compare their home’s energy
consumption with other households of
a similar age and size.
We have now installed nearly 2,000
energy management connections
into customer sites nationwide. Each
time we deploy a product that has
an internet of things sensor, we are
growing our customer understanding.
This boosts our ability to deliver useful,
personalised and timely information
to support their needs. Genesis has
also reviewed its metering services.
Following and extensive RFP process
and entering into new arrangements
with service providers, Genesis
continues to improve its customer
understanding and is set to deliver a
New Zealand first with the roll out of
gas smart meters to its customers late
next year.
Our Bottled Gas Monitoring, Electricity
Monitoring and Electricity Insights
products are adding to our energy
management connections. They deliver
Reimagining energy
with and for our customers
valuable insights for customers today,
while generating the data that's helping
us build the products of tomorrow.
LPG customer numbers have grown
by 10 per cent across the year and now
stand at over 64,000. In tandem, the
volume of LPG sold has also increased
by nearly 10 per cent to 38,500 tonnes.
Today, Genesis has 27 major LPG
depots nationwide.
In addition, service quality has
improved 8 percentage points over the
past 12 months, with 90 per cent of
customers now receiving their gas on
time. This has resulted in a substantial
improvement in customer experience,
which is reflected in strong Net
Promoter Scores. Considerable focus
has gone into achieving this positive
change, which concurrently improved
our cost to deliver by 9 per cent.
We are actively implementing digital
processes to improve business
efficiency. Over the next 12 - 24
months we will be using new digital
technologies to further enhance the
customer experience. Digitalised and
streamlined processes will significantly
reduce manual paperwork and improve
delivery efficiency. Importantly, our
drivers' time has been freed up so they
can focus on better serving our LPG
customers.
Our drive for innovation continues in
the Wairarapa. Douglas Park School,
Ata Rangi Winery and local residents
from our Local Energy Project are
generating, storing, sharing and selling
energy through our virtual power plant
trial. The virtual power plant aggregates
and coordinates the energy produced
or stored in homes and businesses. At
times of high wholesale prices or grid
constraints, it can provide an alternative
source of power and reward customers
in the process. The trial will help us
understand what customers value and
how it might be scaled up for the future.
E hangahangaia ana te pūngao mōu, mō tātou
REIMAGINING ENERGY WITH AND FOR OUR CUSTOMERSREIMAGINING ENERGY WITH AND FOR OUR CUSTOMERS
Total Customer
Lifetime Value up
%
Digital Customer
Interactions up
%
Residential
Dual Fuel
Customers up
%
Cost to
Serve
down
%
Delivering targeted growth across
retail and business
In a New Zealand first, and aligned to
our With You. For You. mantra, Genesis
launched For Dairy in May. The plan has
been specifically designed with, and
for, New Zealand dairy farmers to give
them greater control over, and value
from, their energy use.
For Dairy takes account of the fact
that, for most dairy farms, the greatest
volume of electricity is generally used
at off-peak and shoulder periods of
the day. For Dairy graphs and forecasts
farmers’ electricity use and savings,
taking into consideration seasonal
variations and usage patterns during a
typical milking day on the farm.
For Dairy is a tangible example of your
Company delivering on its strategy
of targeted growth through product
differentiation. Farmers with For Dairy
can make straightforward changes to
energy use and achieve significant cost
savings.
Simple behaviour changes, such as
using a timer to ensure water heating
takes place in off-peak and shoulder
periods or chillers are off in peak
periods, result in more efficient on-farm
energy use.
The product also gives dairy farmers
greater transparency by splitting out
the network charges from the energy
charges. We are very proud to have
developed an energy management
product that is the first to let farming
customers track, monitor and optimise
their energy usage as an input cost to
their business.
Doing this can generate savings of up
to 25 per cent on annual dairy shed
electricity costs. For Dairy is available
through Fonterra’s Farm Source group,
which exclusively services Fonterra
co-operative members. It has achieved
outstanding uptake since launch, with
over 400 plans sold already.
The Retail group has seen
the positive results from
the platform for growth
established over the last
couple of years. By investing
in great service experience,
as well as innovative
products that reward loyal
customers, we have given
customers more reasons to
stay with Genesis. Therefore,
investors are benefitting
from reduced churn, stable
customer accounts and
improving netback margins.
Agile ways of working,
coupled with increased
empowerment and deeper
employee engagement in
our success, continue to
drive Genesis' innovation
engine. It’s rewarding to
see our customer-centric
strategy delivering strongly
for employees, customers
and shareholders alike.
James Magill
Executive General Manager
Customer & Innovation in FY19
Executive General Manager Retail
Markets in FY20
The increased adoption of
new digital technologies
has generated large-scale
efficiency improvements,
improved service and
bolstered our ability to meet
customer needs.
Increasing the number of
channels and hours of the
day customers can contact
us has also improved
customer experience.
We’ve surpassed the targets
we set ourselves a year ago
by delivering more LPG to
more customers on time.
This is testament to ongoing
improvements and structural
change being driven in our
LPG teams.
I’m looking forward to
applying this experience to
the Wholesale Operations &
Kupe role going forward.
Nigel Clark
Executive General Manager
Customer Service & Operations in FY19
Executive General Manager
Wholesale Operations & Kupe JV
in FY20
9
GENESIS ANNUAL REPORT 2019
8
GENESIS ANNUAL REPORT 2019
Growing customer loyalty
Our new Everything is Energy brand
campaign is now in market, showcasing
how we partner with customers and
reimagine energy together.
Genesis has seen churn for our
residential customers drop to 16 per
cent, down from 19 per cent in 2018.
Customers are choosing us and
staying with us. Fostering loyalty and
engagement has been a deliberate,
considered strategy for Genesis. We
have focused on delivering simple,
useful loyalty rewards that customers
value.
In May, we held our fifth Power Shout,
offering customers two hours of free
power. Based on their regular electricity
use, we were able to recommend the
time and day when they would get
the greatest value from their Power
Shout. The response to this advice-led
approach was incredible, with close
to 150,000 customers taking up a
Power Shout. We are also rewarding
loyalty with Fly Buys. Nearly 160,000
customers have opted into earning
points on their monthly Genesis bills.
Investment in retail service
delivering strong returns
Real energy has gone into making it
easy for customers to connect with us.
Digital self-service interactions have
increased 41 per cent on FY18. We
have invested in both our people and
platforms to drive these outcomes.
Digital self-service achieves the dual
benefits of putting customers in control
of straightforward administration of
their accounts, while allowing our team
members to concentrate on higher-
value service activities.
We launched LiveChat this year.
This service allows customers to
chat with us via our website and is
particularly helpful for those who have
straightforward queries around our
products, their accounts or joining
Genesis. LiveChat users are connected
with an online Genesis agent, bypassing
queue wait times when calling and
talking to an agent in person. This
year there were over 45,000 LiveChat
interactions, showing the value of this
channel, which can deliver customer
support outside our regular call centre
contact hours.
Customers are also making the most of
the new service functionality available
through our new integrated service
platform. Close to 120,000 customers
requested call backs and over 2,700
customers chose to use our new ‘book
a call’ option. This lets customers be
called back by Genesis at a pre-agreed
time that suits them.
Additionally, 74 per cent of Genesis
customers and 82 per cent of Energy
Online customers are now opting to
receive their Genesis invoices online.
Overall, savings of 27 per cent have
been made on communications costs
by your Company this year.
Investment in service boosts
profitability and loyalty
Over the past 12 months Genesis’ cost-
to-serve for customers has reduced by
7 per cent on FY18. Concurrently, bad
debt has decreased.
Genesis customers have increased
the number of fuels they buy from us,
helping boost the lifetime profitability
of our customers. Our customers
recognised our ability to provide
market-leading energy products, tools
and advice when we won the CanStar
Blue Dual Fuel Award in November
2018.
Pleasing performance metrics are
not limited to the overall profitability
of your Company. Customer loyalty
metrics have increased over the
year too. Genesis’ 2019 Brand
Promoter Score is now at 36%, up
one percentage point on FY18. The
score shows customers today are
more willing to actively recommend
us to friends and family. Positive shifts
in these scores indicate our focus
on loyalty, and innovative energy
management services are boosting
overall customer satisfaction with
Genesis.
We are looking to the future and have
trialled agents working from home this
year. We see clear benefits in enabling
customer service representatives to
have greater flexibility in when and how
they work, and the approach allows us
to service customers at times that best
suit them.
Genesis invests in electric
mobility business
In August 2019 Genesis invested
$2 million for a 40 per cent stake
in Yoogo Share, an EV car sharing
company aimed at supporting
businesses and individuals to reduce
their carbon emissions.
Yoogo Share’s experience in EV
fleet management and charging
infrastructure, combined with Genesis’
customer and brand reach, will go a
long way to achieving momentum in this
essential and growing sector.
There is a groundswell of activity from
individuals, business and government
to support New Zealand’s emissions
reduction targets and we hope to
support that. Partnering with Yoogo
Share enables a solution to help our
customers further reduce their energy
costs and carbon emissions.
Energy Online keeps power
brilliantly simple
Energy Online is our challenger
brand, offering ‘brilliantly simple’,
competitively priced electricity and
natural gas.
The brand continues to perform
strongly and its 2019 customer numbers
are up two per cent on the previous
financial year.
Energy Online’s 52-point Interaction Net
Promoter Score indicates its customers
are highly satisfied and happy to
recommend the brand to friends and
family following an interaction with the
Energy Online customer care centre.
Key back-end changes have
contributed to this. During 2019 Energy
Online’s billing platform was integrated
into Gentrack, the billing system used
by Genesis. Having common systems
has enabled one core billing platform
across both brands, dual branded
back-office processes, together with
a single back-office team supporting
Energy Online and Genesis. This has
enabled cost savings, employee skills
enhancement and strengthened the
service experience we offer our Energy
Online customers.
REIMAGINING ENERGY WITH AND FOR OUR CUSTOMERSREIMAGINING ENERGY WITH AND FOR OUR CUSTOMERS
Schools to benefit from our
energy powering Emirates Team
New Zealand
We are incredibly proud to be the
energy behind Emirates Team
New Zealand's 36th America’s Cup
defence. As Official Energy Partner,
Genesis is the sole provider of
electrical, gas and solar power for
Emirates Team New Zealand’s Auckland
base. Our partnership with Emirates
Team New Zealand will benefit schools
nationwide through our Genesis
School-gen programme.
Genesis and Emirates Team
New Zealand will work together
through School-gen to introduce
new STEM (science, technology,
engineering and maths) resources and
activities for schools in the lead up to
the defence. Members of Emirates
Team New Zealand and the Genesis
School-gen team will also visit schools
with the America’s Cup. We can’t wait
to inspire the next generation of STEM
leaders and innovators!
“Both Emirates Team New Zealand and
Genesis are focused on pushing the
boundaries when it comes to technical
innovations,” said Grant Dalton, Chief
Executive Officer of Emirates Team
New Zealand. “Behind the scenes we
both rely on engineers, scientists and
designers, who are the unsung heroes
powering New Zealand homes and our
America’s Cup boats.”
11
GENESIS ANNUAL REPORT 2019
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GENESIS ANNUAL REPORT 2019
Electricity generation
– Resilience shines in tough conditions
Gas constraints and
variable hydrology led to
challenging times for many
in New Zealand’s energy
sector over the past
year. Genesis has again
demonstrated resilience, as
its generation and wholesale
portfolios delivered soundly.
Whakahiko - mā te kōtonga e whakawhitia te manawaroa
GENERATION — RESILIENCE SHINES IN TOUGH CONDITIONSGENERATION — RESILIENCE SHINES IN TOUGH CONDITIONS
TotalThermal
Carbon Intensity Profile
of Genesis Energy's Generation Portfolio
FY00FY19FY05FY10FY15
200
400
600
800
1,000
Tonnes CO2
/GWh
Carbon Dioxide Emissions (kt CO2)
and Gas/Coal Use (PJs) at Huntly
7,000
6,000
5,000
4,000
3,000
2,000
1,000
FY00FY19FY05FY10FY15
Coal Burn(ktCO₂)Gas Burn
ktCO2
60
50
40
30
20
10
0
PJs
Generation trend (Gwh) by fuel type
1,000
2,000
3,000
4,000
0
FY00FY19FY05FY10FY15
CoalRenewableGas
Genesis’ Rankine units again enabled
New Zealand to operate its 85 per
cent renewable electricity system by
ensuring security of supply during
significant natural gas shortages from
suppliers in the first half of this financial
year.
Meeting demand in an environment of
gas shortages and variable hydrology
has required high levels of reliability
from the generation fleet.
Engineering innovation also enabled a
new and more flexible operating mode
for the Huntly Unit 5 Gas Turbine. Unit
starts have increased this year as we
shifted from an always-on model of
operating to moving production across
different sites and locations to match
demand and resource availability. Start
reliability across the fleet has been very
high at 99.3 per cent, a particularly
pleasing result.
The Wholesale Markets
were extremely volatile
in FY19, driven by
numerous unplanned
and unprecedented gas
outages or constraints and
low inflows into the hydro
catchments at different
points across the year.
The Genesis team showed
resilience and passion for
the integrity of the New
Zealand electricity market
as we worked hard to ensure
supply could be maintained
to our customers and other
market participants. We
achieved high asset reliability
and operational flexibility
in a year where we also
successfully carried out
significant life extension
investment in many of our
generation assets.
I’m looking forward to taking
some of that passion for the
industry with me into the
Retail Operations role.
Tracey Hickman
Executive General Manager
Generation & Wholesale in FY19
Executive General Manager
Retail Operations in FY20
As the newest member of
the Executive team and
the first with Iwi ancestry
I am proud of the role we
play in ensuring a reliable,
sustainable and low-cost
electricity market.
We couldn’t do what we
do without the support
of the communities we
operate in. The projects
we deliver through our
generation sites are focused
on working actively with our
communities on the issues
that matter.
At Genesis we take very
seriously the impact we have
around us and are always
balancing that with the
need to ensure homes and
businesses in New Zealand
receive the energy they need
to power their lives.
Shaun Goldsbury
Executive General Manager
Wholesale Markets from FY20
The Generation team also delivered a
significant asset lifecycle investment
programme to tight timeframes,
enabling availability of the assets when
required and delivering significant
efficiency improvements.
Agile planning of this programme and
flexibility of resources allowed the
temporary return of Huntly Rankine
Unit 2 to the market from planned
storage, providing important
generation during periods of market
constraints.
Future-gen: powering a
low-carbon future
Genesis is actively moving toward a
lower-carbon position through new,
innovative generation partnerships,
such as our 20-year electricity offtake
agreement with Tilt Renewables.
The agreement will see Genesis
purchasing around 450 Gigawatt hours
of renewable energy produced at Tilt’s
Waipipi Wind Farm. The wind farm is
expected to be operational from 2021.
Genesis has also joined forces with
Air New Zealand, Contact Energy and
Z Energy to form Drylandcarbon, a
limited liability partnership that will
see the four companies invest in the
establishment of a geographically
diversified forest portfolio to sequester
carbon.
The primary objective is to produce a
stable supply of forestry-generated
New Zealand Unit (NZU) carbon
credits, and the initiative will also
expand New Zealand’s national
forest estate. While Genesis is not
involved in the day-to-day running of
Drylandcarbon and its forests, credits
gained through the partnership will
support Genesis in meeting its annual
requirements under the New Zealand
Emissions Trading Scheme.
Record performance from Kupe
Kupe delivered another record year
of gas production in FY19, increasing
total production by one per cent on
last year’s record production. Kupe's
operator, Beach Energy, has focused
on lowering operating costs. This has
delivered efficiencies and cost savings
benefitting Genesis as its joint venture
partner over the past 12 months.
This outcome is particularly
noteworthy as gas production was
reduced for a month and a half, as
scheduled Huntly Unit 5 outage and
statutory required maintenance at the
Kupe production plant were carried
out, leading to a shortfall of around
1,000 terajoules in gas production.
The reduced production capacity
coincided with significant market
volatility, exacerbated by production
constraints experienced in the largest
gas-producing field in New Zealand.
Despite scheduled maintenance Kupe
plant availability continued to be high
at 95 per cent, demonstrating the
quality of the asset. Kupe’s contribution
to Genesis’ earnings continues to be
significant, delivering $109 million, or
30 per cent, of total EBITDAF in FY19.
LPG yield improved 10 per cent in FY19,
while oil yields continued to decrease
in line with expectations, reflecting the
natural decline in oil production. Oil
prices in United States dollars increased
eight per cent on average.
Managing climate risk
Genesis is cognisant of the ongoing and
developing effects of climate change,
along with the potential environmental
impacts and associated operational,
regulatory and financial risks to the
business.
13
GENESIS ANNUAL REPORT 2019
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GENESIS ANNUAL REPORT 2019
GENERATION — RESILIENCE SHINES IN TOUGH CONDITIONSGENERATION — RESILIENCE SHINES IN TOUGH CONDITIONS
Embracing digital
Remotely operated aerial and
submersible drones are increasingly
being used to inspect tunnels, confined
spaces and underwater or elevated
areas that formerly were inspected by
staff. In addition to improving safety
outcomes, the use of drones is proving
more efficient and cost-effective than
traditional physical inspection methods.
Whanganui Iwi:
Genesis is a member of Te Kōpuka,
which was formed following
Te Awa Tupua 2014 Settlement.
Te Kōpuka’s membership is comprised
of Iwi, industry and recreational and
environment groups. Together,
Te Kōpuka members are responsible for
producing a strategy to identify issues
relevant to the health and wellbeing of
the Whanganui River. The first
Te Kōpuka hui took place in May, with
Executive General Manager Tracey
Hickman representing Genesis. We are
excited to be involved in this significant
workstream, which we believe is of
international interest.
We will continue to track and forecast
the impacts of the changing climate
on our generation assets and make
generation decisions as needed based
on these impacts.
Genesis operates three hydro
catchments across the North and
South Islands. This diversity, together
with our operations at Huntly Power
Station and wind generation at Hau
Nui, gives Genesis flexibility in where
and how it produces electricity. Having
these options provides some mitigation
around climate risk.
Iwi relationships
As kaitiaki of the natural resources we
use when producing electricity, Iwi
relationships are valued and highly
significant to Genesis. Genesis partners
with Iwi and hapū as we collectively
seek to mitigate the impacts of our
activities and enhance ecological
integrity generally.
Supporting Tongariro Tuna:
Tuna, or eels, are an important food
source for Iwi and an endemic aquatic
species. We have expanded our
existing partnership with Ngāti Hikairo
and Ngāti Tuwharetoa to support tuna
populations and migration within the
Ngāti Hikairo rohe. We recognise that
the hydro scheme creates a physical
barrier for tuna as they migrate from
rivers to the sea. We are actively
collaborating with local Iwi to help
manually transport elvers (young eel)
upstream and help mature adult eels
downstream to enable their journey to
sea to spawn. A special tuna pass for
the Whanganui intake is currently being
designed. This will be in place for the
2019/2020 elver season.
Leveraging our expertise in Energy
Management, Generation teams are
now implementing advanced analytics
using production data to predict
performance and provide early warning
of deterioration. This improves financial
performance by reducing operational
losses, unplanned outages and
improved maintenance efficiency.
Girls with Hi-Vis®
Girls with Hi-Vis is a unique initiative for
female students in Years 10-13 aimed at
showing them a new world of career
options in infrastructure industries
like ours. The initiative, established by
Connexis, our industry learning partner,
enables female students to spend a
day on-site, hearing from Genesis
employees working in infrastructure
roles and trialling practical work
experience tasks.
This year Genesis hosted 34 girls from
six schools at Huntly Power Station,
Tokaanu Power Station and Tuai Power
Station in Waikaremoana. It is the third
consecutive year we've participated in
the Girls with Hi-Vis programme.
Whio: boosting a national taonga
Whio are a critical indicator of the
health of high-country waterways.
They’re also one of New Zealand’s
rarest species, with less than 3,000
birds left. Working in partnership with
the Department of Conservation and
others, Genesis is helping to ensure the
restoration of whio populations through
targeted predator control activities.
We’re rightfully proud of what we’re all
achieving:
in Whio breeding
pairs since 2011
We have had another
phenomenally successful year,
with 714 whio breeding pairs
now protected, this is more than
double the number of ducks
breeding since our partnership
with Genesis began in 2011. We
should all be very proud of these
achievements and recognise the
significance of this success, for
whio and for conservation in
New Zealand.
Lou Sanson
Director-General
Department of Conservation
Engaging the next generation
A big part of delivering New Zealand’s
energy future is making sure we’re
developing the energy innovators
of tomorrow through the Genesis
School-gen programme. This year
we ran events with secondary school
students looking at how New Zealand
might meet its target of generating 100
per cent renewable electricity. Led by
our CEO Marc England, these events
were intended to open a dialogue with
high school students passionate about
climate change and the role the energy
sector can play. Twenty students from
six schools attended our Auckland
event where they heard Marc and
other Genesis staff discuss renewable
energy and climate change. At Huntly
we hosted 56 secondary students as
part of the ‘Blake Inspire’ programme,
a week-long leadership development
adventure for environmentally focused
students. Students discussed and
debated the issues with management
and toured our Huntly site.
One student told us:
“I really liked that we heard it from the
CEO because it made it feel like we
were actually taken seriously. It also
shows that the changes are moving
from the top down and that they are
important!”
The meetings were extremely valuable,
showing that the next generation care
deeply about the environment and are
well informed about the challenges
ahead.
15
GENESIS ANNUAL REPORT 2019
14
GENESIS ANNUAL REPORT 2019
A new understanding of safety
and wellness
Over the past year we have challenged
ourselves to look beyond physical
safety and explore the wellbeing needs
of our people, and today ‘keeping
our people safe and well’ is one of
Genesis’ five key all-Company strategic
performance priorities.
Our mental wellbeing programme has
been hugely engaging for Genesis
team members, with 65 per cent
of our employee base engaging in
mental wellbeing initiatives, such as:
registering for resilience and wellbeing
talks, workshops and courses this
year. Mental health advocate Mike
King presented to Generation teams,
enabling some of the most stoic
members of our workforce to openly
discuss and share their experiences
around maintaining mental wellness.
Managing our critical risks remains
of the highest importance to us. New
technology, such as drones and robots,
are today being used by our Generation
teams to de-risk activities, such as
working at heights, in confined spaces
or in remote places.
This year we have introduced our Safe
Supplier Framework. Relationship
managers have been trained and
dashboards created to monitor and
support the ongoing, high performance
of our suppliers.
The total recordable injury frequency
rate (TRIFR) for employees and
contractors has increased slightly
from FY18 to FY19, from 1.34 to 1.43
injuries per 200,000 hours worked,
with delivery of services to customers'
premises continuing to be where the
majority of incidents are occurring.
We have implemented action plans to
reduce re-occurrence.
Inclusion enables strength
We are incredibly proud of our own
inclusive, open workplace. Genesis
people self-identify with more than 50
different nationalities.
We were delighted to host five
high-performing Māori and Pasifika
interns through our involvement
with the TupuToa programme this
year, and we have launched Te Reo
classes for Genesis team members
at our Greenlane office who want to
grow their Te Reo language skills and
knowledge of te ao Māori.
Genesis was named as the 'On the
Journey' award winner at the YWCA
Equal Pay Awards held in November.
The award recognises the focus
Genesis has brought to closing the
gender pay gap for its employees.
Genesis has led the way for other
large corporates in this space, with
Westpac’s New Zealand business
recently adopting our practice of not
asking new hires for their previous
salary details to remove bias and the
possibility of ‘importing’ pay gaps from
other organisations.
With you, for your community
In late 2018 we launched a revitalised
volunteering programme at Genesis,
with the tagline With you. For your
community. giving every Genesis staff
member one volunteer day a year.
By streamlining the process, organising
volunteer days, creating staff ‘DIY’
volunteer days with charities they are
passionate about and encouraging
‘snack-size volunteering’ to allow
part- time staff and busy staff to do
a few hours of volunteering where
they can, participation has risen
dramatically. A total of 172 volunteers
have contributed 1,272 hours, with
Genesis organising 26 volunteer days.
ENABLING INNOVATION THROUGH OUR PEOPLE
Enabling innovation
through our people
Working for Genesis means
being focused on continuous
improvement to help drive
our business forward. People
in our teams are committed
to actively learning, growing
with energy and delivering a
difference for our customers,
the community and
environment.
Our culture unites us
We are seeing higher internal
alignment with our customers,
greater empowerment within teams,
faster execution and real growth in
the ability of our people to share the
Genesis story. To enable advocacy,
all employees can now download
G-Crew, our staff app, allowing Genesis
team members to log sales leads and
customer feedback when they are out
and about with family and friends or
even when they interact with strangers.
Staff engagement has increased 12
points over the past year, with our
overall engagement score now sitting at
71 per cent.
We have actively focused on removing
pain points for our people by aligning
business processes that embed and
support our aspirational culture.
This has involved increasing the
agility of all teams within Genesis,
enabling executive role modelling and
development of an inclusion index
within our engagement survey to better
track people’s sense of belonging.
How we work has changed significantly
in the last 12 months. Work is now
transparent and visual, with information
readily available for all to see. Goals
are clearly defined, communicated and
understood and progress is measured
and shared.
How we recognise and celebrate
great performance has also pivoted
to reflect our new ways of working.
We have launched the Genesis Genies
programme, a peer-nominated
recognition programme that lets
individual contributors at Genesis
nominate the people and teams they
see actively living our behaviours of:
succeeding together, growing with
energy and delivering a difference.
Recognition is now as collaborative as
our ways of working.
Flex for all
The energy Genesis people bring
to work every day helps drive
your Company’s sustained high
performance. We have focused
on developing a suite of options
to help Genesis people meet their
commitments and aspirations on the
job and in life outside of work.
We’ve done this because enabling
our people to succeed, perform and
grow at work means better business
performance for Genesis. Genesis’
new flexibility options take a holistic
approach, reflecting that every age
group in the workforce has different
circumstances that might necessitate
non-standard working hours or time
away from the workplace. Today,
Genesis is offering buyable leave,
career breaks and phased retirement.
We have also enhanced parental
leave entitlements. Our parental leave
package has been designed to support
new mums and dads across two key
periods – the arrival of their child and in
transitioning back to work at Genesis.
The new options are available to any
permanent employee.
Our generation sites are also
implementing flexible working options.
E whakamanahia ana te hiringa e mātou
ENABLING INNOVATION THROUGH OUR PEOPLE
We are actively addressing
what skills, attributes and
culture Genesis people
need to work and perform
at their best as we support
the delivery of our strategy.
We continue to evolve our
working environments,
processes and practices to
enable that. We’re seeing
strong results, as this year’s
significant gains around
customer retention and
employee engagement show.
Our customers and
shareholders rightly expect
big things from us. This
means our people need to
be highly engaged, included
and empowered to make the
right decisions as they deliver
on our energy management
vision.
Nicola Richardson
Executive General Manager
People & Culture
This year has been an exceptional year
for our incredible Emergency Response
Team. The team, supported by many
of their Genesis colleagues, raised
$61,000 for Leukaemia & Blood Cancer
New Zealand. The team won this year's
Sky Tower Stair Challenge event from a
field of over 90 crews.
17
GENESIS ANNUAL REPORT 2019
16
GENESIS ANNUAL REPORT 2019
Gender diversity
45
Female Male
42
26
19
Executive
Officers
BoardSenior
Management
100%
75%
50%
25%
0%
Grand Total: 1,187
Ethnicities represented - Across Genesis
300
450
150
0
NZ EuropeanUndisclosed
Other (European)
Asian
M
ā
ori
Other
Pasifika Peoples
African
Latin American
75
Number of employees
ENABLING INNOVATION THROUGH OUR PEOPLE
Sustainability
See Genesis’ full sustainability update at
www.genesisenergy.co.nz/sustainability
Kia toitū a Kenehi
SUSTAINABILITY
Sustainability at Genesis
is holistic and covers the
environmental, social
and economic health
of our organisation and
our country. Whether it’s
sustainably powering New
Zealand, building strong
communities or caring for our
environment, the mindset is
embedded across Genesis
and you don’t have to look
far to find people passionate
about the positive impact we
can have.
We are cognisant of the
challenges that New Zealand
faces as we move to a lower-
carbon economy. At Genesis,
we are proud to be able to
speak to those challenges,
to articulate the key role of
the electricity sector as an
enabler in that context and
to work with regulators and
policy makers as we play our
part in that transition.
Matthew Osborne
Executive General Manager
Corporate Affairs, General Counsel
and Company Secretary
As New Zealand’s largest thermal
electricity generator, we are very
aware of the role we play – and the
responsibility we have – in transitioning
to a low-carbon future. That’s why
we have committed to not using any
coal to generate electricity in normal
market conditions by 2025, with
the intention to phase out coal use
completely by 2030. Given the variable
weather dependent nature of our
electricity sector, it won’t necessarily
be a linear transition but we stand by
that commitment and, through our
Future-gen programme, we are actively
working towards it.
Our care for the environment goes
beyond emissions from generation,
which is why we’re calculating and then
reducing our overall carbon footprint.
This footprint takes in our own
electricity consumption and vehicle
fleet, while our focus on doing what's
right sees us working actively on issues
around water and wildlife.
Caring for our environment
It’s an outstanding result and reflects
the team’s commitment, drive for
success and willingness to challenge
themselves to go further and faster
every year. The team has placed first
two years running, in the face of
staunch national and international
competition. Genesis’ Martina Perez
Casajuana was the fastest woman up
the tower, with many of the Genesis
crew placing in the top five for their age
categories.
Boosting velocity to enable
delivery
This year has seen Genesis gain real
momentum in what it delivers for
customers. This upward trend in
velocity has been achieved by aligning
internal business processes to embed
and support our aspirational culture.
We have implemented market-leading
processes in how we fund our agile
tribe, increased agile ways of working
across our non-tribe teams and
refreshed Genesis’ Code of Conduct so
everyone working for us understands
our commitment to doing the right
thing, in the right way with the right
people.
Growing the capability of Genesis
leaders has been continuously enabled
across 2019. All senior leaders were
immersed in agile practices and
tools through our bi-annual Business
Leaders’ Forum. New leaders are being
onboarded into the Genesis way of
working through our New Leaders
Fast Start programme and we have
implemented coaching guilds and
coaching support for Tribe members
and team leaders in our Customer
Excellence and Residential Sales teams.
We are developing leaders who are
able to drive cooperation, collaboration
and empathy for customers as we focus
on delivering the energy management
solutions New Zealanders need.
Gender diversity - Age, gender profiles of workforce
M F MF M FM F M FM F
18-2425-3435-4445-54 55-6465+
200
0
50
100
150
Number of employees
MF
Under 18
Female 525 Male 662
Grand Total: 1,187
M F
unknown
ACC
accreditation
Retained our
ACC accreditation at
tertiary level
Genesis gender pay
gap now just
(FY18 2.9%)
Measuring the pay gap
between women and
men doing the same or
comparable work
Scope 1 and 2 emissions (tCO2)
Scope 1CategoryFY19 tCO2e
Stationary combustionFuel used for generation 2,491,223
Mobile combustionFuel used in vehicles860
Fugitive emissions196
To t a l2,492,279
Scope 2
Electricity consumption*Purchased electricity251
Total scope 1 and 22,492,530
*Our 100KW solar array on our Kenehi on Bryce building in Hamilton produced approximately 30% of the electricity used by that site in this financial year, saving 11,164 tCo2e.
Graphs as at 30 June 2019
19
GENESIS ANNUAL REPORT 2019
18
GENESIS ANNUAL REPORT 2019
worth of STEM
equipment gifted
in FY19
$
schools applied for equipment in
the Trust's first funding round
SUSTAINABILITY
Helping customers make
sustainable choices
Genesis customers are now able to
make energy decisions based on
an informed view of their carbon
footprints, thanks to new functionality
in Energy IQ. This functionality lets
customers see overall carbon emissions
from electricity in real time, together
with electricity demand across the
country. Customers can then use these
insights to inform their own home
energy use.
Customers say:
"It lets me see and understand what
my individual carbon footprint is, which
really makes me think about my usage
and why I should reduce it."
"Well done for making this information
available to your customers, it shows
Genesis cares about our environment
and our carbon footprint."
Virtual power plant
The latest step in our Local Energy
Project saw the establishment of
a virtual power plant in June with
our partner Karit, a Christchurch
technology start-up.
This initiative involves residential
participants in the project, along with
Ata Rangi Winery and Douglas Park
School (a Genesis School-gen solar
school) generating, storing, sharing and
selling energy through a virtual power
plant in the South Wairarapa.
Karit's Bruce Emson says:
“We’re delighted that Genesis is willing
to trial our technology. Not only can
it reduce New Zealand’s reliance on
traditional forms of energy but it has
the potential to transform the electricity
sector by allowing consumers to
directly participate in the market.”
Powering New Zealand
Genesis School-gen
For more than a decade the Genesis
School-gen programme has provided
educational resources to support
teachers and schools nationwide and
we are well on our way to our target of
engaging with 50 per cent of schools
by 2020.
We have enhanced our engagement
with secondary schools this year
through the launch of new NCEA
resources and have cemented our role
in primary and intermediate schools
through the launch of our Crunch Time
2.0 online quiz game.
Access to energy for all
In April we joined forces with the
Electricity Retailers Association of New
Zealand (ERANZ), the Government
and the wider electricity sector to help
fund and launch EnergyMate, a free
in-home energy literacy service to help
curtains to 4,056
households since 2010
Christchurch Curtain Bank
helped over
Wellington Curtain Bank
has provided
households in the ten years
from 2008-2018
,
families most at risk of energy hardship.
EnergyMate is being delivered by
community-based financial mentors,
initially to 150 families in Wellington,
Rotorua and South Auckland. It
supports vulnerable families by
helping cut power bills and provides
advice around home heating, energy
efficiency and insulation. This initiative
builds on Genesis’ existing Vulnerable
Care Package, which already delivers
a wide range of services to support
those who are medically dependent
or are needing support controlling and
managing their energy use.
Duffy Books in Homes
Genesis has been supporting Duffy
Books in Homes for 20 years, making
it our longest running community
investment. Our funding provides
books for students at Huntly Primary
School and Huntly West Primary
School.
Building strong communities
Keeping the warmth in for
low-income families
Genesis has supported the Wellington
Curtain Bank and the Christchurch
Curtain Bank for almost ten years.
In February 2019 Genesis established
the independent charitable School-gen
Trust to complement the School-gen
programme, by providing equipment
to New Zealand schools and inspiring
students’ interest in STEM (science,
technology, engineering and
mathematics) and renewable energy.
Genesis has donated $100,000 for the
first two rounds of funding and, from
September, Genesis customers can also
donate via their bills.
Together with our customers, we will
be supporting New Zealand’s future
innovators and preparing them for the
future of work.
In FY19 six schools received STEM
equipment packages (valued at $5,000
each) and a seventh school received a
$20,000 solar package.
Tamatea High School principal Robin
Fabish says students' learning is
improved by ‘doing’.
“We want to apply the technology
to real-world problems so that our
students can work together to be
creative, innovative collaborators who
can see that their skills and talents can
make a difference to someone’s life,”
said Fabish.
Maungatapu School principal Tane
Bennett said the equipment would
allow the students to extend their
learning about the Rangataua Harbour,
including water quality and sea life.
“We’ve received science microscopes,
a TV monitor and a drone – all of
which will make the children’s learning
tangible,” said Bennett.
Introducing the
Genesis School-gen Trust
In FY19
www.genesisschoolgentrust.org.nz
GENESIS SCHOOL-GEN TRUST
students benefitting
through the seven
recipient schools to date
E whakamōhiotia ana te Kura Whakatipu o Kenehi
21
GENESIS ANNUAL REPORT 2019
20
GENESIS ANNUAL REPORT 2019
Your - Board of Directors
Catherine Drayton
BCom, LLB, FCA
Catherine joined the Genesis
Board in March 2019. She is a
member of the Audit and Risk
Committee.
Catherine brings extensive
governance experience to
Genesis. She is currently
the Chair of Christchurch
International Airport Limited, as
well as being a Director of Beca
Group Limited, Southern Cross
Medical Care Society, Southern
Cross Hospitals Limited and
Southern Cross Benefits
Limited and is a Board member
of Guardians of New Zealand
Superannuation. Her former
directorships include Ngai Tahu
Holdings Corporation Limited,
Powerbyproxi Limited and
Meridian Energy Limited.
Catherine’s executive
career as a senior partner in
PricewaterhouseCoopers,
specialising in mergers and
acquisitions, culminated
in leading that company’s
Assurance and Advisory
practices for Central and
Eastern Europe (excluding
Russia). Catherine is a Fellow
of Chartered Accountants New
Zealand and Australia.
CONTACT THE BOARD
If you have a comment
or question, please email
the Board on:
board@genesisenergy.co.nz
CHAIRMAN
Barbara Chapman
CNZM, BCom, CMInstD
Barbara joined the Genesis Board
in May 2018 and assumed the role
of Chairman in October 2018.
Barbara is a Director of NZME,
Fletcher Building, IAG New
Zealand and is the Deputy Chair
of The New Zealand Initiative.
Barbara also serves on the Prime
Minister’s Business Advisory
Council and is the Chair of the
APEC CEO Summit Committee
and co-Chair of the APEC
Business Leadership Group.
Barbara served as Chief Executive
and Managing Director of ASB
Bank for seven years and has
worked in a variety of financial
services executive roles in New
Zealand and Australia. She is
a former Chair of Oxfam New
Zealand, has served on the
Board of Supervisors for Oxfam
International and was a previous
Chair of the New Zealand Equal
Opportunities Trust.
Barbara was named New Zealand
Herald’s Business Leader of the
Year in 2017 and was named the
inaugural INFINZ Diversity and
Inclusion Leader in 2018.
Barbara was awarded a
Companion of the New Zealand
Order of Merit (CNZM) for
services to business in the 2019
New Year Honours List.
Doug McKay
ONZM, BA, AMP (Harvard)
Doug McKay joined the Genesis
Board in 2014 and is Chairman
of the Company’s Human
Resources and Remuneration
Committee and is also a member
of the Company’s Nominations
Committee.
Doug is Chairman of the Bank
of Ne
w Zealand and Eden Park
Trust Board and has directorships
with National Australia Bank
(NAB), IAG New Zealand Limited
and Fletcher Building Limited.
Doug began his career with
Procter & Gamble, working
in a number of roles both in
New Zealand and overseas
and subsequently worked in
Managing Director and Chief
Executive roles with Lion Nathan,
Carter Holt Harvey, Goodman
Fielder, Sealord and Independent
Liquor where he was also
Chairman.
Doug was the inaugural Chief
Ex
ecutive of the amalgamated
Auckland Council until the end
of 2013.
James Moulder
BA, BCA
James joined the Genesis
Board in October 2018. He is a
member of the Audit and Risk
Committee.
James has strong governance
experience having held a number
of non-executive Board and
Advisory Board positions.
He was until recently Chairman
of the Electricity Authority’s
Market Development
Wholesale Advisory Group
and previously chaired the
Electricity Commission: Market
Development Advisory Group.
James’ previous directorships
include CO2 New Zealand
Limited, Rodney Properties
Limited and Bosco Connect. He
has held executive leadership
positions with Mighty River
Power, including leading its
Mercury Energy business.
More recently James has been
involved in the commercialisation
of large datasets in New Zealand,
Europe and the United States,
coupled with the development
of a carbon asset management
business in Australia.
Ko tō tātou poari
YOUR BOARD OF DIRECTORS
Joanna Perry
MNZM, MA Econ (Cantab), FCA,
CFInstD
Joanna Perry joined the Genesis
Board in 2007 and is Chair of
the Company’s Audit and Risk
Committee.
Joanna is a professional
Director, whose other Board
appointments currently include
Oyster Property (Chair), Partners
Life Limited, Regional Facilities
Auckland (Deputy Chair) and
Nyriad Limited. Joanna is
Chairman of the International
Financial Reporting Standards
(IFRS) Advisory Council.
Her previous Board
appointments include Trade Me
Group, Kiwi Property Group and
Rowing New Zealand. Prior to
embarking on her governance
career Joanna was a partner
at KPMG. She has also been
Chairman of the New Zealand
Financial Reporting Standards
Board and a member of the
Securities Commission.
Tim Miles
BA
Tim Miles joined the Genesis
Board in November 2016 and
is a member of the Company’s
Human Resources and
Remuneration Committee and
the Nominations Committee.
Tim began his career with IBM
and later joined Data General
Corporation, rising to Director
of Marketing – Asia Pacific. He
then joined Unisys Corporation
in various senior executive
roles before taking up roles
as the Chief Executive Officer
of Vodafone New Zealand,
the Chief Executive Officer of
Vodafone UK and the Vodafone
Group Chief Technology
Officer.
Upon returning to
New Zealand, Tim was
M
anaging Director of listed
agricultural group PGG
Wrightson before taking up a
role as Chief Executive Officer
of Spark Digital, playing a key
role in the transition of Spark to
become New Zealand’s leading
digital services provider.
Tim is a Director of UDC
Finance, Nyriad Limited,
Chairman of Gut Cancer
Foundation and ASX listed
company oOh! Media Limited.
Tim has also served as a
Director of Goodman Property
and Chair on the Advisory
Boards of Revera Limited and
the CCL Group.
Maury Leyland Penno
BE (Hons), FEng, CMInstD
Maury Leyland Penno joined
the Genesis Board in July
2016. She is a member of the
Company's Audit and Risk
Committee and the Human
Resources and Remuneration
Committee.
Maury is the Chair of The
Education Hub and on the
steering committee of Te Hono
Movement. She has been a
Director of Spark New Zealand
and Transpower New Zealand.
She is a Fellow of Engineering
New Zealand and a Chartered
Member of the Institute of
Directors.
Maury worked at Fonterra
from 2005 until 2016, most
recently as a member of the
Executive team in the role of
Managing Director for People,
Culture and Strategy. She has
also held leadership roles in
risk and crisis management,
supply chain management and
for the listing of the Fonterra
Shareholders’ Fund. Earlier in
her career Maury worked as
a consultant with the Boston
Consulting Group, and was
with Team New Zealand as a
member of the design team
during the successful 1995
America’s Cup campaign.
Paul Zealand
BSc Mech. Eng (Hons), MBA
Paul Zealand joined the Genesis
Board in October 2016 and is
a member of the Company’s
Human Resources and
Remuneration Committee and
the Nominations Committee.
Paul is a professional Director,
currently sitting on the Boards
of New Zealand Refining
Company Limited and Lochard
Energy.
Paul has over 40 years’
international experience in
the oil and gas sector. His
executive roles included
Country Chairman of Shell New
Zealand and Chief Executive
Officer of the upstream oil
and gas business of Origin
Energy in Australia. Through
these roles Paul developed
skills in strategic business
management, health and
safety, and environmental
management, operational
risk and the commercial
management of complex
assets.
YOUR BOARD OF DIRECTORS
23
GENESIS ANNUAL REPORT 2019
22
GENESIS ANNUAL REPORT 2019
Chris Jewell
Chief Financial Officer &
Executive General Manager
Strategy
BE (Hons), MEM, CIMA
Chris joined the Genesis
Executive in 2013 as General
Manager Portfolio Management
and was appointed Chief
Financial Officer in 2016. From
1 July 2019 his role was expanded
t
o include executive general
management of Strategy.
Chris is responsible for leading
the Company’s strategy
formulation and overseeing all
finance functions, treasury, tax,
risk, corporate finance, mergers
and acquisitions, investor
relations and procurement.
Chris brings significant
senior leadership experience
in the energy sector across
the disciplines of markets,
infrastructure investment and
asset operations. Chris sat
on the Electricity Authority
governance boards and has
previously worked in the
telecommunications and
infrastructure sectors in the
United Kingdom.
CHIEF EXECUTIVE,
Marc England
MBA, MENG
Marc joined Genesis in May
2016. He is responsible for the
leadership, strategic direction
and management of all its
business interests.
Prior to joining Genesis, Marc
was Executive General Manager
New Energy at AGL Energy in
Australia and also previously
held the role of Group Head
of Strategy there. Marc has 12
years’ experience in the sector
across three markets having
also worked at British Gas, a
subsidiary of Centrica Plc, in the
UK from 2007.
Earlier in his career Marc held a
number of Corporate Finance
roles at Ford Motor Company
and prior to that was a Petroleum
Engineer for Halliburton Energy
Services in the Middle East
and United States. Marc has
an Master of Engineering in
Mechanical Engineering and
European Studies and an MBA.
James Magill
Executive General Manager
Retail Markets
BSc (Hons), Dip Corp Finance, MBA
James joined Genesis in
October 2016 as Executive
General Manager, Customer
and Innovation. From 1 July 2019
his role expanded to Executive
General Manager, Retail Markets.
James is responsible for
driving growth across the retail
portfolio. This includes product
development, sales, brand and
marketing, the development
of customer applications
and architecture and data
governance.
James brings broad experience
in strategy, corporate finance,
product development and
originating new business
opportunities to his role at
Genesis. He has international
energy sector experience, having
worked in the United Kingdom,
North America and Australia
prior to joining Genesis.
Matthew Osborne
Executive General Manager
Corporate Affairs, General Counsel
and Company Secretary
BCom, LLB
Matthew joined Genesis in May
2018 as General Counsel and
Company Secretary and was
appointed Executive General
Manager of Corporate Affairs in
October that year.
Matthew is responsible for our
legal, regulatory, government
relations, sustainability,
community investment,
communications and company
secretarial functions.
Having worked in a number
of international markets, he
brings significant experience
in executing business strategy
and in providing specialist risk
management, commercial, legal
and regulatory advice.
Prior to joining Genesis, Matthew
held senior legal and governance
roles with the Vodafone Group in
the Middle East and Ireland.
Your - Executive team
Genesis is beginning FY20 with refreshed portfolios for
several senior leadership team members designed to meet
evolving business priorities.
From 1 July 2019, Tracey Hickman is the Executive General
Manager Retail Operations, previously known as Customer
and Service Operations. Nigel Clark is responsible for the new
role of Executive General Manager Wholesale Operations.
Shaun Goldsbury has been promoted to the new role of
Executive General Manager Wholesale Markets.
James Magill is Executive General Manager Retail Markets and
Chris Jewell is Chief Financial Officer and Executive General
Manager Strategy.
Three years into our journey to become first choice for energy
management, refreshing and energising the Executive team is
strategically important for the Company, and is an opportunity
for each Executive to continue to develop their breadth of
knowledge, while ensuring a cross-section of experience can
contribute to the choices we make at the Executive table.
Ko tō tātou tira ārahi
YOUR EXECUTIVE TEAM
Shaun Goldsbury
Executive General Manager
Wholesale Markets
BSc
Shaun was appointed to the
Genesis Executive team on
1 July 2019. He joined Genesis in
20
13 as an analyst and has held a
number of senior roles, including
that of General Manager
Wholesale.
As Executive General Manager
Wholesale Markets Shaun is
responsible for managing the
Wholesale Market trading
activities for Genesis. He is
accountable for management of
our electricity, gas, coal, LPG and
carbon portfolios.
Prior to joining Genesis Shaun
held roles at Trustpower and
Sport Bay of Plenty. His iwi
affiliations are Ngati Porou and
Te Aitanga-a-Hauiti. Additionally,
Shaun is a current Board member
of Volleyball New Zealand.
Nigel Clark
Executive General Manager
Wholesale Operations & Kupe JV
BBus (Acc), Dip Treasury
Management, FCPA, FAICD, CFTP
(Snr)
Nigel joined Genesis in October
2016 as Executive General
Manager Customer and Service
Operations. From 1 July 2019
he has taken on a new portfolio
as Executive General Manager
Wholesale Operations with
responsibility for Genesis’ Kupe
Joint Venture.
In this role Nigel is responsible
for driving value creation from
our electricity generation assets,
environmental management, our
Kupe Joint Venture Investment
and leading safety and wellness
across Genesis. Nigel brings
deep executive-level energy
sector experience to Genesis.
He has held Managing Director
and Chief Financial Officer
roles within Australia’s energy
sector and is motivated by the
challenge of transformational
change to achieve growth
and sustained increases in
profitability. He served on the
Snowy Hydro Board as a Director
from 2015 to 2019.
Tracey Hickman
Executive General Manager
Retail Operations
MA (Hons)
Tracey Hickman joined the
Genesis Executive team in 2012
as General Manager Generation.
From 1 July 2019 she has taken
on a new portfolio as Executive
General Manager Retail
Operations.
As Executive General Manager
Retail Operations Tracey is
responsible for Genesis’ customer
functions, including billing,
payments, inbound and outbound
customer service, switching,
metering and field services.
Additionally, she is accountable
for Genesis’ digital solutions,
information security and LPG
service and delivery operations
across New Zealand.
Prior to her current role Tracey led
Genesis’ Generation, Wholesale
and Fuels portfolio businesses.
She brings over 25 years of energy
sector experience to the Executive
team, having begun her career
with the Electricity Corporation of
New Zealand, managing
large-scale environmental
pr
ojects.
Nicola Richardson
Executive General Manager
People & Culture
BA (Hons)
Nicola joined Genesis in 2014
as Group Manager Talent
and Development. She was
appointed to the Executive team
to lead the Company’s People
and Culture function in 2016.
Nicola is responsible for the
people and culture focus of the
Company, including human
resources, property and facilities
management, organisational
development and remuneration.
She has a particular interest in
business transformation and has
led Genesis’ successful transition
to agile work practices.
Prior to joining Genesis Nicola
held senior leadership roles in
the financial services, real estate
and human resource consulting
sectors in the United Kingdom,
Asia and New Zealand.
YOUR EXECUTIVE TEAM
Consolidated Financial Statements
For the year ended 30 June 2019
Consolidated
Financial Statements
Consolidated comprehensive
income statement
25
Consolidated statement of
changes in equity
26
Consolidated balance sheet27
Consolidated cash flow statement28
Notes to the consolidated financial
statements
General inf
ormation and significant matters29
A. Financial performance
A1. Underlying EBITDAF and underlying earnings32
A2. Segment reporting32
A3. External revenue35
A4. Other gains (losses)36
A5. Depreciation, depletion and amortisation36
A6. Income tax36
B. Operating assets
B1. Property, plant and equipment37
B2. Oil and gas assets39
B3. Intangible assets40
C. Working capital and provisions
C1. Receivables and prepayments43
C2. Inventories43
C3. Payables and accruals43
C4. Provisions44
D. Group Structure
D1. Subsidiaries and controlled entities45
D2. Joint operations45
D3. Share in associates45
E. Funding
E1. Capital management 46
E2. Share capital46
E3. Earnings per share46
E4. Dividends 46
E5. Borrowings47
E6. Finance expense48
F. Risk management
F1. Derivatives51
F2. Price risk52
F3. Interest rate risk52
F4. Foreign exchange risk53
F5. Impact of derivatives on the income statement and equity53
F6. Sensitivity analysis for each type of market risk54
F 7. Liquidity risk54
F8. Fair value measurement55
G. Other
G1. Share-based payments57
G2. Related party transactions57
G3. Auditor's remuneration58
G4. Commitments58
G5. Contingent assets and liabilities58
G6. Subsequent events58
Ngā Tauākī Pūtea Tōpū
Consolidated comprehensive income statement
For the year ended 30 June 2019
Note
2019
$ million
Restated*
2018
$ million
Operating revenueA2, A3 2,700.7 2,302.5
Operating expensesA2 (2,337.3) (1,942.1)
Earnings before net finance expense, income tax, depreciation, depletion,
amortisation, impairment, fair value changes and other gains and losses
(EBITDAF)
363.4 360.4
Depreciation, depletion and amortisationA5 (196.5) (205.7)
Impairment of non-current assetsB1, B3 (7.0) (0.4)
Revaluation of generation assetsB1 4.6 (48.8)
Change in fair value of financial instrumentsF5 (15.2) (3.1)
Share of associateD3 (0.2) -
Other gains (losses)A4 7.3 (0.7)
Profit before net finance expense and income tax 156.4 101.7
Finance revenue 0.6 1.0
Finance expenseE6 (73.9) (75.3)
Profit before income tax 8 3.127.4
Income tax expenseA6 (23.9) ( 7. 7 )
Net profit for the year 59.219.7
Other comprehensive income
Change in cash flow hedge reserveF5 (22.9) (28.8)
Income tax credit relating to items aboveA6 6.4 8.1
Total items that may be reclassified to profit or loss (16.5) (20.7)
Change in asset revaluation reserveB1 394.6178.7
Income expense relating to items aboveA6 (110.5) (50.0)
Total items that will not be reclassified to profit or loss 284.1128.7
Total other comprehensive income for the year 267.6 108.0
Total comprehensive income for the year 326.81 2 7. 7
Earnings per share (EPS) from operations attributable to shareholders Cents Cents
Basic and diluted EPSE35.84 1.97
* The comparative information has been restated to reflect the adoption of two new accounting standards. Refer to the ‘General
information and significant matters’ section in the notes for a reconciliation to the previously reported information.
The above statement should be read in conjunction with the accompanying notes.
25
GENESIS ANNUAL REPORT 2018
GENESIS ANNUAL REPORT 2019
GENESIS ANNUAL REPORT 2019
25
24
CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of changes in equity
For the year ended 30 June 2019
Note
Share
capital
$ million
Share-
based
payments
reserve
$ million
Asset
revaluation
reserve
$ million
Cash flow
hedge
reserve
$ million
Retained
earnings
$ million
Total
$ million
Balance as at 1 July 2017539.7 1.0 987.2 (22.6)476.6 1,981.9
Restatement for adoption of new accounting
policies*
- - - - (5.0)(5.0)
Restated equity as at 1 July 2017539.7 1.0 987.2 (22.6)471.6 1,976.9
Restated net profit for the year - - - - 19.7 19.7
Other comprehensive income
Change in cash flow hedge reserveF5 - - - (28.8) - (28.8)
Change in asset revaluation reserveB1 - - 178.7 - - 178.7
Income tax (expense) credit relating to other
comprehensive income
A6 - - (50.0)8.1 - (41.9)
Restated total comprehensive income
(expense) for the year
- - 128.7 (20.7)19.7 127.7
Revaluation reserve reclassified to retained
earnings on disposal of assets
- - (0.6) - 0.6 -
Share-based payments - 0.6 - - - 0.6
Shares issued under dividend
reinvestment plan
E219.1 - - - - 19.1
Net change in treasury sharesE2(1.1) - - - - (1.1)
DividendsE4 - - - - (166.8)(166.8)
Restated balance as at 30 June 2018557.7 1.6 1,115.3 (43.3)325.1 1,956.4
Net profit for the year - - - - 59.2 59.2
Other comprehensive income
Change in cash flow hedge reserveF5 - - - (22.9) - (22.9)
Change in asset revaluation reserveB1 - - 394.6 - -394.6
Income tax (expense) credit relating to other
comprehensive income
A6 - - (110.5) 6.4 - (104.1)
Total comprehensive income (expense) for
the year
- - 284.1 (16.5) 59.2 326.8
Revaluation reserve reclassified to retained
earnings on disposal of assets
- - (1.2) - 1.2 -
Hedging gains and losses transferred to the cost
of assets
F5
- - -
0.1
-
0.1
Share-based payments - 0.1 - - - 0.1
Shares issued under dividend
reinvestment plan
E2 40.9 - - - - 40.9
Net change in treasury sharesE2 (1.0) - - - - (1.0)
DividendsE4 - - - - (172.5) (172.5)
Balance as at 30 June 2019 597.6 1.7 1,398.2 (59.7) 213.0 2,150.8
* Two new accounting standards have been adopted during the year. Refer to the ‘General information and significant matters’ section
in the notes for a reconciliation to the previously reported information.
The above statement should be read in conjunction with the accompanying notes.
Consolidated balance sheet
As at 30 June 2019
Note
2019
$ million
Restated
2018
$ million
Cash and cash equivalents 61.9 49.3
Receivables and prepaymentsC1 226.7 225.2
InventoriesC2 126.0 70.3
Intangible assetsB3 7. 6 14.7
Tax receivable 16.2 4.4
DerivativesF1 39.9 24.8
Total current assets 478.3 388.7
Receivables and prepaymentsC1 0.9 1.7
InventoriesC2 4.2 5.3
Property, plant and equipmentB1 3,392.8 3,051.6
Oil and gas assetsB2 324.1 378.4
Intangible assetsB3 364.0 364.3
Investments in associatesD3 0.2 -
DerivativesF1 68.0 37.5
Total non-current assets 4,154.2 3,838.8
Total assets 4,632.5 4,227.5
Payables and accrualsC3 241.5 205.7
BorrowingsE5 172.8 210.0
ProvisionsC4 11.4 1 0.1
DerivativesF1 70.7 36.8
Total current liabilities 496.4 462.6
Payables and accrualsC3 0.7 0.8
BorrowingsE5 1,117.0 1,045.4
ProvisionsC4 154.2 156.0
Deferred taxA6 656.0 569.4
DerivativesF1 5 7. 4 36.9
Total non-current liabilities 1,985.3 1,808.5
Total liabilities 2,481.7 2,271.1
Share capitalE2 597.6 557.7
Reserves 1,553.2 1,398.7
Total equity 2,150.8 1,956.4
Total equity and liabilities 4,632.5 4,227.5
The above statement should be read in conjunction with the accompanying notes.
The Directors of Genesis Energy Limited authorise these financial statements for issue on behalf of the Board.
Barbara Chapman
Chairman of the Board
Date 27 August 2019
Joanna Perry
Chairman of the Audit and Risk Committee
Date 27 August 2019
27
GENESIS ANNUAL REPORT 2018
GENESIS ANNUAL REPORT 2019
GENESIS ANNUAL REPORT 2019
27
26
CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
29
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated cash flow statement
For the year ended 30 June 2019
Note
2019
$ million
Restated
2018
$ million
Receipts from customers2,683.92,297.3
Interest received0.61.0
Payments to suppliers and related parties(2,232.9)(1,827.3)
Payments to employees(97.1)(88.7)
Tax paid(5 3.1 )(51.7)
Operating cash flows301.4330.6
Proceeds from disposal of property, plant and equipment0.20.3
Payments to associates(0.4) -
Purchase of property, plant and equipment(65.9)(43.7)
Purchase of oil and gas assets(6.9)(6.4)
Purchase of intangibles (excluding emission units and deferred customer
acquisition costs)
(19.7)(32.4)
Investing cash flows(92.7)(82.2)
Proceeds from borrowingsE5240.0 -
Repayment of borrowingsE5(232.6)(9.0)
Interest paid and other finance charges(70.6)(69.1)
DividendsE4(131.6)(147.7)
Acquisition of treasury sharesE2(1.3)(1.1)
Financing cash flows(1 9 6 .1 )(226.9)
Net increase in cash and cash equivalents12.621.5
Cash and cash equivalents at 1 July49.327.8
Cash and cash equivalents at 30 June61.949.3
Reconciliation of net profit to operating cash flowsNote
2019
$ million
Restated
2018
$ million
Net profit for the year59.219.7
Net loss on disposal of property, plant and equipment0.11.0
Interest and other finance charges paid6 7. 869.4
Items classified as investing/financing activities6 7. 970.4
Depreciation, depletion and amortisation expenseA5196.5205.7
Revaluation of generation assetsB1(4.6)48.8
Impairment of non-current assets B1, B37. 00.4
Change in fair value of financial instrumentsF515.23.1
Deferred tax expenseA6( 1 7. 5 )(45.7)
Change in capital expenditure accruals(1 .1 )(1.7)
Change in rehabilitation and contractual arrangement provisions3.310.3
Share of associate 0.2 -
Other non-cash items 0.31.0
Total non-cash items199.3221.9
Change in receivables and prepayments(0.7)(4.9)
Change in inventories(54.6)4.2
Change in emission units on hand7.1(1.2)
Change in deferred customer acquisition costs(0.2)(0.4)
Change in payables and accruals35.725.5
Change in tax receivable/payable(11.8)1.9
Change in provisions(0.5)(6.5)
Movements in working capital(25.0)18.6
Net cash inflow from operating activities301.4330.6
The above statement should be read in conjunction with the accompanying notes.
Notes to the consolidated financial statements
For the year ended 30 June 2019
General information
These consolidated financial statements comprise Genesis
Energy Limited (‘Genesis’), its subsidiaries, controlled entities
and the Group’s interests in associates and joint operations
(together, the ‘Group’). Refer to section D for more information
on the Group structure.
Genesis is r
egistered under the Companies Act 1993. It is a mixed
ownership model company, majority owned by the ‘Crown’,
bound by the requirements of the Public Finance Act 1989.
Genesis is listed on the New Zealand Stock Exchange (NZX) and
the Australian Securities Exchange (ASX) and has bonds listed on
the NZX debt market. Genesis is an FMC reporting entity under
the Financial Markets Conduct Act 2013.
The c
ore business of the Group and activities carried out by each
segment is disclosed in note A2.
Basis of preparation
These financial statements have been prepared:
•
In ac
cordance with New Zealand generally accepted
accounting practice ('GAAP') and comply with International
Financial Reporting Standards (‘IFRS’) and New Zealand
equivalents (‘NZ IFRS’), as appropriate for profit-oriented
entities;
• In accordance with the Financial Markets Conduct Act 2013,
the Financial Reporting Act 2013 and the Companies Act
1993;
•
Using the hist
orical-cost convention, modified by the
revaluation of derivatives, emission units held for trading and
generation assets;
• In New Zealand dollars rounded to the nearest 100,000;
•
On a Goods and S
ervices Tax (‘GST’) exclusive basis with the
exception of receivables and payables, which include GST
where GST has been invoiced;
•
Using the ac
counting policies set out in the notes to
the financial statements. The impact of adopting new
and revised accounting standards, interpretations and
amendments is disclosed below.
Estimates and judgements
In the process of preparing the financial statements
Management makes a number of estimates and judgements
based on historical experience and various other factors that are
reasonable under the circumstances. The table below lists the
key estimates and judgements:
Key estimates and judgementsNotePage
Fair value of generation assetsB138
Depletion of oil and gas producing assetsB240
Valuation of rehabilitation and restoration
provisions
C444
Valuation of electricity derivativesF856
Impairment of assets
Assets that have indefinite useful lives are tested annually for
impairment. Assets that are subject to depletion, depreciation or
amortisation are reviewed for impairment annually or whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. If an asset’s carrying value
exceeds its recoverable amount, the difference is recognised
as an impairment loss in the income statement, except where
the asset is carried at a revalued amount then it is treated as a
revaluation decrease up to the amount previously recognised in
the revaluation reserve.
Adoption of new and revised accounting standards,
interpretations and amendments
During the year the Group adopted NZ IFRS 9 Financial
Instruments (‘NZ IFRS 9’) and NZ IFRS 15 Revenue from Contracts
with Customers (‘NZ IFRS 15’). The impact of adopting these
standards, using the full retrospective method, is disclosed
below.
NZ IFRS 9 Financial Instruments
Key changes introduced by NZ IFRS 9 include:
1. Changes to the classification and measurement of financial
instruments;
2. A new expected credit loss methodology for calculating
impairment of financial assets; and
3.
A new hedge accounting framework that better aligns with risk
management practices.
The only financial instruments affected by the change in
classification were cash and cash equivalents and receivables.
These were previously classified as 'loans and receivables' but
are now classified as 'measured at amortised cost'. The change
did not impact the measurement of the assets.
Adoption of NZ IFRS 9 has resulted in a change in the method
used to calculate impairment of receivables. Under NZ IFRS 9
the provision is based on the lifetime credit loss expected to be
incurred, whereas the previous model was based on incurred
losses. This change results in earlier recognition of credit losses.
The impact of the change is disclosed in the table on page 30.
No adjustment was made to opening equity on transition.
The Group elected to adopt the hedge accounting requirements
of NZ IFRS 9. As a result the foreign currency basis spread
components of Cross-Currency Interest Rate Swaps ('CCIRS')
are now excluded from a number of hedge relationships with
amounts recognised in a separate Cost of Hedging Reserve
('CoHR'). The balance of the CoHR is disclosed in note F5.
There were no other changes in measurement as a result of
applying NZ IFRS 9.
General information and significant matters
GENESIS ANNUAL REPORT 2019
28
CONSOLIDATED FINANCIAL STATEMENTS
31
GENESIS ANNUAL REPORT 2019
30
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Comprehensive income statement
For the year ended 30 June 2018
As originally
presented
$ million
NZ IFRS 9
$ million
NZ IFRS 15
$ million
Restated
$ million
Operating revenue2,304.5 - (2.0)2,302.5
Operating expenses(1,944.0)(1.8)3.7 (1,942.1)
EBITDAF360.5 (1.8)1.7 360.4
Income tax expense( 7. 7 )0.5 (0.5)( 7. 7 )
Net profit after tax19.8 (1.3)1.2 19.7
Total comprehensive income for the year127.8 (1.3)1.2 127.7
Earnings per share reduced from 1.98 cents per share to 1.97 cents per share as a result of adopting NZ IFRS 9 and NZ IFRS 15.
Consolidated cash flow statement
For the year ended 30 June 2018
As originally
presented
$ million
NZ IFRS 9
$ million
NZ IFRS 15
$ million
Restated
$ million
Receipts from customers2,301.0 - (3.7)2,297.3
Payments to suppliers and related parties(1,831.0) - 3.7 (1,827.3)
Consolidated balance sheet
As at 30 June 2018
As originally
presented
$ million
NZ IFRS 9
$ million
NZ IFRS 15
$ million
Restated
$ million
Receivables and prepayments233.9 (1.8)(5.2)226.9
Tax receivable4.9 - (0.5)4.4
Deferred tax(571.8)0.5 1.9 (569.4)
Retained earnings(330.2)1.3 3.8 (325.1)
Adoption of new and revised accounting standards,
interpretations and amendments (continued)
NZ IFRS 15 Revenue from Contracts with Customers
The adoption of NZ IFRS 15 has resulted in two changes:
1. Reduction in the period over which account credits given to
customers is allocated. The previous policy was to spread
account credits over the length of the average customer tenure
where there was evidence that the return from the customer over
the amortisation period was positive. Taking into consideration
recent guidance, the amortisation period has been reduced
to the length of the contract and as a result will not take into
consideration future contracts that may be entered into when
the contract expires. The change has resulted in a decrease in
receivables and prepayments of $5.2 million as at 30 June 2018,
$6.9 million ($5.0 million net of tax) was recognised in opening
retained earnings on 1 July 2017. This was offset by $1.7 million
($1.2 million net of tax) being recognised in the income statement
for the year ended 30 June 2018.
2. FlyBuy points issued through the Group’s loyalty programme are
considered to represent a separate performance obligation under
the contract and, as a result, a portion of the revenue received
from the contract is allocated to this obligation. The Group is
considered to act as an agent for the programme and as a result
the Group recognises the net amount of the consideration
retained in relation to the points in operating revenue (being the
difference between the consideration allocated to the points
and the amount paid to Loyalty NZ for the points). Previously,
the programme was recognised as a cost in other operating
expenses. The change has resulted in a decrease in operating
revenue and operating expenses of $3.7 million for the year
ended 30 June 2018.
Determining the number of renewal periods to include in the
lease term can have a material impact on the value of the right-
of-use asset and lease liability. For sites with perpetual leases
the number of renewal periods included in the calculation was
aligned with the period used to value the assets.
All other standards, interpretations and amendments approved
but not yet effective in the current year are unlikely to have a
material impact on the Group and, therefore, have not been
discussed.
Accounting standards, interpretations and amendments in
issue not yet effective
NZ IFRS 16 Leases
NZ IFRS 16 specifies how to recognise, measure and disclose
leases. The standard provides a single lessee accounting model,
requiring lessees to recognise right-of-use assets and lease
liabilities for almost all leases. Lessor accounting remains similar
to the current standard. This standard will be adopted by the
Group for the financial year ending 30 June 2020 using the
retrospective method. The retrospective method will result in the
30 June 2019 information being restated when it is reported in
the 30 June 2020 financial statements. The estimated impact of
adopting the standard is as follows:
Comprehensive income statement
For the year ended 30 June 2019
Increase/
(decrease)
$ million
Operating expenses(6.9)
Depreciation, depletion and amortisation4.5
Finance expense4.1
Profit before income tax(1.7)
Income tax expense(0.5)
Net profit after tax(1.2)
The change is estimated to increase EBITDAF by $6.9 million.
The change does not change the underlying cash flows
payable under the contracts.
Consolidated balance sheet
As at 30 June 2019
Increase/
(decrease)
$ million
Property, plant and equipment60.1
Borrowings70.5
Provisions(0.4)
Deferred tax(2.8)
Retained earnings(7.2)
Consolidated cash flow statement
For the year ended 30 June 2019
Increase/
(decrease)
$ million
Operating cash flows7. 0
Financing cash flows(7.0)
33
GENESIS ANNUAL REPORT 2019
32
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A1. Underlying EBITDAF and underlying earnings
Underlying EBITDAF and underlying earnings are performance
measures used internally to provide insight into the operating
performance of the Group by adjusting for items that are outside
Management’s control or items that relate to strategic rather
than operational decisions. Items are excluded from underlying
EBITDAF and underlying earnings when they meet the criteria
outlined in the Group’s non-GAAP financial information policy
(refer to www.genesisenergy.co.nz/investors/governance/
documents for a copy of the policy). These measures are not
A. Financial performance
A2. Segment reporting
The Group reports activities under four operating segments as follows:
SegmentActivity
Retail (previously 'Customer')Supply of energy (electricity, gas and LPG) and related services to end-users.
Wholesale
Supply of electricity to the wholesale electricity market, supply of gas and LPG to wholesale
customers and the Retail segment and the sale and purchase of derivatives to fix the price of
electricity.
Kupe
Exploration, development and production of gas and petroleum products. Supply of gas and LPG
to the Wholesale segment and supply of light oil.
Corporate
Head-office functions, including new generation investigation and development, fuel
management, information systems, human resources, finance, corporate relations, property
management, legal and corporate governance. Corporate revenue is made up of property rental
and miscellaneous income.
Reconciliation of reported net profit to underlying earnings
Note
2019
$ million
Restated
2018
$ million
Net profit for the year 59.2 19.7
Change in fair value of financial instrumentsF5 15.2 3.1
Revaluation of generation assetsB1 (4.6) 48.8
Impairment of non-current assetsB1, B3 7. 0 0.4
Unrealised gain on revaluation of carbon units held for tradingA4( 7. 4 )(0.2)
Adjustments before tax expense 10.2 52.1
Tax expense on adjustments (2.9) (14.6)
Adjustments after tax expense 7. 337.5
Underlying earnings 66.5 57.2
CentsCents
Underlying EPS 6.56 5.71
There were no differences between reported EBITDAF and underlying EBITDAF.
defined in NZ IFRS and therefore are considered to be non-
GAAP performance measures. They should not be viewed in
isolation nor considered a substitute for measures reported in
accordance with NZ IFRS. Underlying EBITDAF and underlying
earnings are used by many companies, however, because these
measures are not defined by NZ IFRS they may not be uniformly
defined or calculated by all companies. Accordingly, these
measures may not be comparable with similarly titled measures
used by other companies.
The segments are based on the different products and services
offered by the Group. All segments operate in New Zealand.
No operating segments have been aggregated. The Group has
no individual customers that account for 10.0 per cent or more of
the Group’s external revenue (2018: none).
Year ended 30 June 2019
Retail
$ million
Wholesale
$ million
Kupe
$ million
Corporate
$ million
Inter-
segment
items
$ million
Total
$ million
Electricity 1,258.6 1,506.2 - - (530.8) 2,234.0
Gas 155.4 164.2 88.0 - (143.6) 264.0
Petroleum (oil and LPG) 68.2 22.4 66.5 - (34.9) 122.2
Emission unit revenue from trading - 62.4 - - - 62.4
Other 13.3 3.5 0.7 0.6 - 18.1
Operating revenue 1,495.5 1,758.7 155.2 0.6 (709.3) 2,700.7
Electricity purchase, transmission and distribution (1,052.6) (917.8) - - 530.8 (1,439.6)
Gas purchase, transmission and distribution (121.9) (208.4) - - 55.6 (274.7)
Petroleum production, marketing and distribution (32.6) (22.8) (42.0) - 34.9 (62.5)
Fuel consumed - (289.6) - - 88.0 (201.6)
Employee benefits (44.4) (28.9) (0.1) (25.5) - (98.9)
Emission unit expenses from trading - (57.3) - - - (57.3)
Other operating expenses (121.5) (56.3) (4.3) (20.6) - (202.7)
Operating expenses (1,373.0) (1,581.1) (46.4) (46.1) 709.3 (2,337.3)
Earnings before net finance expense, income tax,
depreciation, depletion, amortisation, impairment,
fair value changes and other gains and losses
(EBITDAF)
122.5 1 7 7. 6 108.8 (45.5) - 363.4
Depreciation, depletion and amortisation (18.6) (104.6) (63.2) (1 0.1) - (196.5)
Impairment of non-current assets (0.9) (0.3) (5.6) (0.2) - (7.0)
Revaluation of generation assets - 4.6 - - - 4.6
Change in fair value of financial instruments - (16.7) 0.5 1.0 - (15.2)
Share of associate - (0.2) - - - (0.2)
Other gains (losses) 0.1 7.4 - (0.2) - 7. 3
Profit (loss) before net finance expense
and income tax
1 0 3.1 6 7. 8 40.5 (55.0) - 156.4
Finance revenue - - 0.1 0.5 - 0.6
Finance expense (0.2) (2.1) (3.6) (68.0) - (73.9)
Profit (loss) before income tax 102.9 65.7 3 7. 0 (122.5) - 8 3.1
Other segment information
Capital expenditure22.5 48.1 9.0 11.1 - 90.7
A2. Segment reporting (continued)
35
GENESIS ANNUAL REPORT 2019
34
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A2. Segment reporting (continued)
Inter-segment revenue
Sales between segments is based on transfer prices developed
in the context of long-term contracts. The electricity transfer
price per MWh charged between Wholesale and Retail was
$83.01 (2018: $78.97). Inter-segment gas and petroleum revenue
includes the Group’s share of Kupe gas and LPG sales to
Wholesale and gas and LPG on-sold from Wholesale to Retail.
Year ended 30 June 2018
Restated
retail
$ million
Wholesale
$ million
Kupe
$ million
Corporate
$ million
Inter-
segment
items
$ million
Restated
total
$ million
Electricity1,230.8 1,147.9 - - (497.6)1,881.1
Gas145.5 124.0 88.9 - (136.2)222.2
Petroleum (oil and LPG)63.1 26.3 69.1 - (33.4)125.1
Emission unit revenue from trading - 43.7 - - - 43.7
Other 12.2 16.8 0.6 0.8 - 30.4
Operating revenue1,451.6 1,358.7 158.6 0.8 (667.2)2,302.5
Electricity purchase, transmission and distribution(1,022.1)(603.1) - - 497.6 (1,127.6)
Gas purchase, transmission and distribution(114.8)(158.3) - - 47.2 (225.9)
Petroleum production, marketing and distribution(33.6)(26.3)(38.7) - 33.4 (65.2)
Fuel consumed - (267.6) - - 89.0 (178.6)
Employee benefits(40.8)(27.8)(0.1)(23.1) - (91.8)
Emission unit expenses from trading - (42.0) - - - (42.0)
Other operating expenses(130.6)(55.6)(4.5)(20.3) - (211.0)
Operating expenses(1,341.9)(1,180.7)(43.3)(43.4)667.2 (1,942.1)
Earnings before net finance expense, income tax,
depreciation, depletion, amortisation, impairment,
fair value changes and other gains and losses
(EBITDAF)
109.7 178.0 115.3 (42.6) - 360.4
Depreciation, depletion and amortisation(14.9)(111.9)(66.6)(12.3) - (205.7)
Impairment of non-current assets(0.1)(0.3) - - - (0.4)
Revaluation of generation assets - (48.8) - - - (48.8)
Change in fair value of financial instruments - (2.2)(1.5)0.6 - (3.1)
Other gains (losses)(0.1)(0.6)0.3 (0.3) - (0.7)
Profit (loss) before net finance expense
and income tax
94.6 14.2 47.5 (54.6) - 101.7
Finance revenue0.1 - 0.10.8 - 1.0
Finance expense(0.3)(2.3)(3.5)(69.2) - (75.3)
Profit (loss) before income tax94.4 11.9 44.1 (123.0) - 27.4
Other segment information
Capital expenditure35.8 22.0 6.8 15.8 - 80.4
A3. External revenue
Year ended 30 June 2019
Retail
$ million
Wholesale
$ million
Kupe
$ million
Corporate
$ million
Total
$ million
Electricity 1,258.6 9 6 7. 7 - - 2,226.3
Gas 155.4 98.4 - - 253.8
LPG 68.2 3.4 10.2 - 81.8
Oil --38.8 - 38.8
Emissions on fuel sales and electricity contracts* -18.61.1 -19.7
Emission unit revenue from trading - 62.4 - - 62.4
Other revenue 13.3 3.3 0.7 0.6 17.9
Operating revenue 1,495.5 1,153.8 50.8 0.6 2,700.7
Year ended 30 June 2018
Retail
$ million
Wholesale
$ million
Kupe
$ million
Corporate
$ million
Total
$ million
Electricity
1,230.8 647.1 - - 1,877.9
Gas145.5 72.6 - - 218.1
LPG63.1 9.0 9.2 - 81.3
Oil - - 42.7 - 42.7
Emissions on fuel sales and electricity contracts* - 7.9 1.0 - 8.9
Emission unit revenue from trading - 43.7 - - 43.7
Other revenue12.2 16.3 0.6 0.8 29.9
Operating revenue1,451.6 796.6 53.5 0.8 2,302.5
* Emissions on fuel sales and electricity contracts is not a separate performance obligation under the revenue standard. It has been reported separately
as it provides useful information to finance statement users.
Revenue stream
Contract
term
Nature of goods or services and revenue recognitionPayment terms
Electricity (retail),
gas and LPG
(including emissions)
0-36
months
Daily supply of electricity, gas or metered LPG over the
contract period. Revenue is recognised over time at the
end of each day when the consumption is known. The
amount of revenue recognised is based on the amount the
Group has the right to invoice.
Customers are invoiced
monthly and payment is due
between two weeks to one
month after invoice.
Individual supply of bottled LPG. Revenue is recognised
when the bottle is delivered to the customer.
Electricity (wholesale)No term
Half hourly supply of electricity. Revenue is recognised
over time when each trading period is concluded and the
electricity generation is known.
The clearing manager
calculates and invoices the
revenue. Payment is received
on the 20th of the following
month.
Emission unit revenue
from trading
No term
Sale of emission units. Revenue is recognised at the
point in time that the emission unit is confirmed as being
transferred into the acquirer's emission unit account.
Payment is due within five
business days of the units
being transferred.
Oil12 months
Individual oil shipments. Revenue is recognised on the bill
of lading date.
Payment is due no later
than 30 days from the bill of
lading date.
Other revenue
O
ther revenue for the Wholesale segment in the prior year
includes an amount in relation to the insurance claim for Tekapo
B power station outage.
Revenue recognition
The table belo
w provides a summary of the accounting policies
applied to material revenue streams.
37
GENESIS ANNUAL REPORT 2019
36
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A5. Depreciation, depletion and amortisation
Note
2019
$ million
2018
$ million
Property, plant and equipment B1 111.5 118.3
Oil and gas assets B2 58.5 61.5
Intangibles (excluding amortisation of deferred customer acquisition costs) B3 26.5 25.9
196.5205.7
Judgement used in determining revenue
Where customer meters are unbilled at balance date the Group
uses judgement to determine the volume of the unbilled revenue.
The Group estimates the unbilled volume using historical
consumption information. Unbilled revenue is disclosed in
note C1.
A6. Income tax
2019
$ million
Restated
2018
$ million
Current tax 41.4 53.4
Deferred tax (17.5) (45.7)
Income tax expense 23.9 7. 7
Deferred tax
Property,
plant and
equipment
$ million
Oil and gas
assets
$ million
Provisions
$ million
Intangibles
$ million
Restated
other
$ million
Restated
total
$ million
Balance as at 1 July 2017494.9 109.6 (46.1)27.0 (12.2)573.2
Recognised in the income statement(26.7)(16.6)1.2 (2.9)(0.7)(45.7)
Recognised in other comprehensive income50.0 - - - (8.1)41.9
Balance as at 30 June 2018518.2 93.0 (44.9)24.1 (21.0)569.4
Recognised in the income statement(0.6)(14.2)(0.4)(3.7)1.4 (17.5)
Recognised in other comprehensive income 110.5 - - - (6.4) 104.1
Balance as at 30 June 2019 628.1 78.8 (45.3) 20.4 (26.0) 656.0
Income tax
Income tax is recognised in the income statement unless it
relates to other comprehensive income.
Current tax
C
urrent tax is the expected tax payable on taxable income for
the year, using tax rates enacted or substantively enacted at
the end of the reporting period, together with any unpaid tax or
adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax reflects the differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amounts of assets and
liabilities, using tax rates enacted or substantively enacted at the
end of the reporting period.
A3. External revenue (continued)
Reconciliation of pre-tax
accounting profit to income tax
expense
2019
$ million
Restated
2018
$ million
Profit before income tax 8 3.12 7.4
Income tax at 28% 23.3 7. 7
Tax effect of adjustments:
Under (over) provided
in prior periods
1.6(0.6)
Non-deductible expenditure
and other adjustments
(1.0)0.6
Income tax expense 23.97. 7
Where a discount is offered for prompt payment, revenue is
initially recognised net of the estimated discount. The estimated
discount is based on historical trends in customer payments.
A4. Other gains (losses)
Other gains (losses) includes a $7.4 million unrealised gain in relation to the change in fair value of carbon units held for trading as a
result of units being acquired at below current market prices. The unrealised gain in the prior year was $0.2 million.
B. Operating assets
B1. Property, plant and equipment
Note
Generation
assets
$ million
Buildings and
improvements
$ million
Other
property,
plant and
equipment
$ million
Capital work
in progress
$ million
Total
$ million
Carrying value at 1 July 20172,903.9 1.4 61.0 3 7. 7 3,004.0
Additions - - - 56.4 56.4
Revaluation of generation assets
Increase taken to revaluation reserve178.7 - - - 178.7
Decrease taken to the income statement(48.8) - - - (48.8)
Change in rehabilitation and contractual
arrangement assets
- - - (4.5)(4.5)
Transfer between asset categories2.9 - 15.3 (18.2) -
Transfer to intangible assetsB3 - - - (14.2)(14.2)
Disposals(0.8)(0.2)(0.3) - (1.3)
Impairment - - - (0.4)(0.4)
Depreciation expenseA5(109.0) - (9.3) - (118.3)
Carrying value at 30 June 20182,926.9 1.2 66.7 56.8 3,051.6
Additions - - - 63.8 63.8
Revaluation of generation assets
Increase taken to revaluation reserve 394.6 - - - 394.6
Increase taken to the income statement 4.6 - - - 4.6
Change in rehabilitation and contractual
arrangement assets
- 1.8 - 0.9 2.7
Transfer between asset categories 35.3 - 20.2 (55.5) -
Transfer to intangible assetsB3 - - - (11.3) (11.3)
Disposals (0.2) - (0.1) - (0.3)
Impairment - - - (1.4) (1.4)
Depreciation expenseA5 (102.2) (0.7) (8.6) - (111.5)
Carrying value at 30 June 20193,259.02.378.253.3 3,392.8
Summary of cost and accumulated depreciation and impairment
Fair value or cost2,926.9 1.9 160.5 59.5 3,148.8
Accumulated depreciation and impairment - (0.7)(93.8)(2.7)(97.2)
Carrying value at 30 June 20182,926.9 1.2 66.7 56.8 3,051.6
Fair value or cost 3,259.0 3.7 180.0 54.7 3,497.4
Accumulated depreciation and impairment - (1.4) (101.8) (1.4) (104.6)
Carrying value at 30 June 2019 3,259.0 2.3 78.2 53.3 3,392.8
Generation assets
Generation ass
ets include land, buildings and plant and
equipment associated with generation assets. Generation assets
are recognised in the balance sheet at fair value at the date of
valuation, less any subsequent accumulated depreciation and
impairment losses. The underlying assumptions used in the
valuation are reviewed at each reporting date. Revaluations
are performed with sufficient regularity to ensure the carrying
amount does not materially differ from the estimated fair value at
balance date.
Any increase in the valuation is recognised in other
comprehensive income, unless it reverses a revaluation
decrease for the same asset previously recognised in the income
statement, in which case it is recognised in the income statement
to the extent it reverses a decrease previously recognised.
A decrease in carrying amount arising on revaluation is
recognised in the income statement to the extent that it exceeds
the balance, if any, held in the asset revaluation reserve for that
asset. Accumulated depreciation at the date of the revaluation
is eliminated against the gross carrying value so that the
gross carrying amount after revaluation equals the revalued
amount.
S
ubsequent additions to generation assets are recognised at
cost. Cost includes the consideration given to acquire the asset
plus any other costs incurred in bringing the asset to the location
and condition necessary for its intended use, including major
inspection costs, resource consent, relationship agreement costs
and financing costs where appropriate.
39
GENESIS ANNUAL REPORT 2019
38
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Significant
unobservable inputs Method used to determine input
Sensitivity
range
Increase/
(decrease) in
fair value of
generation assets
Inter-relationships
between unobservable
inputs
Wholesale electricity
price path
Average of the internally generated price path
and price paths published by independent third
parties. The average annual wholesale electricity
price paths used to value generation assets range
from $91 per MWh to $127 per MWh referenced
to the Otahuhu 220KV locational node from July
2019 to June 2039.
+10%
- 10%
$579 million
($579) million
Hydrological inflows
affect generation
volumes, as well as
wholesale electricity
prices.
Generation volumesIn-house modelling of the wholesale electricity
market. The generation volumes used in the
valuation range between 2,820 GWh and 6,732
GWh per annum. The low end of the range relates
to periods where there is no thermal generation.
+10%
- 10%
$415 million
($415) million
Wholesale electricity
prices affect the
amount of generation.
Discount ratePre-tax equivalent discount rate of 9.9%.+1%
- 1%
($334) million
$387 million
Discount rate is
independent of
wholesale electricity
prices and generation
volumes.
Generation assets were revalued at 30 June 2019 to
$3,259.0 million (2018: $2,926.9 million) resulting in a net gain
on revaluation of $399.2 million (2018: $129.9 million gain).
The revaluation gain was principally driven by an increase in
wholesale electricity prices and a decrease in the discount rate
as a result of the decrease in long term interest rates, partially
offset by higher fuel costs. The revaluation increase taken to
the income statement partially reverses previous revaluation
decreases for Huntly units 1 to 4.
The valuation is based on a discounted cash flow model prepared
by Management, calculated by generating scheme except for
the Huntly site where it is calculated by type of unit (units 1 to 4,
unit 5 and unit 6). As the key inputs into the valuation are based
on unobservable market data, the valuation is classified as level
3 in the fair value hierarchy. It requires significant judgement and
therefore there is a range of reasonably possible assumptions
that could be used in estimating the fair value.
If generation assets were carried at historical cost less
accumulatd depreciation and accumulated impairment, the
carrying amount would be approximately $1,558.4 million (2018:
$1,585.5 million).
Key estimates and judgements
The wholesale electricity price path is the key driver of
changes in the valuation. The price path is an average of the
internally generated price path and price paths published by
independent third parties. A slight adjustment has been made to
the way short term prices are calculated to better reflect likely
settlement prices. Changes in electricity demand, hydrology and
new generation build affect the price path. These factors are
reviewed for reasonableness by senior management personnel
who are responsible for the price path used by the business.
All other categories of property, plant and equipment
All other categories of property, plant and equipment, with the
exception of land and capital work in progress, are recognised
at cost less accumulated depreciation and any accumulated
impairment losses. Land and capital work in progress are not
depreciated.
Asset categoryEstimated useful lives
Generation assetsup to 85 years
Buildings and improvements10 to 50 years
Other plant and equipment3 to 50 years
Depreciation
Depr
eciation is calculated on a straight-line basis. The estimated
useful lives are reviewed annually. An asset’s carrying amount
is written down immediately to its recoverable amount if the
carrying amount is greater than its estimated recoverable
amount.
The internally generated price path assumes national demand
growth based on the latest available industry analysis and Genesis’
view of economic growth. Forecast hydrology is based on 83 years
of historical hydrological inflow data, and new generation build
assumptions are based on public information and an assessment
on the wholesale electricity prices required to support new
generation build. The internally generated price path assumes the
ongoing operation of New Zealand Aluminium Smelters Limited
at Tiwai Point. The significant unobservable inputs in the valuation
model were:
B1. Property, plant and equipment (continued)
Impairment
Impairment of c
apital work in progress relates to expenditure
on new technology, Huntly unit 6 and a variety of small projects.
Huntly unit 6 capital work in progress is impaired as incurred as
the fair value of this unit is nil. Refer to note A2 for disclosure of
impairment by segment.
B2. Oil and gas assets
Note
Exploration
and evaluation
expenditure
$ million
Oil and gas
producing
assets
$ million
Other oil
and gas
assets
$ million
Capital
work
in progress
$ million
Total
$ million
Carrying value at 1 July 201712.2 400.8 19.0 2.8 434.8
Additions0.2 2.1 - 4.5 6.8
Transfer between asset categories - 1.2 - (1.2) -
Change in rehabilitation asset - (1.7) - - (1.7)
Depreciation and depletion expenseA5 - (60.4)(1.1) - (61.5)
Carrying value at 30 June 201812.4 342.0 1 7. 9 6 .1 378.4
Additions 2.0 1.2 - 5.8 9.0
Transfer between asset categories - 6.3 - (6.3) -
Change in rehabilitation asset - (4.8) - - (4.8)
Depreciation and depletion expenseA5 - (57.4) (1.1) - (58.5)
Carrying value at 30 June 2019 14.4 287.3 16.8 5.6 324.1
Summary of cost and accumulated depreciation, depletion and impairment
Cost30.9 756.7 25.1 6.1 818.8
Accumulated depreciation, depletion and impairment(18.5)(414.7)(7.2) - (440.4)
Carrying value at 30 June 201812.4 342.0 1 7. 9 6 .1 378.4
Cost 32.9 759.4 25.1 5.6 823.0
Accumulated depreciation, depletion and impairment (18.5) (472.1) (8.3) - (498.9)
Carrying value at 30 June 2019 14.4 287.3 16.8 5.6 324.1
Exploration and evaluation expenditure
All exploration and evaluation costs, including directly
attributable overheads and general permit activity are
expensed as incurred except for the costs of drilling exploration
wells and the costs of acquiring new interests. The costs of
drilling exploration wells are initially capitalised pending the
determination of the success of the wells. Costs are expensed
immediately where a well does not result in a successful
discovery. Costs incurred before the Group has obtained the
legal rights to explore an area are expensed as incurred.
Exploration and evaluation expenditure assets are not amortised;
instead, they are assessed annually for indicators of impairment.
Any impairment is recognised in the income statement. Once
commercial approval has been obtained for the development of a
project, the accumulated expenditure in relation to the project is
transferred to oil and gas producing assets.
Oil and gas producing assets
Oil and g
as producing assets include costs associated with
the production station, platform and pipeline transferred from
exploration and evaluation expenditure, mining licences and
major inspection costs. Depletion of oil and gas producing
assets, excluding major inspection costs, is calculated on a
unit-of-production basis using proved remaining reserves (‘1P’)
estimated to be obtained from, or processed by, the specific
asset. Major inspection costs are depreciated on a straight-line
basis over the period up to the next major inspection. Major
inspections occur every two to 10 years depending on the nature
of the work undertaken.
Asset categoryEstimated useful lives
Buildings50 years
Storage facilities25 years
Sales pipeline25 years
Motor vehicles5 years
Other oil and gas assets
Other oil and gas assets include land, buildings, storage
facilities, sales pipeline, motor vehicles and the ongoing
costs of continuing to develop reserves for production. The
cost of other oil and gas assets, less any estimated residual
value, is depreciated on a straight-line basis.
41
GENESIS ANNUAL REPORT 2019
40
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2019
PJe
2018
PJe
2019
PJe
2018
PJe
Opening remaining field reserves at 1 July 209.8 250.5 351.1 373.1
Change in reserve estimate 15.0(4.5) 4.6 14.2
Production (36.7) (36.2) (36.7)(36.2)
Closing remaining field reserves at 30 June 1 8 8 .1209.8 319.0351.1
Developed 93.3126.9 126.5 163.8
Undeveloped 94.882.9 192.5 187.3
Closing remaining field reserves at 30 June 188.1 209.8 319.0 351.1
Further investment will be required to access the undeveloped field reserves disclosed above.
Key estimates and judgements
Proved reserves (‘1P’) are the estimated quantities of oil and
gas that geological and engineering data demonstrates with
reasonable certainty to be recoverable in future years from
known reservoirs, under existing economic and operating
conditions. Proved reserves (‘1P’) are defined as those that have
a 90 per cent likelihood of being delivered. Proved reserves
used to deplete oil and gas producing assets are reviewed
annually. Because the geology of the Kupe oil and gas field
subsurface cannot be examined directly, an indirect technique,
Proved and probable reserves (‘2P’)
known as volumetrics, has been used to estimate the size and
recoverability of the reserve. There are high levels of uncertainty
in terms of accessibility of reserves through sealing faults and
pressure support. A reduction of 10 per cent in these reserves
would impact depletion charges going forward by approximately
$5.6 million per annum at current production rates. The table
below presents the remaining Kupe oil and gas field reserves in
Peta joule equivalents (‘PJe’) of which the Group has a 46.0 per
cent interest (2018: 46.0 per cent).
B2. Oil and gas assets (continued)
Proved reserves (‘1P’)
B3. Intangible assets
Note
Goodwill
$ million
Software
$ million
Emission
units held
for own use
$ million
Contractual
arrangements
$ million
Deferred
customer
acquisition
costs
$ million
Total
$ million
Carrying value at 1 July 2017228.4 28.3 13.5 96.1 5.2 371.5
Additions - 17.2 14.8 0.4 5.5 37.9
Transfer from property, plant and equipment B1 - 14.2 - - - 14.2
Disposal or surrender - - (13.6) - (0.5)(14.1)
Amortisation expense A5 - (15.3) - (10.6) - (25.9)
Amortisation expense included in other
operating expenditure
- - - - (4.6)(4.6)
Carrying value at 30 June 2018228.4 44.4 14.7 85.9 5.6 379.0
Additions - 17.9 27.9 2.4 4.8 53.0
Transfer from property, plant and equipment B1 - 11.3 - - - 11.3
Disposal or surrender* - - (35.0) - - (35.0)
Impairment - - - (5.6) - (5.6)
Amortisation expenseA5- (16.4)- (10.1) - (26.5)
Amortisation expense included in other
operating expenditure
- - - - (4.6) (4.6)
Carrying value at 30 June 2019 228.4 57.2 7. 6 72.6 5.8 371.6
* The disposal or surrender of emission units held for own use includes a $12.8m transfer to the 'held for trading' account.
Summary of cost and accumulated amortisation and impairment
Cost228.4 193.9 14.7 101.2 13.7 551.9
Accumulated amortisation and impairment - (149.5) - (15.3)(8.1)(172.9)
Carrying value at 30 June 2018228.4 44.4 14.7 85.9 5.6 379.0
Cost 228.4 225.8 7. 6 102.5 18.5 582.8
Accumulated amortisation and impairment - (168.6) - (29.9) (12.7) (211.2)
Carrying value at 30 June 2019 228.4 57.2 7. 6 72.6 5.8 371.6
The current portion of intangible assets disclosed in the balance sheet relates to emission units held for own use. All other intangible
assets are non-current.
Goodwill
Goodwill represents the excess of the cost of a business
acquisition over the fair value of the Group’s share of the net
identifiable assets, liabilities and contingent liabilities at the date
of acquisition. Goodwill is assessed as having an indefinite useful
life and is not amortised but is subject to impairment testing
at each reporting date or whenever there are indications of
impairment. For the purpose of impairment testing, goodwill has
been allocated to the following cash-generating units (‘CGU’):
Goodwill by CGU
2019
$ million
2018
$ million
Retail – electricity and gas 102.6 102.6
Retail – LPG 112.6 112.6
Kupe 13.2 13.2
Total goodwill 228.4 228.4
Retail – electricity and gas
The goodwill associated with the electricity and gas business
mainly relates to the acquisition of NGC electricity and gas
business in 2002 and 2003. The impairment test is based on
an estimated discounted cash flow analysis (value in use).
Estimated future cash flow projections are based on the Group’s
five-year business plan for the CGU. Cash flows beyond the five-
year business plan are extrapolated using a 1.0 per cent year-
on-year growth rate (2018: 1.0 per cent). The estimated future
cash flow projections are discounted using a pre-tax equivalent
discount rate of 9.9 percent (2018: 10.4 per cent). Any reasonably
possible change in key assumptions on which the recoverable
amount is based is not expected to cause the carrying value of
the goodwill to exceed its recoverable amount.
Retail – LPG
The goodwill associated with LPG relates to the acquisition
of the LPG business from Nova Energy on 1 June 2017. The
impairment test is based on an estimated discounted cash flow
analysis (fair value less disposal costs) using ten years of forecast
information. Cash flows beyond the forecast period are based
on an EBITDAF multiple of 7.5x (2018: 7.5x). The estimated future
cash flow projections are discounted using a pre-tax equivalent
discount rate of 9.9 per cent (2018: 10.4 per cent). The forecast
takes into consideration both the acquired and existing LPG
business, as the assets of the acquired business are used to
service the pre-acquisition LPG customers. Any reasonably
possible change in key assumptions on which the recoverable
amount is based is not expected to cause the carrying value of
the goodwill to exceed its recoverable amount. As the valuation
is based on inputs that are not based on observable market data
the valuation is classified as level three in the fair value hierarchy.
Key assumptions in the impairment tests for electricity and gas and LPG were:
AssumptionsMethod of determination
Customer numbers and
customer churn
Review of actual customer numbers and historical data regarding movements in customer
numbers (the historical analysis is considered against expected market trends and competition for
customers).
Gross margin
(electricity and gas)
Review of actual gross margins and consideration of expected market movements and impacts.
EBITDAF (LPG)Review of actual EBITDAF and consideration of expected market movements and impacts.
Cost to serve Review of actual costs to serve and consideration of expected future costs.
Kupe
The goodwill associated with Kupe relates to the acquisition of
the Kupe subsidiaries from New Zealand Oil and Gas Limited
(‘NZOG’) on 1 January 2017. The impairment test is based on
an estimated discounted cash flow analysis (value in use). The
estimated future cash flow projections are based on proved
and probable reserves (‘2P’), as disclosed in note B2. The pre-
tax equivalent discount rate was 9.9 per cent (2018: 10.4 per
cent). Any reasonably possible change in key assumptions on
which the recoverable amount is based is not expected to cause
the carrying value of the goodwill to exceed its recoverable
amount.
B3
. Intangible assets (continued)
43
GENESIS ANNUAL REPORT 2019
42
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Software
Software are assets with finite lives. These assets are recognised
at cost less accumulated amortisation and impairment losses.
Amortisation is recognised in the income statement on a
straight-line basis over the estimated useful life of the asset
from the date it is available for use. The estimated useful life is
between one and ten years.
Emission units held for own use
Emission units held for own use are used to settle the Group’s
emission obligation. The units are initially recognised at fair value
and are not revalued. As the units do not have an expiry date
they have an indefinite useful life. The units are not amortised
but are subject to impairment testing.
Contractual arrangements
C
ontractual arrangements include customer contracts and
relationships acquired through business acquisitions and
sponsorship contracts.
Customer contracts and relationships
Customer contracts and relationships are assets with finite
lives. These assets are recognised at cost less accumulated
amortisation and impairment losses.
Amortisation of customer contracts and relationships related
to Kupe are recognised in the income statement on a units-of-
use basis, using proved remaining reserves (‘1P’) expected to be
obtained over the contract period. Remaining reserves used in
the calculations range from 164.7 to 188.1 PJe (2018: 183.3 to 213.8
PJe). Refer to note B2 for further information on the reserves
estimate.
B3. Intangible assets (continued)
Amortisation of customer contracts and relationships related to
the LPG business are recognised in the income statement on a
diminishing-value basis over the estimated life of the contract or
relationship to reflect the likely churn of customers. The majority
of the assets have 50 year lives with one contract having a five
year life.
Impairment of customer contracts and relationships relates to a
change in the term of a contract.
Sponsorship contracts
Sponsorship contracts are assets with finite lives. These assets
are recognised at cost less accumulated amortisation and
impairment losses. Amortisation is recognised in the income
statement on a straight-line basis over the estimated useful life
of the asset from the date it is available for use. The useful life is
based on the contract period, which ranges between one and
15 years.
Deferred customer acquisition costs
Customer acquisition costs that are directly attributable to
securing a particular customer contract are capitalised and
amortised over the length of the average customer tenure (30
months). Amortisation of these costs is included within operating
expenditure.
C1. Receivables and prepayments
2019
$ million
Restated
2018
$ million
Trade receivables 99.6104.8
Accrued revenue 9 7. 894.3
Expected credit loss provision ( 7. 4 )( 7. 8 )
Deferred customer account credits 5.56.2
To t a l 195.5197.5
Emission units receivable 9.9 2.7
Other receivables 8.0 13.6
Prepayments 14.2 13.1
To t a l 227.6 226.9
Current 226.7225.2
Non-current 0.9 1.7
To t a l 227.6 226.9
Trade receivables and accruals
Trade receivables and accruals are initially recognised at fair
value and are subsequently measured at amortised cost. Trade
receivables and accrued revenue, which are known to be
uncollectable, are written off.
Total bad debts written off during the year was $6.4 million
(2018: $8.0 million).
Expected credit loss provision
The e
xpected credit loss provision is calculated using the
simplified approach, which takes into account the lifetime
expected credit loss on trade receivables and accrued revenue.
The provision is based on the following matrix:
Deferred customer account credits
Account credits given to customers are included in the
measurement of revenue. The account credit is spread over the
term of the customer contract.
C2. Inventories
2019
$ million
2018
$ million
Fuel 76.7 39.7
Petroleum products 1.6 1.1
Consumables and spare parts 27.5 27.5
Emission units held for trading 24.47.3
To t a l 130.275.6
Current 126.070.3
Non-current 4.2 5.3
To t a l 130.2 75.6
Fuel, petroleum, consumables and spare parts
F
uel, petroleum, consumables and spare parts are recognised
at the lower of cost and net realisable value. Cost is determined
using the weighted average cost basis, which includes
expenditure incurred in bringing the inventories to their present
location and condition, including shipping and handling. Net
realisable value is the estimated selling price in the ordinary
course of business less the estimated costs necessary to make
the sale.
Fuel inventories mainly consist of coal used in electricity
production. Fuel inventories (excluding natural gas) expensed
during the year amounted to $101.0 million (2018: $43.6 million).
Petroleum products consist of LPG and light crude oil held for
resale produced from the Kupe production facility. Petroleum
products expensed during the year amounted to $26.9 million
(2018: $26.0 million).
Consumables and spare parts are held to service or repair
generating assets. Consumables and spare parts relating to
Huntly unit 6 are impaired when incurred, as the fair value of this
unit is nil.
Emission units held for trading
Emission units held for trading are measured at fair value.
Changes in the fair value are recognised in the income statement
within other gains (losses). The fair value is determined using the
OM Financial forward curve. As the fair value is calculated using
inputs that are not quoted prices, the units are classified as level
two in the fair value hierarchy. Refer to note F8 for an overview of
the fair value hierarchy.
C3. Payables and accruals
2019
$ million
2018
$ million
Trade payables and accruals 200.1 189.2
Employee benefits 8.97.5
Emission obligations 33.2 9.8
To t a l 242.2 206.5
Current 241.5205.7
Non-current 0.7 0.8
To t a l 242.2 206.5
Trade payables and accruals
Trade payables and accruals are recognised when the Group
becomes obligated to make future payments, resulting from the
purchase of goods or services, and are subsequently carried at
amortised cost.
Employee benefits
A liabilit
y for employee benefits (wages and salaries, annual and
long-service leave and employee incentives) is recognised when
it is probable that settlement will be required and the amount is
capable of being measured reliably. Provisions made in respect
of employee benefits are measured using the remuneration rate
expected to apply at the time of settlement.
Emission obligations
Emission obligations are recognised as a liability when the
Groups incurs the emission obligation. Emission units payable to
third parties are recognised at the average cost of emission units
on hand, up to the amount of units on hand at the recognition
date. Where the emission obligation exceeds the level of units
on hand, the excess obligation is measured at the contract
price where forward contracts exist or the market price for any
obligation not covered by units on hand or forward contracts.
C. Working capital and provisions
Class of receivableExpected loss rate
Trade receivables 0.76% of revenue
Trade receivables referred to
a collection agency
85% of the receivable balance
Unoccupier trade receivables100% of the receivable balance
45
GENESIS ANNUAL REPORT 2019
44
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
C4. Provisions
Note
Contractual
arrangements
$ million
Rehabilitation
and restoration
$ million
Other
provisions
$ million
Total
$ million
Balance at 1 July 201756.4110.3 5.9 172.6
Created0.30.2 0.1 0.6
Released(3.3)(2.3)(0.1)(5.7)
Used(5.1)(0.4)(1.8)(7.3)
Time value of money adjustmentE61.84.0 0.1 5.9
Balance at 30 June 20185 0.1111.8 4.2 166.1
Created4.0 1.8 - 5.8
Released- (5.8) (1.3) (7.1)
Used(3.9) (0.1) (1.3) (5.3)
Time value of money adjustmentE61.6 4.5 - 6.1
Balance at 30 June 201951.8 112.2 1.6 165.6
Current6.61.3 2.2 1 0.1
Non-current43.5110.5 2.0 156.0
As at 30 June 20185 0.1111.8 4.2 166.1
Current8.2 2.5 0.7 11.4
Non-current43.6 109.7 0.9 154.2
As at 30 June 201951.8 112.2 1.6 165.6
R
ehabilitation and restoration
The majority of this provision relates to the remediation of the
Huntly ash ponds and the Kupe production facility. The provision
represents the present value of the Group’s best estimate of
future expenditure to be incurred to remediate the sites at
balance date. Key assumptions include: an estimate of when the
rehabilitation and restoration is likely to take place, the possible
remediation alternatives available, the expected expenditures
attached to each alternative and the foreign currency exchange
rate.
Ther
e is no provision for the remediation of the Huntly
generation site because the Group has the right to lease the site
in perpetuity, there is no fixed or planned termination date for
the Huntly lease and the site remains a key electricity generation
site for the Group. The lease of the site is independent of
decisions around the retirement of Huntly units 1 to 4, which are
planned to be available to the electricity market until such time
they are uneconomic to run. There may be costs and recoveries
associated with retiring Huntly units 1 to 4 but these cannot be
reliably estimated at this time.
Contractual arrangements
Contractual arrangements provisions relate to relationship and
sponsorship agreements with various parties. The provisions
represents the present value of the best estimate of cash flows
required to settle the Group’s obligations under the agreements.
The timing of the outflows is expected to occur over the next
20 years.
Key estimates and judgements
The key assumption that could have a material impact on the
Huntly ash ponds rehabilitation estimate relates to the extent of
rehabilitation work required. The current assumption is that all
the ash would be removed from the ponds but if some of the ash
was capped in situ, the provision could decrease by $6.7 million.
The rehabilitation work on the ash ponds is estimated to be
completed within the next 14 years.
The key assumptions that could have a material impact on
the Kupe production facility rehabilitation estimate relate to
foreign exchange rates, mobilisation and demobilisation costs
for rig and offshore supply vessel and regulatory requirements
in relation to the removal of the subsea pipeline. The majority
of costs are based in United States dollars and, therefore, are
sensitive to fluctuations in foreign exchange rates. If the foreign
exchange rate were to decrease by 10 per cent the provision
would increase by $10.6 million. Given the equipment required
to complete the rehabilitation comes from overseas, the
mobilisation and demobilisation costs can fluctuate significantly
depending on the volume of work the contractor has nearby at
the time the rehabilitation is required to be completed. The full
cost of mobilisation and demobilisation has been provided for
given the uncertainty around the ability to share these costs
with other entities. If the costs could be shared with other
entities the provision would decrease by between $9.9 million
and $19.9 million. The provision is based on the removal of the
shore section of the subsea pipeline. The remaining pipeline
will be flushed and left in situ. If all of the pipeline needed to be
removed, the cost would increase the provision by $16.4 million.
The rehabilitation is estimated to be completed in approximately
12 years.
Name of entity Principal activity
Place of
incorporation
2019
%
2018
%
Kupe Venture LimitedJoint venture holding companyNew Zealand100100
Genesis Energy Insurance Pte LimitedCaptive insurance companySingapore100100
Genesis Energy Talent Retention Plan TrustTrustNew Zealand--
Genesis Energy Limited Executive Long-term Incentive Plan TrustTrustNew Zealand--
All entities have 30 June balance dates.
Interest held
D2. Joint operations
The Group has a 46.0 per cent interest in the Kupe production
facility and Petroleum Mining Permit 38146 held by the Kupe
Joint Venture (2018: 46.0 per cent). The principal activity of
the Kupe Joint Venture is petroleum production and sales. The
Joint Venture is unincorporated and operates in New Zealand.
The Group is considered to share joint control based on the
contractual arrangements between the Group and other joint
operators that state unanimous decision-making is required for
relevant activities that most significantly impact the returns of
the joint operation.
The Joint Venture is classified as a joint operation under NZ
IFRS 11 Joint Arrangements. The Group’s share of revenue,
expenditure, assets and liabilities is included in the Group
financial statements on a proportionate line-by-line basis. The
operating results of the Kupe Joint Venture are included in
the Kupe segment in note A2 and the Group’s share of capital
expenditure commitments relating to joint operations is
disclosed in note G4.
D. Group Structure
D1. Subsidiaries and controlled entities
The consolidated financial statements include Genesis, its
subsidiaries and controlled entities listed below. The two Trusts
have been consolidated into the Group on the basis that Genesis
determined how the Trusts were designed and how they operate,
Genesis controls the financing and investing activities of the
Trusts and the Trusts are dependent on funding from Genesis.
D3. Share in associates
During the year Genesis entered into a limited liability
partnership with three other investors to establish a
geographically diverse forest portfolio. The objective of entering
into the arrangement is to provide the Group with a stable
supply of forestry-generated emission units. The investment
in DrylandCarbon One Limited Partnership is accounted for
using the equity method. The Group’s share in DrylandCarbon
One Limited Partnership profit/loss is disclosed in the income
statement.
47
GENESIS ANNUAL REPORT 2019
46
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
E. Funding
E1. Capital management
The Group manages its capital to ensure that each entity in
the Group will be able to continue as a going concern while
maximising the return to shareholders through the appropriate
balance of debt and equity. This is achieved by ensuring that
the level and timing of its capital investment programmes,
equity raisings and dividend distributions are consistent with
the Group’s capital structure strategy. This strategy remains
unchanged from previous years. The capital structure of the
Group consists of debt, which includes the borrowings disclosed
in note E5, cash and cash equivalents and equity attributable to
the shareholders of Genesis, comprising issued capital, reserves
and retained earnings, as disclosed in the balance sheet.
E2. Share capital
Note
2019
No. of
shares
million
2019
$ million
2018
No. of
shares
million
2018
$ million
Issued capital
Balance as at 1 July1,008.5 559.7 1,000.0 540.6
Shares issued under dividend reinvestment planE4 1 5.1 40.9 8.5 19.1
Balance as at 30 June 1,023.6 600.6 1,008.5 559.7
Treasury shares
Balance as at 1 July (0.9) (2.0) (0.5)(0.9)
Shares acquired for long-term incentive and talent retention plans (0.5) (1.3) (0.4)(1.1)
Sharesissued to LTIP paticipants
0.20.3--
Balance as at 30 June (1.2) (3.0) (0.9)(2.0)
Total share capital 1,022.4 597.6 1,007.6 557.7
E3. Earnings per share
2019
Restated
2018
Net profit for the year attributable to shareholders ($ million) 59.219.7
Weighted average number of ordinary shares (million units) 1,015.31,001.7
Less weighted average number of Treasury shares (million units) (1 .1 ) (0.8)
Weighted average number of shares used in EPS calculation (million units) 1,014.2 1,000.9
CentsCents
Basic and diluted EPS 5.84 1.97
E4. Dividends
Note
2019
Imputation
2019
Cents
per share
2019
$ million
2018
Imputation
2018
Cents
per share
2018
$ million
Dividends declared and paid during the year
Prior year final dividend 80% 8.60 86.7 80% 8.40 84.0
Current year interim dividend 80% 8.45 85.8 80% 8.30 82.8
1 7. 0 5 172.5 16.70 166.8
Less: dividend reinvestment planE2 (40.9) (19.1)
Cash dividend paid 131.6 147.7
Dividends declared subsequent to balance date
Final dividend 80% 8.60 88.080%8.60 86.7
Imputation credits
There were no imputation credits as at 30 June 2019 (2018: nil). Future tax payments will cover the imputation of the final dividend.
All shares are ordinary authorised, issued and fully paid shares.
They all have equal voting rights and share equally in dividends
and any surplus on winding up.
Under the Group’s debt funding facilities, the Group has given
undertakings that the ratio of debt to equity will not exceed
a prescribed level and the interest cover will not be below a
prescribed level. For the purpose of these undertakings the
capital bonds and related interest costs are treated as 50 per
cent equity. The covenants are monitored on a regular basis
to ensure they are complied with. There were no breaches in
covenants during the year (2018: nil).
Treasury shares relate to shares held in trust for the Long-Term
Incentive Plan (‘LTI’) and the employee Talent Retention Plan
(‘TRP’) (refer to note G1 and G2).
E5. Borrowings
Weighted
average
effective
interest rate %
2019
$ million
2018
$ million
Revolving credit and
money market
Floating 154.5187.5
Term loan facility4.6% 30.0 30.0
Wholesale term notes6.0% 292.8292.8
Retail term notes4.3% 100.7 100.5
Capital bonds5.5% 474.5426.0
United States Private
Placement ('USPP')
3.6% 237.3 218.6
To t a l 1,289.81,255.4
Current 172.8210.0
Non-current 1 ,1 1 7. 01,045.4
To t a l 1,289.8 1,255.4
Borrowings
B
orrowings are initially recognised at fair value, net of
transaction costs incurred and are subsequently measured
at amortised cost using the effective interest rate method.
Borrowings designated in a fair value hedge relationship are
carried at amortised cost adjusted for the change in the fair
value of the hedged risk.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the balance date.
Reconciliation of change in liabilities
arising from financing activities
2019
$ million
2018
$ million
Opening balance 1,255.4 1,259.8
Proceeds from borrowings 240.0 -
Repayment of borrowings (232.6) (9.0)
Non-cash changes
Change in foreign exchange on USPP 1.6 16.8
Change in fair value interest rate risk
adjustment
2 7. 7(13.3)
Amortisation of capitalised issue costs (1.4) 1.0
Change in accrued interest (0.9)0.1
Closing balance 1,289.8 1,255.4
Bond issued during the year
On 16 July 2018 the Group exercised its right to redeem $200.0
million of fixed rate subordinated capital bonds with an original
maturity date of 15 July 2041. The redeemed capital bonds were
replaced by $240.0 million of capital bonds with a maturity date
of 16 July 2048. This issue pays a quarterly coupon of 4.65 per
cent per annum. On the first reset date and every five years
thereafter, the interest rate will reset to be the sum of the five-
year swap rate on the relevant reset date plus the margin of 2.01
per cent per annum plus the step-up margin of 0.25 per cent
per annum. Issue costs are amortised over five years to the first
reset date. An interest rate swap has been used to manage the
fair value risk of the bonds.
Expiring FY26 74.473.9
Expiring FY27 148.9 147.8
Fair value interest rate risk
adjustment
11.6(5.4)
Accrued interest 3.0 3.0
Capitalised issue costs (0.6)(0.7)
Total USPP 2 3 7. 3218.6
Analysis of borrowings
2019
$ million
2018
$ million
Money market44.4 -
Revolving credit drawn down 110.0 187.0
Accrued interest 0.1 0.5
Total revolving credit and money market 154.5 187.5
Expiring FY20 - 220.0
Expiring FY2180.0110.0
Expiring FY2270.050.0
Expiring FY23150.075.0
Expiring FY2450.0 -
Total available revolving credit facilities 350.0 455.0
Revolving credit drawn down
(excluding accrued interest)
110.0 187.0
Total undrawn revolving credit facilities240.0268.0
Expiring FY2430.030.0
Total term loan facility30.030.0
Expiring FY20120.0120.0
Expiring FY2370.070.0
Expiring FY25100.0100.0
Accrued interest3.13.3
Capitalised issue costs(0.3)(0.5)
Total wholesale term notes292.8292.8
Expiring FY22 100.0 100.0
Accrued interest 1.2 1.2
Capitalised issue costs (0.5)(0.7)
Total retail term notes 100.7100.5
Expiring FY19 -200.0
Expiring FY47225.0225.0
Expiring FY49240.0-
Fair value interest rate risk
adjustment
11.50.8
Accrued interest3.13.4
Capitalised issue costs(5.1 )(3.2)
Total capital bonds474.5426.0
49
GENESIS ANNUAL REPORT 2019
48
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
USPP
During the 2015 financial year the Group issued $150.0 million
United States dollar-denominated unsecured notes to United
States-based institutional investors. CCIRS have been used to
manage foreign exchange and interest rate risks on the notes
(refer to note F4 for further information on CCIRS).
While the New Zealand dollar amount required to repay the
USPP is fixed as a result of the CCIRS, the USPP is required
to be translated to New Zealand dollars at the spot rate at the
reporting date. Any revaluation of the USPP as a result of this
translation is offset by the change in the fair value of the CCIRS.
Revolving credit facility
Subsequent to year end the Group entered into an additional
$75.0 million revolving credit facility which expires in August
2022.
Capital bonds
The interest rate on the capital bonds resets every five years. The
next interest rate reset is June 2022 for the FY47 bonds and July
2023 for the FY49 bonds.
Fair value of borrowings held at amortised cost
2019
Carrying
value
$ million
2019
Fair
value
$ million
2018
Carrying
value
$ million
2018
Fair
value
$ million
Level one
Retail term
notes
100.7105.7100.5103.4
Capital bonds 474.5498.6426.0439.3
Level two
Fixed term loan
facility
30.03 2 .130.030.8
Wholesale term
notes
292.8 316.0292.8311.3
USPP 237.3 241.6218.6220.8
E6. Finance expense
Note
2019
$ million
2018
$ million
Interest on borrowings
(excluding capital bonds)
42.843.5
Interest on capital bonds 25.325.8
Total interest on borrowings 6 8 .169.3
Other interest and finance
charges
0.40.6
Time value of money
adjustments on provisions
C4 6 .15.9
74.675.8
Capitalised finance expenses (0.7)(0.5)
73.975.3
Weighted average
capitalisation rate
5.9%5.7%
Interest on borrowings, bank and facility fees and transaction
costs are recognised in the income statement over the period of
the borrowings, using the effective interest rate method, unless
such costs relate to funding capital work in progress. Time value
of money adjustments on provisions are recognised in the income
statement up to the point the provision is used or released.
Finance expense on capital work in progress (qualifying assets)
is capitalised during the construction period. The capitalisation
rate used to determine the amount of finance expense to be
capitalised is based on the weighted average finance expenses
incurred by the Group.
The valuation of the fixed term loan facility and the wholesale
term notes is based on estimated discounted cash flow analyses,
using applicable market yield curves adjusted for the Group’s
credit rating. The credit-adjusted market yield curves at balance
date used in the valuation ranged from 1.9 per cent to 3.0 per
cent (2018: 2.9 per cent to 4.3 per cent).
The valuation of USPP is based on estimated discounted cash
flow analyses, using applicable United States market yield
curves adjusted for the Group’s credit rating. The credit-adjusted
market yield at balance date used in the valuation was 2.6 per
cent (2018: 3.9 per cent).
The c
arrying value of all other borrowings approximate their fair
values.
Security
All of the Group’s borrowings are unsecured. The Group borrows
under a negative pledge arrangement, which does not permit the
Group to grant any security interest over its assets, unless it is an
exception permitted within the negative pledge.
F. Risk management
The Group’s activities expose it to a variety of financial risks,
including market risk (price risk, interest rate risk and foreign
exchange risk), credit risk and liquidity risk. The Board has
established policies that provide an overall risk management
framework, as well as policies covering specific areas, such as
electricity and oil price risk, interest rate risk, foreign exchange
risk, credit risk, liquidity risk and the use of derivatives.
Compliance with policies is monitored by the risk assurance
function.
Market risk
Nature and exposure to the GroupNoteHow the risk is managed
Price risk
The Group is exposed to movements in the spot
price of electricity arising through the sale and
purchase of electricity to and from the market,
movements in the spot price of light crude oil
arising from oil sales and movements in the spot
price of emission units.
F2
The Group aims to hedge price risk on electricity sales and purchases,
oil sales and emission costs by entering into electricity swaps and
options, oil swaps and forward purchase agreements for emission units,
in line with policy limits.
The Electricity hedging policy focuses on the Group’s net exposure to
electricity prices over a three-year period, with greater focus on the
near term period. The Treasury policy requires that 50-90 per cent of oil
sales are fixed for a period of up to one year. The range decreases to a
maximum of 50 per cent for sales forecasted in two to three years' time.
The Carbon hedging policy focuses on managing price risk using units
on hand and forward purchase agreements to cover price risk in the
short to medium term.
Interest rate risk
The Group is exposed to interest rate risk because
Genesis borrows funds at both fixed and floating
interest rates. Changes in market interest rates
expose the Group to changes in:
•
F
uture interest payments on borrowings
subject to floating interest rates (cash flow
risk); and
•
The fair value of borrowings subject to fixed
interest rates (fair value risk).
F3
The Group uses interest rate swaps to manage interest rate risk in line
with the Group’s Treasury policy. The Treasury policy requires that
50-100 per cent of projected debt is fixed for a period of up to one year.
The range decreases as the age profile increases to a maximum of
20 per cent for debt due in 10-15 years.
Foreign exchange risk
The Group is exposed to foreign currency risk as a
result of capital and operational transactions and
borrowings denominated in a currency other than
the Group’s functional currency.
F4
Capital and operating transactions
The Group uses foreign exchange contracts to manage foreign exchange
risk on capital and operational transactions (including maintenance of
capital equipment and oil sales) in accordance with the Group’s Treasury
policy. The Treasury policy requires that 50-90 per cent of projected oil
sales are fixed for a period of up to one year. The range decreases as the
age profile increases to a maximum of 50 per cent for projected oil sales
in two to three years' time. All foreign currency exposures on capital
commitments are hedged, as well as operating commitments over
$0.5 million.
Overseas borrowings
The Group uses CCIRS to manage foreign exchange risk on overseas
borrowings. All interest and principal repayments are hedged. The
combination of the foreign-denominated debt and CCIRS results in a net
exposure to New Zealand dollar floating interest rates and a fixed New
Zealand dollar-denominated principal repayment. The New Zealand
dollar floating interest rate risk is managed using the process described
in the interest rate risk section above.
The Group uses the following derivatives to hedge its financial
risk exposures:
• Electricity swaps and options;
• Oil swaps;
• Forward purchase agreements for emission units;
• Foreign exchange contracts;
• CCIRS; and
• Interest rate swaps.
A summary of the financial risks that impact the Group, how they
arise and how they are managed is presented below:
E5. Borrowings (continued)
51
GENESIS ANNUAL REPORT 2019
50
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F. Risk management (continued)
Other risks
Nature and exposure to the GroupNoteHow the risk is managed
Liquidity risk
Liquidity risk is the risk that the Group will not be
able to meet its financial obligations as they fall
due. The Group’s approach to managing liquidity
risk is to ensure that it will always have sufficient
funds to meet its liabilities when due, under both
normal and stressed conditions.
F7
The Group has a policy that requires the debt facilities to be maintained
with a minimum headroom amount above the projected peak debt levels
over the next 12 months. Liquidity risk is monitored by continuously
forecasting cash flows and matching the maturity profiles of financial
assets and liabilities.
The Group’s ability to attract cost-effective funding is largely driven
by its credit standing (Standard & Poor’s = BBB+). Prudent liquidity
risk management implies maintaining sufficient cash and marketable
securities, the availability of funding through an adequate amount of
committed credit facilities and the spreading of debt maturities.
Credit risk
Credit risk is the risk that a counterparty will
default on its contractual obligations, resulting
in financial loss to the Group. The Group has no
significant concentrations of credit risk and the
carrying amounts of cash and cash equivalents,
receivables and derivative assets in the balance
sheet represent the Group’s maximum exposure to
credit risk at balance date.
C1
Wholesale electricity sales
The Group purchases wholesale electricity for its retail customer base,
therefore the credit risk is limited to the net amount receivable after
deducting purchases. Market participants are required to provide letters
of credit to the market-clearing agent (NZX Limited), which would be
called upon should any market participant default.
Retail electricity sales, gas, LPG and oil sales
The Group minimises its exposure to credit risk by applying credit limits,
obtaining collateral where appropriate and applying credit-management
practices, such as monitoring the size and nature of exposures and
mitigating the risk deemed to be above acceptable levels. The credit risk
is mitigated by the Group’s large customer base and the diverse range of
industries customers operate in.
BS,
F1
Cash and cash equivalents and derivative contracts
Credit risk is managed by using high-credit quality financial institutions
and other organisations. The Group’s exposure and the credit ratings
of its counterparties are continuously monitored to ensure the risk is
spread among approved counterparties.
F1. Derivatives
2019
$ million
2018
$ million
Electricity swaps and options (26.3)11.3
Oil swaps (1.7) (15.8)
Interest rate swaps (29.4)(26.9)
CCIRS 3 7. 920.4
Foreign exchange contracts (0.3)(0.4)
Forward purchase and forward
sale agreements for emission units
(0.4) -
To t a l (20.2)(11.4)
Current assets 39.9 24.8
Non-current assets 68.037.5
Current liabilities (70.7)(36.8)
Non-current liabilities ( 5 7. 4 ) (36.9)
To t a l (20.2)(11.4)
Derivatives
Derivatives are initially recognised at fair value on the date the
contract is entered into and subsequently re-measured to fair
value. The gain or loss on re-measurement is recognised in the
income statement, unless the derivative is designated into an
effective hedge relationship as a hedging instrument, in which
case the timing of recognition in the income statement depends
on the nature of the designated hedge relationship. The Group
may designate derivatives as either:
Cash flow hedges where the derivative is used to manage the
variability in cash flows relating to recognised liabilities or highly
probable forecast transactions.
The effective portion of changes in the fair value of cash flow
hedges are recognised in other comprehensive income and
accumulate in the cash flow hedge reserve. The ineffective
portion of changes in the fair value of cash flow hedges is
recognised immediately in the income statement in the change
in fair value of financial instruments line.
Amounts accumulated in other comprehensive income are
reclassified to the income statement in the period when the
hedged item is recognised in the income statement. However,
when the forecast transaction that is hedged results in the
recognition of a non-financial asset (for example, inventory) or
liability, the gains and losses previously deferred in the cash flow
hedge reserve are reclassified from the cash flow hedge reserve
and included in the initial measurement of the cost of the asset
or liability.
Once hedge accounting is discontinued the cumulative gain or
loss at that time remains in the cash flow hedge reserve and is
reclassified to the income statement either when the transaction
occurs or if the forecast transaction is no longer expected to
occur, it is reclassified immediately.
Fair value hedges where the derivative is used to manage the
variability in the fair value of recognised assets and liabilities.
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Once hedge accounting is discontinued the fair value
adjustments to the carrying amount of the hedged item arising
from the hedged risk is amortised to the income statement from
that date through to maturity of the hedged item.
Hedge accounting is discontinued when the hedge instrument
expires or is sold, terminated, exercised or no longer qualifies for
hedge accounting.
The Gr
oup’s policy is to designate derivatives in hedge
relationships on inception when their fair value is zero applying
a hedge ratio of 1:1. The Group determines the existence of an
economic relationship between the hedging instrument and the
hedged item based on the amount and timing of their respective
cash flows, reference rates, pricing dates, maturities and
notional amounts. The Group assesses whether the derivative
designated in each hedging relationship is expected to be, and
has been effective in, offsetting the changes in cash flows of the
hedged item.
Derivatives that do not qualify for hedge accounting
This category includes derivatives that economically hedge
financial risks but have not been designated in hedge
relationships for accounting purposes. In these cases changes
in the fair value are recognised immediately in the income
statement within the change in fair value of financial instruments
line (refer to note F5).
Certain electricity derivatives and electricity future contracts
cannot be hedge accounted under NZ IFRS 9. These are
principally swap and option contracts that provide dry year cover
for counterparties and electricity futures offered to the market to
enable other counterparties to hedge their electricity risks.
Forward purchase and forward sale agreements for emission
units are entered into for both ‘own use’ and ‘held for trading’.
Agreements to purchase emission units for the Group’s own use
are not recognised in the financial statements until the units
are delivered. Forward purchase and forward sale agreements
held for trading do not meet the ‘own use’ exemption and are
accounted for as derivatives. These contracts are measured at
fair value and any gain or loss on re-measurement is recognised
immediately in the income statement.
The effects of the Group’s application of hedge accounting in
respect of derivatives used to manage financial risks are shown
in notes F2 to F5.
53
GENESIS ANNUAL REPORT 2019
52
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F2. Price risk
2019
$ million
2018
$ million
2019
$ million
2018
$ million
Nominal amount at balance date1,575.4914.9 USD 24.5 USD 41.3
Carrying value of asset at balance date22.09.6 1.0 -
Carrying value of liability at balance date(62.4)(25.5)(2.7)(16.6)
Recognised in other comprehensive income during the year(60.4)29.8 1 9.1(14.0)
Reclassified to the income statement during the year39.2(36.2)(5.7)(5.9)
Hedge ineffectiveness (gain (loss)) during the year (3.2) (0.2) 1.4(2.1)
Electricity swapsOil swaps
Electricity swaps are entered into to manage the variability of
cash flows from electricity purchases and sales. Oil swaps are
entered into to manage the variability of cash flows from oil
sales. Cash flow hedge accounting is applied.
Gains and losses on electricity swaps are recognised in
electricity revenue and gains and losses on oil swaps are
recognised in petroleum revenue. Electricity revenue includes
$22.6 million (2018: $20.0 million) of option fees on electricity
swaps and options.
The main source of ineffectiveness for electricity swaps relates
to the difference between the market price and the strike price
at inception of the contracts. For oil swaps ineffectiveness arises
F3. Interest rate risk
2019
$ million
2018
$ million
2019
$ million
2018
$ million
Nominal amount at balance date420.0380.0 240.0240.0
Carrying value of asset at balance date- - 11.40.8
Carrying value of liability at balance date(40.2)(25.6)- -
Recognised in other comprehensive income during the year(6.6)2.9 N /A N/A
Reclassified to the income statement during the year( 7. 8 )(6.6) N /A N/A
Maturity0-9 years 1-9 years4 years 4-5 years
Weighted average rate4.4%4.8%2.6%2.6%
Cash flow hedge
(receive float, pay fixed)
Fair value hedge
(receive fixed, pay float)
due to price premiums and discounts on oil sales (the hedged
item) that are not present in the hedging instrument.
At balance date the carrying value of non-hedge accounted
electricity swaps was a $19.1 million asset, electricity future
options was a $5.0 million liability, and oil swaps was nil (2018:
$26.6 million asset, $0.6 million asset and $0.8 million asset
respectively). The nominal value at balance date of non-hedge
accounted electricity swaps was $202.3 million and oil swaps
was nil (2018: $158.9 million and USD 3.5 million respectively).
Interest rate swaps are entered into to manage interest rate
risk on borrowings. Gains and losses on interest rate swaps
designated as cash flow hedges reclassified to the income
statement are recognised in finance expenses.
The fair value hedge adjustment is recognised in finance
expenses in the income statement.
A
t balance date the carrying value of non-hedge accounted
interest rate swaps was $0.6 million liability and the nominal
value was $65.0 million (2018: $2.1 million liability and $65.0
million nominal value).
C
CIRS (cash flow
and fair value hedge)
Foreign exchange contracts
(cash flow hedge)
F5. Impact of derivatives on the income statement and equity
The tables below provide a break down of the change in fair value of financial instruments recognised in the income statement and a
reconciliation of movements in the cash flow hedge reserve.
Change in fair value of financial instruments
Note
2019
$ million
2018
$ million
CCIRS 16.8 (13.3)
Interest rate swaps 10.6 0.8
Fair value interest rate risk adjustment on borrowings (27.7) 13.3
Fair value hedges – gain (loss) (0.3) 0.8
Cash flow hedges – hedge ineffectiveness – gain (loss)F2, F4 (1.8)(3.6)
Electricity swaps and options (1 3.1 ) (2.0)
Other derivatives - 1.7
Derivatives not designated as hedges – gain (loss) (1 3.1 ) (0.3)
Total change in fair value of financial instruments (15.2)(3.1)
Reconciliation of movements in the cash flow hedge reserve
2019
$ million
2018
$ million
Opening balance (43.3) (22.6)
Total reclassified from the cash flow hedge reserve to the income statement 25.2 (64.9)
Effective gain (loss) on cash flow hedges recognised directly in the cash flow hedge reserve (4 8 .1 )36.1
Total recognised in other comprehensive income (22.9) (28.8)
Total reclassified from the cash flow hedge reserve to the cost of assets0.1-
Income tax on change in cash flow hedge reserve 6.48.1
Closing balance (59.7) (43.3)
The amount accumulated in the cost of hedging reserve at 30 June 2019 was $1.4 million (2018: $0.3 million).
F4. Foreign exchange risk
2019
$ million
2018
$ million
2019
$ million
2018
$ million
Nominal amount at balance date193.2193.2 (36.6)(33.7)
Carrying value of asset at balance date3 7. 920.4 0.40.9
Carrying value of liability at balance date- - (0.7)(1.3)
Recognised in other comprehensive income during the year(0.4)20.1 0.2(2.7)
Reclassified to the cost of assets--0.1-
Reclassified to the income statement during the year(0.4)(15.7)(0.1 )(0.5)
Hedge ineffectiveness (gain (loss)) during the year - (1.1) -(0.2)
The Group enters into foreign exchange contracts to hedge
highly probable forecast transactions denominated in foreign
currencies. Cash flow hedge accounting is applied. The amount
and maturity of the derivative and forecast transactions are
aligned to ensure the hedge relationship remains effective.
The Group uses CCIRS to manage foreign exchange risk on
the USPP. All interest and principal repayments are hedged.
The combination of the foreign-denominated debt and CCIRS
results in a net exposure to New Zealand dollar floating interest
rates and a fixed New Zealand dollar-denominated principal
repayment.
The principal, basis and margin components of the CCIRS
are designated as a cash flow hedge and the benchmark
component of the CCIRS is designated as a fair value hedge of
the USPP notes. The change in fair value relating to the foreign
currency basis spread component of the CCIRS is excluded
from the hedge relationship. The change is recognised in other
comprehensive income in a separate Cost of Hedging Reserve
(CoHR).
Gains and losses on foreign exchange contracts reclassified to
the income statement are recognised in operating expenses
and oil revenue. Gains and losses reclassified to the income
statement on CCIRS are recognised in finance expenses.
55
GENESIS ANNUAL REPORT 2019
54
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F6. Sensitivity analysis for each type of market risk
The table below represents the effect on the income statement and the cash flow hedge reserve at balance date if various market
rates had been higher or lower with all other variables held constant. A positive number in the table represents an increase in profit or
the cash flow hedge reserve.
2019
$ million
2018
$ million
2019
$ million
2018
$ million
Electricity prices
+10%7. 3(6.1)20.5(2.9)
-10%(5.6)4.2 (19.7)2.9
Oil prices
+10%- (0.1)(2.7)(5.0)
-10%- 0.1 2.75.0
Foreign exchange rates
+10% (NZD appreciation) - - 2.4 2.2
-10% (NZD depreciation) - - (2.9) (2.6)
Interest rates
+100 bps(0.5)(0.6)11.79.6
-100 bps0.50.7 (12.6)(10.3)
Post-tax impact on the
income statement
Post-tax impact on cash flow
hedge reserve (equity)
As at 30 June 2019
Less than
1 year
$ million
1 to 2 years
$ million
2 to 5 years
$ million
More than
5 years
$ million
Total
contractual
cash flows
$ million
Trade and other payables (224.7) - - - (224.7)
Borrowings (221.5) (80.0) (409.4) (1,380.0) (2,090.9)
Total non-derivative financial liabilities (446.2) (80.0) (409.4) (1,380.0) (2,315.6)
Inflows 8.6 8.2 24.6 244.4 285.8
Outflows (6.8) (6.1) (18.4) (209.9) (241.2)
Gross-settled derivatives 1.8 2 .1 6.2 34.5 44.6
Net-settled derivatives (16.3) 10.3 36.9 69.3 100.2
Total non-derivative financial liabilities and derivatives (460.7) ( 6 7. 6 ) (366.3) (1,276.2) (2,170.8)
As at 30 June 2018
Less than
1 year
$ million
1 to 2 years
$ million
2 to 5 years
$ million
More than
5 years
$ million
Total
contractual
cash flows
$ million
Trade and other payables(196.7) - - - (196.7)
Borrowings(258.0)(267.1)(374.9)(925.2)(1,825.2)
Total non-derivative financial liabilities(454.7)(267.1)(374.9)(925.2)(2,021.9)
Inflows8.9 8.1 24.5 250.7 292.2
Outflows(8.2)(8.0)(25.9)(226.7)(268.8)
Gross-settled derivatives0.7 0.1 (1.4)24.0 23.4
Net-settled derivatives*(0.5)5.335.6(3.4)3 7. 0
Total non-derivative financial liabilities and derivatives(454.5)(261.7)(340.7)(904.6)(1,961.5)
F7. Liquidity risk
The following table details the Group’s liquidity analysis for its
financial liabilities and derivatives. Where the amount payable
or receivable is not fixed, the amount disclosed has been
determined by reference to the internally generated forward
price curves existing at balance date. As the amounts included
in the table are contractual undiscounted cash flows, these
amounts will not reconcile to the amounts disclosed in the
balance sheet.
F8. Fair value measurement
Fair value hierarchy
The Group’s assets and liabilities measured at fair value are
categorised into one of three levels as follows:
Level one – the fair value is determined using unadjusted
quoted prices from an active market for identical assets and
liabilities. A market is regarded as active if quoted prices are
readily and regularly available from an exchange, a dealer, a
broker, an industry group, a pricing service or a regulatory
agency and those prices represent actual and regularly occurring
market transactions on an arm’s-length basis.
Level two – the fair value is derived from inputs other than
quoted prices included within level one that are observable for
the asset or liability, either directly (ie, as prices) or indirectly (ie,
derived from prices). Financial instruments in this level include
interest rate swaps, foreign exchange contracts, oil swaps,
CCIRS and electricity derivatives, valued using the ASX forward
price curve.
Level three – the fair value is derived from inputs that are not
based on observable market data. Financial instruments included
in this level are electricity derivatives valued using the wholesale
electricity price path.
The Group’s policy is to recognise transfers into and out of fair
value hierarchy levels at the date the change in circumstances
occurred. Refer to the reconciliation of level three electricity
swaps and options table for transfers between levels.
All derivatives disclosed in F1 other than electricity swaps and
options are considered level two. The $26.3 million electricity
swap and option net liability, comprises a $1.3 million liability
classified as level two and a $25.0 million liability classified
as level three (2018: $0.6 million asset and $10.7 million asset
respectively).
Valuation of level two derivatives
The fair values of level two derivatives are determined using discounted cash flow models. The key inputs in the valuation models
were:
ItemValuation input
Interest rate swapsForward interest rate price curve
Foreign exchange contractsForward foreign exchange rate curves
Oil swapsForward oil price and foreign exchange rate curves
Electricity swaps and optionsASX forward price curve
CCIRSForward interest rate price curve and foreign exchange rate curves
Forward purchase and forward sale agreements for emission
units held for trading
OM Financial forward curve
Valuation of level three derivatives
Valuation process
The team that carries out the valuations reports directly to
the Chief Financial Officer. The results and key drivers of the
changes in the valuations are reviewed at least six monthly
for generation assets and monthly for derivatives. The Chief
Financial Officer reports key changes in fair value to the Board.
Any changes to the valuation methodology are reported to the
Audit and Risk Committee.
*Net settled derivatives have been restated to remove the amortisation of the 'day one' gain.
57
GENESIS ANNUAL REPORT 2019
56
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other unobservable inputs 20192018
Emission credits
(price per unit)
$27 - $48 $21 - $25
Discount rate 1.3% - 3.6% 2.0% - 5.4%
20192018
Price path$92 per MWh to $114 per MWh over the
period from 1 July 2019 to 31 December 2025.
$74 per MWh to $100 per MWh over the
period from 1 July 2018 to 31 December 2025.
Impact of increase/decrease in price
path on fair value
A 10% increase would decrease the liability
by $34.9 million. A 10% decrease would
increase the liability by $31.4 million.
A 10% increase would decrease the asset by
$13.4 million. A 10% decrease would increase
the asset by $11.0 million.
Valuation of electricity swaps and options
The valuation is based on a discounted cash flow model. The
key inputs and assumptions are: the callable volumes, strike
price and option fees outlined in the agreement, the wholesale
electricity price path (‘price path’), ‘day one’ gains and losses,
emission credits and the discount rate. The options are deemed
to be called when the price path is higher than the strike prices
after taking into account obligations relating to the specific
terms of each contract. No calling is required for the swaps
and there are no option fees. The price path is the significant
unobservable input in the valuation model. Refer to note B1 for
information in relation to the method used to determine the
price path. Changes in electricity demand, hydrology and new
generation build affect the price path.
Reconciliation of level three electricity swaps and options
2019
$ million
2018
$ million
Balance as at 1 July 10.721.2
Total gain (loss)
Electricity revenue 12.820.1
Change in fair value of financial
instruments
(14.1)(6.1)
Total gain (loss) in the income statement (1.3)14.0
Total gain (loss) recognised in other
comprehensive income
(60.4)20.4
Settlements (gain) loss 4 9.1(24.9)
Sales ( 2 3.1 )(20.0)
Balance as at 30 June (25.0)10.7
The change in fair value of financial instruments includes an
unrealised loss of $6.6 million (2018: $6.1 million loss).
Deferred ‘day one’ gains (losses)
There is a presumption that when derivative contracts are
entered into on an arm’s-length basis, and no payment is
received or paid on day one, the fair value at inception would
be nil. The contract price of non-exchange traded electricity
derivative contracts are agreed on a bilateral basis, the pricing
for which may differ from the prevailing derived market price
for a variety of reasons. In these circumstances an adjustment
is made to bring the initial fair value of the contract to zero at
inception. The adjustment is called a ‘day one’ gain (loss) and is
deferred and amortised, based on expected call volumes over the
term of the contract. The following table details the movements
and amounts of deferred ‘day one’ gains (losses) included in the
fair value of level three electricity swaps and options:
2019
$ million
2018
$ million
Balance as at 1 July 69.471.6
New derivatives78.63.5
Amortisation of existing derivatives(13.5)(5.7)
Balance as at 30 June 134.569.4
F8. Fair value measurement (continued)
G. Other
G1. Share-based payments
The Group operates three share-based payment plans (Long–
Term Incentive Plan (‘LTI’), Talent Retention Plan (‘TRP’) and
Employee Share Scheme (‘ESS’)) to enable staff to share in the
ownership of Genesis.
The cost of the plans are recognised over the period in which
the performance and/or service conditions are fulfilled. The total
amount to be expensed is based on the Group’s best estimate of
the number of equity instruments that will ultimately vest, taking
into consideration the likelihood that service conditions will be
met, multiplied by the initial fair value of each share.
Note
2019
$ million
2018
$ million
LTIG2 0.60.6
TRP 0.20.1
ESS 0.60.3
Total expense for the year 1.41.0
G2. Related party transactions
Majority shareholder and entities controlled by, and related to,
the majority shareholder
The majority shareholder of Genesis is the Crown. The
Group transacts with Crown-controlled and related entities
independently and on an arm’s-length basis for the following
goods and services: royalties, emission obligations, scientific
consultancy services, electricity transmission, postal services,
rail services and energy-related products (including electricity
derivatives). All transactions with Crown-controlled and related
entities are based on commercial terms and conditions and
relevant market drivers.
During the year the Crown received $88.4 million dividends
(2018: $85.6 million) of which $67.5 million was paid in cash
(2018: $75.8 million) and $20.9 million was paid in shares (2018:
$9.8 million). There were no other individually significant
transactions with the Crown (2018: nil).
The Group has five significant electricity swap and option
contracts with Meridian Energy, a Crown-controlled entity. The
electricity swap and option contracts period and profile vary
between the range of 12.5MW and 150MW, from the period 1
January 2011 to 31 December 2025. In addition to these contracts
there are a small number of insignificant contracts with Crown-
controlled and related entities.
Approximately 36.4 per cent of the value of electricity derivative
assets and approximately 54.1 per cent of the value of electricity
derivative liabilities at year end are held with Crown-controlled
and related entities (2018: 51.9 per cent and 40.9 per cent
respectively). The contracts expire at various times; the latest
expiry date is December 2025.
Note
2019
$ million
2018
$ million
Short-term benefits 6.9 6.7
Post-employment benefits 0.2 0.2
Termination benefits0.2-
Share-based payments — LTIG1 0.6 0.6
Total key management
personnel compensation
7. 97.5
Included in short-term benefits are Directors' fees of $0.9 million
(2018: $0.9 million).
LT
I
Under the LTI plan senior executives purchase shares at market
value, funded by interest-free loans from Genesis. The shares are
held on trust by the Trustee until the end of the vesting period.
Dividends on the shares during the vesting period are deducted
from the loan balance. If the shares vest, each executive is
entitled to a cash amount which, after deduction for tax, is
equal to the outstanding loan balance on day one for the shares
that have vested. That cash amount must be applied towards
repayment of the loan balance and the corresponding shares and
dividends on the shares during the vesting period are released to
the executive.
Vesting of shares is dependent on continued employment
throughout the vesting period and achievement of certain
performance targets relating to total shareholder return (‘TSR’) in
comparison to the NZX50.
In the prior year an updated plan commenced, with an additional
performance hurdle introduced to further enhance alignment
with shareholder interests. In the updated plan the performance
hurdles are a relative TSR hurdle compared against industry
peers and an absolute TSR hurdle where the absolute total
shareholder return compares against the NZX and ASX.
In the event the performance targets are not met or if the
participant ceases to be employed by the Group other than for
qualifying reasons, no shares will vest and the shares will be
forfeited to the Trustee without compensation and the relevant
executive will receive no benefits under the plan (unless the
Board exercises its discretion to allow some or all of the shares
to vest).
$
Number of
options
Balance at 1 July 2017933,668 493,206
Granted 874,340 363,010
Forfeited (113,980) (55,153)
Dividends
(134,348)
-
Balance as at 30 June 20181,559,680 801,063
Granted 835,871 336,700
Vested (331,542) (181,088)
Forfeited (122,382) (57,323)
Dividends
(70,436)
-
Balance at 30 June 20191,871,191 899,352
Grant datePerformance period
FY17 *1 June 2016 - 30 June 2019
FY181 June 2017 - 30 June 2020
FY191 June 2018 - 30 June 2021
* The FY17 grant is 100 per cent vesting.
^ No shares vested in FY18 as the TSR targets for the FY15 grant
were not met.
Key management personnel compensation
The key management personnel of the Group consists of the
Directors and the Executive Management team. Key management
personnel compensation is as follows:
59
GENESIS ANNUAL REPORT 2019
INDEPENDENT AUDITOR'S REPORT
58
GENESIS ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
G2. Related party transactions (continued)
Other transactions with key management personnel or entities
related to them
Key management personnel and their families may purchase gas,
electricity and LPG from the Group on an arm’s-length basis and
may purchase shares in Genesis. Key management personnel
also participate in the LTI plan discussed on the previous page.
The total number of shares held by key management personnel
(excluding LTI shares) as at 30 June 2019 was 314,713 (2018:
289,019). During the year dividends paid to key management
personnel and their families was $69,150 (2018: $48,967).
No other transactions took place between key management
personnel and the Group (2018: nil). As at 30 June 2019 the
balance payable to key management personnel was nil (2018: nil).
G3. Auditor’s remuneration
Audit fees comprise $0.1 million for the review of the interim
financial statements and $0.5 million for the audit of the
annual financial statements (2018: $0.1 million and $0.5 million
respectively). In addition to the audit Deloitte completed the
following work during the year: provision of secretarial services
for the Corporate Taxpayer Group (of which Genesis is a
member), trustee reporting, leadership development initiatives
for senior employees, customer management software support
and whistleblower hotline service (2018: provision of secretarial
services for the Corporate Taxpayer Group (of which Genesis is
a member), trustee reporting and whistleblower hotline service).
Total fees relating to other services was $0.139 million (2018:
$0.031 million).
G4. Commitments
2019
$ million
2018
$ million
2019
$ million
2018
$ million
Less than one year28.825.4 9.38.3
One to five years13.27.9 26.728.7
More than five years-2.0 21.827.5
Total 42.035.3 5 7. 8 64.5
Kupe Joint Venture has capital commitments of $1.2 million
as at 30 June 2019 (2018: nil) and DrylandCarbon One Limited
Partnership has capital commitments of $1.2 million as at 30 June
2019 (2018: nil).
Leases
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) are recognised in the income statement
on a straight-line basis over the lease term.
Operating lease commitments
The Group leases office buildings, land for its generation sites,
LPG depots and vehicles. The leases have varying lease periods
of up to 23 years with some going out to perpetuity. In some
cases renewal rights exist with market review clauses. The Group
does not have any options to purchase the leased assets at the
expiry of the lease periods.
L
ease commitments are disclosed exclusive of GST.
Capital
commitments
Operating
leases
G5. Contingent assets and liabilities
The Group had contingent assets and liabilities at 30 June 2019
in respect of:
Land claims, law suits and other claims
Genesis acquired interests in land and leases from Electricity
Corporation of New Zealand Limited ('ECNZ') on 1 April 1999.
These interests in land and leases may be subject to claims
to the Waitangi Tribunal and may be resumed by the Crown.
Genesis would expect to negotiate with the new M
āori owners
for occupancy and usage rights of any sites resumed by the
Crown. Certain claims have been brought to, or are pending
against ECNZ and the Crown under the Treaty of Waitangi Act
1975. Some of these claims may affect land and leases purchased
from ECNZ. In the event that land is resumed by the Crown, the
resumption would be effected by the Crown under the Public
Works Act 1981 and compensation would be payable. The Board
cannot reasonably estimate the adverse effect (if any) of the
claims and cannot provide any assurance that should a claim be
raised it would not have a material adverse effect on the Group's
business, financial condition or results of operations.
Gas supply agreement
Genesis is currently engaged in a contractual dispute relating to
the carbon terms of one of its long-term gas supply agreements.
Following an escalation process, the matter has been referred
to arbitration in accordance with the terms of the agreement.
The arbitration process is expected to take up to a further 12
months. Details of the dispute remain confidential and have not
been disclosed to avoid any prejudice to the ongoing arbitration
process. At this stage in the process Genesis is confident of
a favourable outcome, however, should there be an adverse
outcome from the proceedings potentially up to 724,000 carbon
units may need to be transferred. As the cost of any unit transfer
will depend on when the units are required to be transferred
and the make up of units held at that time, it is not possible to
provide a reliable estimate of the financial effect of any transfer.
There are no other known material contingent assets or liabilities
(2018: nil).
G6
. Subsequent events
The following events occurred subsequent to balance date:
•
$
88.0 million of dividends declared on 27 August 2019
(refer to note E4);
•
$
75.0 million revolving credit facility was entered into
(refer to note E5); and
•
Genesis ac
quired a 40 per cent interest in Yoogo Share
Limited. The investment in Yoogo Share Limited will be
equity accounted.
Auditor General
The Auditor-General is the auditor of Genesis Energy Limited
and its subsidiaries (‘the Group’). The Auditor-General has
appointed me, Bryce Henderson, using the staff and resources
of Deloitte Limited, to carry out the audit of the consolidated
financial statements of the Group on his behalf.
Opinion
We have audited the consolidated financial statements of the
Group on pages 25 to 58, that comprise the consolidated balance
sheet as at 30 June 2019, the consolidated comprehensive
income statement, consolidated statement of changes in equity
and consolidated cash flow statement for the year ended on that
date, and the notes to the consolidated financial statements that
include accounting policies and other explanatory information.
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position
of the Group as at 30 June 2019, and its consolidated financial
performance and its consolidated cash flows for the year
then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards and International
Financial Reporting Standards.
Basis for opinion
We conducted our audit in accordance with the Auditor-
General’s Auditing Standards, which incorporate the Professional
and Ethical Standards and the International Standards on
Auditing (New Zealand) issued by the New Zealand Auditing and
Assurance Standards Board. Our responsibilities under those
standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of
our report. We are independent of the Group in accordance with
the Auditor-General’s Auditing Standards, which incorporate
Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners issued by the New Zealand Auditing
and Assurance Standards Board, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
In addition to the audit we have carried out assignments in
the areas of trustee reporting, scrutineer’s notice, secretarial
services for the corporate tax payer group, whistleblower hotline
service, leadership development initiatives for senior employees
and review of the interim report which are compatible with
those independence requirements. Customer management
support services have also been provided by a business
acquired by Deloitte Limited during the year ended 30 June
2019. Appropriate safeguards were put in place to mitigate any
threats to audit independence following the acquisition and we
discontinued providing the service to Genesis Energy shortly
after the acquisition. These services have not impaired our
independence as auditor of the Group.
In addition to these assignments, principals and employees
of our firm deal with the Group on normal terms within the
ordinary course of trading activities of the Group. Other than the
audit and these assignments and trading activities, we have no
relationship with, or interests in the Group.
Audit materiality
We consider materiality primarily in terms of the magnitude of
misstatement in the consolidated financial statements of the
Group that in our judgement would make it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced (the ‘quantitative’ materiality).
In addition, we also assess whether other matters that come to
our attention during the audit would in our judgement change
or influence the decisions of such a person (the ‘qualitative’
materiality). We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined the quantitative materiality for the Group
financial statements as a whole to be $9 million.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on
these matters.
Independent
auditor’s report
TO THE SHAREHOLDERS OF GENESIS ENERGY LIMITED
61
GENESIS ANNUAL REPORT 2019
60
GENESIS ANNUAL REPORT 2019
INDEPENDENT AUDITOR'S REPORTINDEPENDENT AUDITOR'S REPORT
Key audit mattersHow our audit addressed the key audit matters and results
Valuation of generation assets
Generation assets were revalued at 30 June 2019 as set out in note
B1 of the consolidated financial statements to $3,259 million.
The fair value of generation assets is estimated using an internally
generated discounted cash flow model. The significant inputs
used to calculate the fair value of the generation assets are the
wholesale electricity price path, generation volumes, and the
discount rate. The wholesale electricity price path is estimated
by Genesis Energy as described in note B1 of the consolidated
financial statements.
The estimate of the wholesale electricity price path is the most
significant input in estimating the fair values determined for the
generation assets and affects the estimated generation volumes
which are also used in the fair value calculation. Changes to the
forecast of the wholesale electricity price path could significantly
change the estimated fair value of the generation assets.
The treatment of the gain on revaluation estimated by Genesis
Energy is described in note B1 of the consolidated financial
statements.
We included the valuation of generation assets as a key audit
matter due to the level of judgement required in forecasting the
wholesale electricity price path.
Our audit procedures included assessing the key inputs to
the model used to estimate the fair value of the generation
assets. Our procedures, which included the use of our internal
valuation experts, were primarily focused on evaluating the
process undertaken by Genesis Energy in forecasting the
wholesale electricity price path and assessing whether the
forecast was consistent with internal and external data.
We assessed the professional competence of the Genesis
Energy valuers involved in the forecasting of the electricity
price path and valuation of the generation assets.
We also compared budgeted performance information from
prior periods to actual data to assess the accuracy of the
forecasting process.
We assessed the forecast wholesale electricity price path
which included externally derived data. We also evaluated the
assumptions used in forecasting the electricity price path to
determine whether they were consistent with assumptions
used across the business, including management budgets
and valuations of other assets including certain electricity
derivatives.
We performed sensitivity analysis on the key assumptions
applied in determining the fair value of the generation assets
and considered the adequacy of the Group’s disclosures.
We have found the assumptions and resulting valuation to be
reasonable.
Valuation of electricity derivatives and cross currency interest
rate swaps
The Group’s activities expose it to electricity and gas market price,
oil price, currency and interest rate risk which are managed using
derivative financial instruments. At 30 June 2019 derivative assets
totalled $107.9 million and derivative liabilities were $128.1 million
as set out in note F1 of the consolidated financial statements.
The valuations of the oil swaps, interest rate swaps, foreign
exchange swaps and some electricity derivatives which are
prepared by Genesis Energy valuers are based primarily on
observable inputs and are measured using standard valuation
techniques.
Cross-currency interest rate swaps and certain electricity swaps
and options are also valued using primarily observable inputs
but require more complex valuation models. Additionally, some
electricity swaps and options are valued using the wholesale
electricity price path forecast prepared by Genesis Energy valuers.
As explained in the ‘Valuation of Generation Assets’ section above,
the wholesale electricity price path forecast requires significant
judgement.
We have included the valuation of electricity derivatives and
cross currency interest rate swaps as a key audit matter due to
the complexity associated with their valuation and the judgement
involved in evaluating the inputs to the electricity derivative
valuation models.
We tested the design and operating effectiveness of key
controls related to the recording and valuation of electricity
derivative transactions.
We challenged key assumptions applied by management and
agreed underlying data to the contract terms on a sample
basis. We have independently recalculated the fair value of a
sample of electricity derivatives.
Our internal valuation experts have evaluated the
appropriateness of the methodology applied in valuation
models for the electricity derivatives.
We also performed audit work on the wholesale electricity
price path as explained above under the section entitled
‘Valuation of Generation Assets’.
Our internal valuation experts have independently recalculated
the value of a sample of cross-currency interest rate swaps
using specialist treasury management software.
We have found the assumptions and resulting valuations to be
reasonable.
Other information
The Directors are responsible on behalf of the Group for
the other information. The other information comprises the
information included in the Annual Report, but does not include
the consolidated financial statements and our auditor’s report
thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Directors’ responsibilities for the consolidated financial
statements
The Directors are responsible on behalf of the Group for the
preparation and fair presentation of the consolidated financial
statements in accordance with New Zealand equivalents to
International Financial Reporting Standards and International
Financial Reporting Standards, and for such internal control as
the Directors determine is necessary to enable the preparation
of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors
are responsible on behalf of the Group for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative
but to do so.
The Directors’ responsibilities arise from the Financial Markets
Conduct Act 2013.
Auditor’s responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the
Auditor-General’s Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of shareholders taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with the Auditor-General’s
Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identif
y and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Group’s
internal control.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of the use of the going
concern basis of accounting by the directors and, based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as
a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the Directors regarding, among other
matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Directors with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we
determine those matters that were of most significance in the
audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Our responsibilities arise from the Public Audit Act 2001.
Bryce Henderson
Deloitte Limited
On behalf of the Auditor-General
Auckland, New Zealand
27 August 2019
63
GENESIS ANNUAL REPORT 2019
62
GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURESCORPORATE GOVERNANCE AND DISCLOSURES
Corporate governance information
This section of the Annual Report
provides information on Directors'
independence, committees, fees and
diversity and inclusion policies and
activities.
Genesis' governance framework
is guided by the principles and
recommendations described in the
NZX Corporate Governance Code.
Genesis considers it has followed
these recommendations in all material
respects during FY19, and as at 30
June 2019¹. Genesis has reported in
detail against the NZX Corporate
Governance Code in its separately
published Corporate Governance
Statement, which, together with
other detailed information on Genesis’
Board of Directors, Executive team
and corporate governance policies,
practices and processes can be
viewed on the Genesis Governance
section on the Genesis website
(www.genesisenergy.co.nz/investors/
governance). This contains the
following documents:
Corporate governance
FY19 Measurable objectives for diversity
OBJECTIVEPROGRESS AS AT 30 JUNE 2019
Lead flexible working
practices in the
Energy Sector
- C
ontinued to explore flexibility options across all sites, including four day weeks and nine day fortnights on
our generation sites; rolled out ‘agents at home’ in our Retail Operations area, and fostered flexible locations to
support team members and minimise productivity impact during crisis events and office refurbishment.
-S
upported people to take career breaks, retaining 100% of those who have taken up these opportunities.
-P
repared for a second-round of buyable leave, offering our people greater flexible to achieve what’s important to
them both in and outside of work.
-C
ontinued to support individuals seeking flexibility around location, schedule and role.
Build a workforce
that reflects New
Zealand’s multi-
cultural society and
customer base
-C
ompleted an in-depth analysis of our ethnic diversity, enabling us to see a comparison against the greater
New Zealand population, and unearthed opportunities for development of ethnic minorities.
-S
upported two people to attend the Pasifika Leadership Development Programme, and committed to another
three years with the TupuToa Internship Programme (an internship scheme aimed at creating pathways for Māori
and Pasifika students into careers).
-C
ontinued Genesis’ commitment to Māori Language Week.
Strive for gender
balance
-R
educed the gender pay gap between women and men doing the same or comparable work to 1.6 per cent.
-Continued to support the Genesis parental leave offering, including 12 weeks’ salary top up (in addition to Internal
Revenue Department Paid Parental Leave), two weeks paid partner leave, annual leave accrual at normal salaried
rate and support for a gradual return to work (80 per cent worked for 100 per cent pay). We have seen 100%
retention of those who have completed their parental leave.
-C
ontinued development of women through Global Women membership and leadership programmes, the Genesis
Women in Operations Network and a step-up in support of the Girls in Hi-Vis® initiative.
-F
ocused attention to gender balance through a dashboard that reports gender metrics in areas of interest.
> Genesis’ Constitution
> Board Charter
> Audit and Risk Committee
Charter
> Human R
esources and
Remuneration Committee
Charter
> Nominations Committee
Charter
> C
orporate Governance
Statement
> Code of Conduct and Ethics
> Diversity and Inclusion Policy
> Trading in Company Securities
Policy
> Market Disclosure Policy
> A
udit Independence Policy
> Inv
estor Communication Policy
> Inf
ormation about Genesis
shares
> Inf
ormation about bonds issued
by Genesis
Director independence
The names of the current Directors,
together with a short biography of
each, are set out on pages 20 and
21. All of the Directors are currently
considered to be independent Directors
as none of them are executives of
the Company or have any direct or
indirect interests or relationships that
could reasonably influence, or could
reasonably be perceived to influence,
in a material way, their decisions on
relation to the company.
Diversity and Inclusion Policy and
gender composition
Genesis’ Diversity and Inclusion Policy
and Minding the Gap Programme
record the Company’s commitment to
an inclusive workplace that embraces
and promotes diversity through a
number of initiatives, including a
focus on equal opportunity. Genesis
has sought to establish measurable
objectives for achieving diversity,
including gender diversity, and its annual
assessment of its diversity objectives
for FY19 and the Company’s progress
towards achieving these objectives are
set out in the table below.
As at 30 June 2019:
> F
our out of eight Genesis Energy
Directors were women
(FY18=three out of eight).
> Two out of eight Officers² were
women (FY18=three out of eight).
2 The term ‘Officer’ is defined in the NZX Listing
Rules as a person, however designated, who is
concerned or takes part in the management of
the public issuer’s business and reports to the
Board or to a person who reports to the Board. At
Genesis our Officers are the Chief Executive and
the Chief Executive’s direct reports.
1 During the year the Company has not complied
with Recommendation 3.6 (takeover protocols) of
the Code due to the Crown's share ownership in
the Company making it practically impossible for
a takeover offer to be made. See the Corporate
Governance Statement for more detail.
SKILL / CAPABILITY
BARBARA
CHAPMAN
CATHERINE
DRAYTON
DOUG
MCKAY
TIM
MILES
JAMES
MOULDER
MAURY
LEYLAND
PENNO
JOANNA
PERRY
PAUL
ZEALAND
Business strategy and leadership experience (a proven
record of developing and executing business strategy)
Listed company governance experience (experience in
listed company governance and driving and assessing the
effectiveness of the executive)
Regulated industry knowledge and experience
(electricity sector experience or experience in a similarly
regulated industry)
Government and stakeholder relationship experience
(a proven record of successfully engaging and managing
key external stakeholder relationships)
Finance / Accounting / Audit Committee experience
(senior executive or Director level experience in financial
accounting, reporting and internal financial controls)
Corporate finance / capital markets / transactional
experience (executive or Director level experience in
corporate finance related transactions – such as capital
raising and/or mergers and acquisitions)
Large industry operational (capital) project
management experience (executive level experience
within the electricity sector or similar large scale industrial
business)
Health and safety, risk experience (deep understanding
of excellence in Health & Safety in strategic and
operational context and applicable legislative framework)
Customer insight, data, marketing and brand
experience (executive level experience in consumer
retail and execution of marketing and brand strategies to
deliver growth).
Technology / innovation and digitalisation experience
(detailed understanding of the role of technology and
innovation in delivering a superior customer experience)
People / culture / reputation management (deep
understanding of the strategic importance of people,
values, behaviours and management style as drivers of
organisational culture and reputation)
DIRECTOR¹APPOINTED
BOARD
MEETINGS²
AUDIT AND
RISK COMMITTEE
HUMAN RESOURCES
AND REM
COMMITTEE
NOMINATIONS
COMMITTEE
Total Meetings held12557
Barbara Chapman (Chairman)1 May 201812537
Catherine Drayton14 Mar 20194100
Doug McKay24 June 201412356
Tim Miles21 Nov 201611056
James Moulder10 Oct 20188302
Maury Leyland Penno1 August 201610535
Joanna Perry1 May 200711506
Paul Zealand19 Oct 201611055
Dame Jenny Shipley*1 Nov 20094124
Mark Cross*24 Jun 20143001
Board and committee meetings and attendances
1. All Directors listed are independent Directors.
2. In addition, Directors participated in a number of stakeholder and investor meetings throughout FY19.
3. The above numbers include attendances at Committee meetings by non-member Directors.
* Dame Jenny Shipley ceased to be a Director on 10 October 2018.
*
M
ark Cross ceased to be a Director on 27 August 2018.
Te Mana Arataki Rangatōpū
65
GENESIS ANNUAL REPORT 2019
64
GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURESCORPORATE GOVERNANCE AND DISCLOSURES
Director and Executive
employee remuneration
This report outlines our refreshed
Remuneration Report for the year
ending 30 June 2019. It sets out
remuneration information for the
Chief Executive, the Executive Team
and Directors. Director and employee
remuneration is also discussed in the
Company’s Corporate Governance
Statement which can be viewed at
www.genesisenergy.co.nz/investors/
governance/documents.
Genesis Energy now follows the
New Zealand Shareholder Association’s
guide to assist all investors to
understand how remuneration is
aligned with value creation for its
shareholders. Genesis’ remuneration
policy for the Executive Team including
the Chief Executive is designed to have
them remunerated with competitive
salaries, a wide range of benefits
and use of performance incentives
to achieve outstanding performance
and alignment with our shareholders'
interests. The Human Resources
and Remuneration Committee (HR
& Rem Committee) regularly reviews
the remuneration policy. For the
Executive Team the policy provides
the opportunity to achieve, where
performance has been outstanding,
a total remuneration package in the
upper quartile for equivalent market
matched roles. Each year the HR & Rem
Committee reviews the performance
and remuneration appraisals of the
Executive Team, with the Board
approving the Chief Executive’s
remuneration.
Total remuneration for the Executive
Team is made up of three elements:
fixed remuneration, short-term
incentives and long-term incentives.
Fixed remuneration consists of base
salary and benefits and is targeted to
be in the third quartile of the market.
Short Term incentives (STIs) are ‘a pay
for performance’ component designed
to motivate and reward performance in
a single financial year. The target value
of an STI is set annually as a percentage
of the Executive’s fixed remuneration.
For FY19 the target for the Chief
Executive was 50 per cent and for other
Executives was between 25 per cent
and 40 per cent. The performance
measures to achieve the STI are then
set across Company KPIs for EBITDAF,
Customer, Health and Safety and
individual KPIs. Within each measure,
there are three performance levels,
‘threshold’, ‘on target’ and ‘stretch’.
On appraisal at the end of each year
an Executive will be awarded an STI
payment based on their performance
between a range of 0 per cent for
below threshold performance, to
150 per cent for outstanding
performance.
The Long Term incentives (LTI) are
also ‘a pay for performance’ component
designed to align rewards for the
Executive with shareholder value over
a three year period. Only the Executive
are eligible to participant in the LTI.
In FY19 LTI grants were made to the
Executive Team and the value of the
grants were set at a percentage of fixed
remuneration between a range of
25 per cent to 50 per cent. This value
less tax was then used to determine the
number of shares held in trust for each
grant for the Executive Team member.
Over the performance period of three
years the Company must satisfy certain
performance measures in order for the
incentive to be paid. LTI payments, if
achieved, are made in Genesis shares
rather than cash, and the Board retains
discretion over the final outcome. More
details on the LTI scheme can be found
on page 57.
Genesis Energy’s LTI scheme has
been reviewed and a new scheme
established to ensure it continues
to attract, retain and motivate
high calibre executive members to
drive outstanding outcomes for our
customers and our shareholders.
Details of the new scheme effective
from FY20 will be included in next
year’s Annual Report.
The following new interests granted in FY19 for vesting in FY21
GRANT YEARLTI LOAN VALUEPERFORMANCE PERIODPERFORMANCE MEASURE
FY19$379,463 used to acquire
152,853 ordinary shares,
restricted for the performance period
July 2018 - June 202150% relative TSR measured against the Peer
Gen-Tailor Group 50% absolute TSR measured
against ASX and NZX performance
In FY19 Marc England was provided with a LTI loan of $379,463 that was used to acquire Genesis shares at a market value of $2.48. Subject to achievement of TSR
performance hurdles over the three-year performance period ending 20 June 2021, Marc England will receive a gross LTI bonus of $566,371 to be applied to repay
his LTI loan balance. See page 57 for LTI detail.
Breakdown of Chief Executive's pay for performance FY19
DESCRIPTIONPERFORMANCE MEASURES
MAXIMUM
PERCENTAGE POSSIBLE
PERCENTAGE
ACHIEVED %
STI
Target set at 50% of fixed
remuneration (Base Salary +
Benefits) based on Company and
individual performance measures
60% based on Company KPIs,
of EBITDAF, Customer and Health and Safety
150%127%
40% based on Individual KPIs
LTI
Conditional awards of shares under
a Long Term Incentive Plan set at
50% of fixed remuneration
Relative TSR performance against NZX50100%100%
Five year summary - Chief Executive remuneration
CHIEF EXECUTIVE
TOTAL
REMUNERATION
PERCENTAGE STI
ACHIEVED AGAINST
MAXIMUM %
PERCENTAGE
VESTED LTI AGAINST
MAXIMUM
LTI
PERFORMANCE
PERIOD
Marc EnglandFY19$2,351,63185%100%July 2016 – June 2019
FY18$2,061,26579% 100%July 2015 – June 2018
FY17$1,429,92868%N/AN/A
FY16$308,07043%N/AN/A
Albert BrantleyFY16$2,114,86243%N/AN/A
FY15$1,733,19358%N/AN/A
Total remuneration including Salary, Benefits, and STI and LTI earned in the year but paid in the following year.
Five year summary - TSR Performance
FY15
10%
20%
30%
0%
40%
50%
60%
FY16FY17FY18FY19
Gen-Tailor Peer Avg NZX50 GNE
FIXED REMUNERATIONPAY FOR PERFORMANCE
TOTAL
REMUNERATION
Period BASE SALARYBENEFITSSUBTOTALSTILTI
SUBTOTAL
FY19 1,164,730 90,447 1,255,177719,2913 7 7,1 6 31,096,4542,351,631
FY181,086,338179,2791,265,617514,848280,800795,6482,061,265
The total remuneration earned by Chief Executive Marc England for FY19 and FY18 is as follows:
The Base Salary is inclusive of holiday pay paid as per New Zealand legislation. Benefits include employer contributions towards KiwiSaver on the base salary, STI
and LTI. FY18 benefits includes a one off payment of $100,000 as reported in FY18. The FY17 LTI grant met the performance measures for Genesis Energy TSR to be
above the 75 percentile of the NZX50 in the three-year performance period ending 30 June 2019 and achieved a 100 per cent vesting outcome.
The FY19 LTI value above represents the gross LTI bonus earned on vesting of the FY17 grant. The net LTI bonus was applied to repay Marc England’s LTI loan
balance. The accumulated cash dividends net of withholding tax of $54,389 was paid to Marc England in July 2019. The dividends are earned subsquent to the
initial grant and are excluded from the LTI amount above. Following repayment of his LTI loan balance, 123,460 ordinary shares with a market value of $3.47 were
transferred to Marc England on 22 July 2019.
The Chief Executive remuneration is presented below as the value of all remuneration and benefits earned in FY19 and FY18.
Ngā utu ā-tau o ngā Kaihautū
67
GENESIS ANNUAL REPORT 2019
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GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURESCORPORATE GOVERNANCE AND DISCLOSURES
Remuneration of employees earning over $100,000 in the year ending 30 June 2019
There were 353 Genesis and subsidiary employees (or former employees) who received remuneration and benefits in excess of
$100,000 (not including Directors) in their capacity as employees during the year ended 30 June 2019, as set out below.
Remuneration of employees
REMUNERATION EMPLOYEESREMUNERATIONEMPLOYEESREMUNERATION EMPLOYEES
$2,030,000 - $2,040,0001$310,000 - $320,0001$200,000 - $210,0007
$930,000 - $940,0001$300,000 - $310,0003$190,000 - $200,0002
$760,000 - $770,0001$290,000 - $300,0002$180,000 - $190,0007
$700,000 - $710,0001$280,000 - $290,0002$170,000 - $180,00018
$600,000 - $610,0001$260,000 - $270,0007$160,000 - $170,00024
$490,000 - $500,0002$250,000 - $260,0002$150,000 - $160,00034
$430,000 - $440,0001$240,000 - $250,0003$140,000 - $150,00029
$350,000 - $360,0003$230,000 - $240,0003$130,000 - $140,00037
$340,000 - $350,0001$220,000 - $230,0002$120,000 - $130,00061
$320,000 - $330,0001$210,000 - $220,0001$110,000 - $120,00045
$100,000 - $110,00050
Total employees earning $100,000+353
Employees who are included but who are no longer at Genesis Energy as at 30 June 201924
This includes base salary, employer KiwiSaver contributions, vested shares from employee share schemes, short-term performance payments, settlement payments and
redundancy payments for all permanent employees received during FY19. Short-term performance payments and the LTI bonus are paid in arrears; therefore the table
above includes the STI and LTI earned in FY18.
Directors’ fees
Directors’ remuneration is in the form
of Directors’ fees for non-executive
Directors, approved by shareholders.
The Chairman receives a higher level
of fees to reflect the additional time
and responsibilities that this position
involves but does not receive any
fees for committee membership or
attendances.
Shareholders have approved
remuneration for membership of the
various Board committees.
Table 1 sets out the Shareholder-
approved Directors’ fees for the year
to 30 June 2019. These fees were
last approved by shareholders at the
Company’s 2016 Annual Shareholder
Meeting.
No Director is entitled to any
remuneration from the Company other
than by way of Directors’ fees and the
reimbursement of reasonable travelling,
accommodation and other expenses
incurred in performing their duties as
Directors.
Table 2 sets out the remuneration paid
to Directors during the year to 30 June
2019.
Details of Directors of subsidiary
entities forming part of the Genesis
Energy Group are set out in the
Statutory Disclosures on page 69.
Directors received no remuneration
or other benefits during the period in
relation to their duties as Directors of a
subsidiary.
All Directors received the benefit of an
indemnity from Genesis and the benefit
of Directors and Officers liability
insurance cover.
The cover extends to liabilities to
persons (other than the Company
and its subsidiaries or related
bodies corporate) that arise out
of the performance of their duties
as Directors, unless the liability is
Table 2 – Directors’ fees paid during FY19
DIRECTOR
BOARD
FEES
AUDIT & RISK
COMMITTEE
HR & REM
COMMITTEE
NOMINATIONS
COMMITTEETOTAL
Barbara Chapman1155,0813,323 --158,404
Catherine Drayton2 26,3373,000--29,337
Doug McKay90,000-15,0005,000110,000
Tim Miles90,000-7,5005,000102,500
James Moulder365,081 8,000 --73,081
Maury Leyland
Penno
90,00012,0004,375-106,375
Joanna Perry90,00024,000--114,000
Paul Zealand90,000-7,5005,000102,500
Dame Jenny
Shipley4
49,839---49,839
Mark Cross515,0002,000--17,000
Pool for additional
work or attendances
----
GRAND TOTAL
$863,036
1. Barbara Chapman was appointed Chairman on 10 October 2018.
2. Catherine Drayton was appointed on 14 March 2019.
3. James Moulder was appointed on 10 October 2018.
4. Dame Jenny Shipley retired from the Board on 10 October 2018.
5. Mark Cross resigned from the Board on 27 August 2018.
Directors’ fees exclude GST and reimbursed costs directly associated with carrying out their duties.
prohibited from being insured against
by law or relates to fraudulent conduct.
Remuneration of Company employees,
including those acting as Directors of
subsidiary companies, is disclosed in
the relevant banding on page 66.
Table 1 – Approved Directors’ fees
POSITIONFEES PER ANNUMTOTAL
Board of DirectorsChairman180,000 180,000
Member (x7)90,000630,000
Audit and Risk Committee Chairman24,00024,000
Member (x3)12,00036,000
Human Resources and
Remuneration Committee
Chairman15,00015,000
Member (x3)7,50022,500
Nominations CommitteeChairman²--
Member (x3)5,00015,000
Pool for additional work or
attendances1
17,50017,500
Total approved pool $940,000
1. In 2016 shareholders approved a $25,000 pool of fees for additional work or attendances. In the year to 30 June,
$7,500 of the pool was reallocated to permit the appointment of a fourth member to the Human Resources and
Remuneration Committee.
2.
The Chairman of the Board is the chairman of the Committee and does not receive any fees for Committee
membership.
Director and Executive
employee remuneration (continued)
Maximum
500,000
1,000,000
1,500,000
0
2,000,000
2,500,000
3,000,000
Chief Executive remuneration performance pay for FY19
FixedOn Plan
FixedSTILTI
Pay For Performance Scenarios
Maximum Potential STI 150%
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GENESIS ANNUAL REPORT 2019
68
GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURESCORPORATE GOVERNANCE AND DISCLOSURES
DIR.POSITIONCOMPANY
Barbara Chapman
(Chairman)
Director IAG New Zealand1
DirectorFletcher Building Limited
Director
and Deputy Chair
The New Zealand Initiative
TrusteeFlinton Trust
Director and
Shareholder
Two Tin Pigs Limited
DirectorNZME
PatronNew Zealand Rainbow Tick Excellence
Awards
Catherine Drayton
DirectorGuardians of New Zealand
Superannuation1
Chair Christchurch International Airport
Limited1
DirectorSouthern Cross Medical Care Society1
DirectorSouthern Cross Hospitals Limited1
DirectorSouthern Cross Benefits Limited1
TrusteeTrustee of Southern Cross Health Trust1
CouncillorUniversity of Canterbury Council1
DirectorFronde Systems Group Limited1
DirectorBeca Group Limited1
Director and ShareholderCMD Associates Limited1
Director and ShareholderCMD Commercial Limited1
Director and ShareholderHarbour View Properties Limited1
Maury Leyland Penno
DirectorLeaft Foods1
DirectorSignum Holdings Limited1
Director and ShareholderPure Food Company Limited1
Director and ShareholderStem and Stalk Limited1
DirectorOkuora Holdings Limited
Chair and TrusteeThe Education Hub
TrusteeArapito Trust
TrusteePolperro No. 2 Trust
DirectorWangapeka River Hops Limited
Doug McKay
DirectorFletcher Building Limited
ChairEden Park Trust Board
Chair
Bank of New Zealand Group (and
subsidiaries)
Director
IAG New Zealand Limited and
subsidiaries
DirectorWymac Consulting Limited
DirectorNational Australia Bank
Director and ShareholderTourism Transport Limited
Tim Miles
DirectoroOh!media Limited1
DirectorUDC Finance1
DirectorNyriad Limited1
ChairmanGut Cancer Foundation1
Director and ShareholderJeffries Miles Consultancy Limited
Director and ShareholderJeffries Miles Property Limited
DirectorKhandallah Trust Limited
TrusteeMarshall Miles Family Trust
TrusteeBarbara Nel Miles Trust
Advisory TrusteeLeadership New Zealand
Interests register entries
In accordance with section 211(1)(e) of the Companies Act, particulars of the entries in the Interests Register of Genesis during
the financial year to 30 June 2019 are set out in the table below:
1 Entries added by notices given by Directors during the year ended 30 June 2019.
DIR.POSITIONCOMPANY
James Moulder
DirectorCybele Capital Limited1
DirectorMotupipi Holdings Limited1
TrusteeMoulder Family Trust1
DirectorMotupipi Offshore Investments1
DirectorLycaon Advisory Limited1
DirectorTasman Environmental Markets Pty
Limited1
DirectorTasman Environmental Markets
Limited Partnership1
DirectorRamp Carbon Limited1
DirectorNDVER Carbon Reductions Pty
Limited1
Joanna Perry
DirectorNyriad Limited
ChairIFRS Advisory Council
DirectorTrade Me Group Limited
Director and ShareholderJMGP Limited
DirectorPartners Life Holding Limited
DirectorPartners Life Limited
Deputy ChairRegional Facilities Auckland
Chairman
Oyster Property Group (and
subsidiaries)
Paul
Zealand
Trustee
Dale Vercoe Community Care
Charitable Trust1
DirectorLochard Energy
Director
The New Zealand Refining Company
Limited
DirectorZoenergy Limited
TrusteeZealand Family Trust
Jenny Shipley
(retired 10 October 2018)
ChairOravida Limited and subsidiaries
Co-ChairChampion for Change
DirectorDirector of BOAO Forum for Asia
Chairman
Chair of China Construction Bank
(New Zealand) Limited
Director and ShareholderJenny Shipley New Zealand Ltd
TrusteeHeart Health Research Trust
TrusteeShipley Family Trust
Executive Board Member New Zealand China Council
Mark Cross
(resigned 27 August 2018)
DirectorChorus Limited
Chairman and Shareholder
Milford Asset Management Limited
(and subsidiaries)
Chairman and ShareholderMFL Mutual Fund Limited
Chairman and ShareholderSuperannuation Investments Limited
Director and ShareholderEmcee Squared Limited
Director and ShareholderAlpha Investment Partners Limited
Director and ShareholderVirsae Group Limited
DirectorZ Energy Limited (and subsidiaries)
DirectorArgosy Property Limited
Trustee
Triathlon Youth Foundation New
Zealand
TrusteeCross Family Trust
As at 30 June 2019:
> The Chairman of Genesis,
Barbara Chapman, the Chief
Executive of Genesis, Marc
England, and Chief Financial
Officer of Genesis, Chris
Jewell, were Directors of all
the subsidiary companies listed
in Note D1 of the financial
statements with the exception
of Genesis Energy’s captive
insurance company incorporated
in Singapore, Genesis Energy
Insurance Pte Limited.
> Chris Jewell, the Chief Financial
Officer, Warwick Williams,
the Senior Regulatory Advisor
and George McGhie (resident
Singapore-based Director
and employed by the Genesis
Energy captive manager Willis
Management (Singapore)
Pte Limited) were Directors
of Genesis Energy’s captive
insurance company incorporated
in Singapore, Genesis Energy
Insurance Pte Limited.
Directors of subsidiary companies
Use of Company information
No notices have been received by the
Board of Genesis under section 145 of
the Companies Act 1993 with regard
to the use of Company information
received by Directors in their capacities
as Directors of the Company or its
subsidiary companies.
Directors’ interests in shares
Directors disclosed the following
relevant interests in Genesis Energy
shares as at 30 June 2019:
DIRECTOR
RELEVANT
INTEREST HELD
IN SHARES
Barbara ChapmanNil
Catherine DraytonNil
Maury Leyland Penno19,088
Doug McKay15,814
Tim Miles40,410
James MoulderNil
Joanna Perry29,799
Paul ZealandNil
Waivers from the NZX
On 19 November 2018, an NZX
Regulation Decision was published
which included a class ruling providing
that waivers and rulings previously
granted to issuers transitioning to
the new NZX Listing Rules will have
comparable effect under the new NZX
Listing Rules (the Class Ruling). The
Class Ruling is available until 30 June
2020. The Company has relied on
the Class Ruling in respect of waivers
from old NZX Listing Rule 9.2.1 (in
respect of transmission agreements
with Transpower) and old NZX Listing
Rule 11.1.6 (in respect of the inclusion
of certain provisions in the Company’s
Constitution) and a ruling in relation to
old NZX Listing Rule 10.8.1 (in respect
of the Company not being a “mining
issuer”). These waivers and ruling were
issued at the time of the initial public
offering of the Company.
Donations
In accordance with section 211(1)(h)
of the Companies Act 1993, Genesis
records that it made donations of
$19,771 during the year ended 30 June
2019. Genesis subsidiaries did not make
any donations.
Credit rating
As at the date of this Annual Report
Standard & Poor’s long-term credit
rating for Genesis was BBB+ Stable.
Exercise of NZX disciplinary powers
The NZX did not exercise any of its
powers under Listing Rule 5.4.2 (of
the NZX listing rules applicable to the
Company during the year) in relation to
Genesis during FY19.
Auditor’s fees
Deloitte, on behalf of the Auditor-
General, has continued to act as
auditor for the Company and the
amounts paid and payable by Genesis
and its subsidiaries to Deloitte, for
audit fees (including half year review
fees) and non-audit fees in FY19, were
$557,000 and $139,510 respectively.
Stock exchange listings
Genesis' ordinary shares are listed
and quoted on the NZX Main Board
(NZSX) and the Australian Securities
Exchange (ASX) under the company
code 'GNE'. Genesis has three issues
of retail bonds listed and quoted on
the NZX Debt Market (NZDX) under
company codes 'GNE030', 'GNE040'
and 'GNE050'. Genesis' listing on the
ASX is as a Foreign Exempt Listing. For
the purposes of ASX lising rule 1.15.3,
Genesis confirms that it continues to
comply with NZX Listing Rules.
Disclosures of Directors’ interests in
share transactions
During FY19, in relation to the
Company’s Directors, the following
disclosures were made in the Interests
Register as to dealing in Company
shares under section 148 of the
Companies Act 1993:
Joanna Perry made ongoing disclosures
in relation to beneficial interests in the
acquisition of 1,604 ordinary shares
in the Company pursuant to the
Company’s Dividend Reinvestment
Plan.
Statutory disclosures
Ngā Whakapuakitanga Whakature
71
GENESIS ANNUAL REPORT 2019
70
GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURESCORPORATE GOVERNANCE AND DISCLOSURES
Twenty largest registered shareholders as at 30 June 2019*
NAME UNITS AT 30 JUNE 2019% OF UNITS
Her Majesty The Queen In Right Of New Zealand Acting By And Through
Her Minister Of Finance And Minister For State Owned Enterprises (SOE)
524,433,65551.23
HSBC Custody Nominees (Australia) Limited31,924,843 3.11
Citibank Nominees (New Zealand) Limited27,236,402 2.66
HSBC Nominees (New Zealand) Limited 22,582,3322.20
HSBC Nominees (New Zealand) Limited 22,010,268 2.15
Accident Compensation Corporation19,991,719 1.95
JP Morgan Chase Bank Na NZ Branch15,389,057 1.50
Forsyth Barr Custodians Limited14,690,5081.43
FNZ Custodians Limited 10,272,493 1.00
Citicorp Nominees Pty Limited 9,116,8960.89
Custodial Services Limited 9,115,7770.89
JBWere (NZ) Nominees Limited 8,925,6480.87
ANZ Wholesale Australasian Share Fund8,575,570 0.83
Custodial Services Limited7,221,900 0.70
BNP Paribas Nominees (NZ) Limited 6,601,363 0.64
New Zealand Depository Nominee Limited5,757,999 0.56
JP Morgan Nominees Australia Limited5,465,178 0.53
Clyde Parker Holland & Rena Holland 5,250,000 0.51
Investment Custodial Services Limited4,942,611 0.48
BNP Paribas Nominees (NZ) Limited4,937,332 0.48
Totals: Top 20 holders of Ordinary Shares764,441,551 74.61
* In the above table the shareholding of New Zealand Central Securities Depository Limited (NZSCD) has been allocated to the applicable members of NZSCD.
Substantial security holders
The following information is given pursuant to section 293 of the Financial Markets Conduct Act 2013 (FMCA). According to
notice given to the Company pursuant to section 280 (1) (b) of the FMCA, the substantial security holder in the Company and its
relevant interests as at the date of the notice are noted below. The total number of voting shares on issue as at 30 June 2019 was
1,023,646,556.
DATE OF
SUBSTANTIAL SECURITY NOTICE
RELEVANT INTEREST IN
THE NUMBER OF SHARES
% OF SHARES HELD AT
DATE OF NOTICE
Her Majesty The Queen
In Right Of New Zealand
6 July 2015519,723,78151.97
Genesis Energy Limited (GNE030)4.14% Bonds 18/03/2022 (Total)
Top Holders As Of 30/06/2019Composition: G001
RANKNAME UNIT% UNITS
1JP Morgan Chase Bank Na Nz Branch-Segregated Clients Acct10,525,00010.53
2FNZ Custodians Limited9,625,0009.63
3Custodial Services Limited6,762,000 6.76
4Forsyth Barr Custodians Limited5,403,0005.40
5Investment Custodial Services Limited 5,390,0005.39
6BNP Paribas Nominees (NZ) Limited 5,200,0005.20
7Citibank Nominees (New Zealand) Limited 5,131,0005.13
8Custodial Services Limited4,537,0004.54
9Custodial Services Limited 4,136,0004.14
10Custodial Services Limited 4,004,0004.00
11Custodial Services Limited 2,527,0002.53
12FNZ Custodians Limited 2,458,0002.46
13Southland Building Society 1,600,0001.60
14ANZ Custodial Services New Zealand Limited 1,340,0001.34
15TEA Custodians Limited Client Property Trust Account 1,100,0001.1 0
16BNP Paribas Nominees (NZ) Limited 1,025,0001.03
17Custodial Services Limited 1,013,0001.01
18Tappenden Holdings Limited700,0000.70
19Custodial Services Limited 660,0000.66
20FNZ Custodians Limited 601,0000.60
Totals: Top 20 holders of 4.14% BONDS 18/03/2022 (Total)73,737,00073.75
Total Remaining Holders Balance26,263,00026.25
Genesis Energy Limited (GNE040)5.70% Bonds 09/06/2047 (Total)
Top Holders As Of 30/06/2019Composition: G004
RANKNAME UNIT% UNITS
1Forsyth Barr Custodians Limited41,108,00018.27
2Jbwere (NZ) Nominees Limited23,412,00010.41
3FNZ Custodians Limited15,013,0006.67
4Custodial Services Limited11,855,0005.27
5Custodial Services Limited 10,141,0004.51
6National Nominees New Zealand Limited9,086,0004.04
7Custodial Services Limited7,207,0003.20
8Investment Custodial Services Limited5,359,0002.38
9Public Trust Class 10 Nominees Limited4,485,0001.99
10Custodial Services Limited4,337,0001.93
11Custodial Services Limited3,989,0001.77
12Ponz Capital Limited 3,146,0001.40
13Custodial Services Limited2,231,0000.99
14Citibank Nominees (New Zealand) Limited1,870,0000.83
15Fletcher Building Educational Fund Limited1,600,0000.71
16Forsyth Barr Custodians Limited1,585,0000.70
17Arden Capital Limited1,450,0000.64
18Vincent Ka Soon Chia & Vui Yung Chia1,300,0000.58
19ANZ Custodial Services New Zealand Limited 1,180,0000.52
20Anne Margaret Tindall1,150,0000.51
Totals: Top 20 holders of 5.70% BONDS 09/06/2047 (Total)151,504,0006 7. 3 2
Total Remaining Holders Balance73,496,00032.68
Genesis Energy Limited (GNE050)4.65% Bonds 16/07/2048 (Total)
Top Holders As Of 30/06/2019Composition: G005
RANKNAME UNIT% UNITS
1Forsyth Barr Custodians Limited61,393,00025.58
2Jbwere (NZ) Nominees Limited32,691,00013.62
3Custodial Services Limited15,134,0006.31
4Custodial Services Limited12,208,0005.09
5Custodial Services Limited 10,243,0004.27
6Investment Custodial Services Limited9,095,0003.79
7FNZ Custodians Limited8,290,0003.45
8Custodial Services Limited5,181,0002.1 6
9Custodial Services Limited4,781,0001.99
10Forsyth Barr Custodians Limited4,450,0001.85
11Custodial Services Limited2,380,0000.99
12John Culyer Wigglesworth & Dennis James Munn & Sondra Wigglesworth1,500,0000.63
13Kps Society Limited835,0000.35
14Forsyth Barr Custodians Limited804,0000.34
15Jbwere (NZ) Nominees Limited750,0000.31
16Investment Custodial Services Limited653,0000.27
17Best Farm Limited600,0000.25
18Investment Custodial Services Limited530,0000.22
19BNP Paribas Nominees (NZ) Limited505,0000.21
20Chilcotin Investments Limited500,0000.21
20Jml Capital Limited500,0000.21
20Renzhong Gong500,0000.21
20Somsmith Nominees Limited500,0000.21
Totals: Top 20 holders of 5.70% BONDS 09/06/2047 (Total)174,023,00072.52
Total Remaining Holders Balance65,977,00027.48
72
GENESIS ANNUAL REPORT 2019
CORPORATE GOVERNANCE AND DISCLOSURES
Distribution of ordinary shares and shareholdings as at 30 June 2019
SIZE OF HOLDING
NUMBER OF
SHAREHOLDERS
% OF
SHAREHOLDERS
NUMBER OF
ORDINARY SHARES
% OF
ORDINARY SHARES
1 to 9994,472 10.092,842,259 0.28
1,000 – 4,99932,440 73.1 773,914,205 7.22
5,000 – 9,9993,401 7. 6 723,173,6332.26
10,000 – 49,9993,5698.0566,582,756 6.50
50,000 – 99,999276 0.6218,165,828 1.78
100,000 and over175 0.40838,967,875 81.96
Totals44,333 100.001,023,646,556 100.00
Debt listings
Genesis Energy’s subordinated, unsecured capital bonds are listed on the New Zealand Debt Market Exchange.
Distribution of holders of quoted securities
INVESTOR RANGES: 30 JUNE 2019
SECURITY CODE: GNE030
RANGEHOLDER% OF HOLDERSNUMBER OF BONDS% OF BONDS
5,000 to 9,99915622.38917,000 0.92
10,000 – 49,99939456.537,863,000 7. 8 6
50,000 – 99,9997911.334,794,0004.79
100,000 – 499,999507.1 78,900,0008.90
500,000 – 999,99971.013,996,0004.00
1,000,000 and over111.5873,530,00073.53
Totals697100.00100,000,000100.00
INVESTOR RANGES: 30 JUNE 2019
SECURITY CODE: GNE040
RANGEHOLDER% OF HOLDERSNUMBER OF BONDS% OF BONDS
5,000 to 9,9991489.52862,000 0.38
10,000 – 49,9991,010 64.9522,213,000 9.87
50,000 – 99,999222 14.2813,015,000 5.78
100,000 – 499,999142 9.1324,514,000 10.90
500,000 – 999,999130.848,192,000 3.64
1,000,000 and over201.28156,204,000 69.43
Totals1,555 100.00225,000,000 100.00
INVESTOR RANGES: 30 JUNE 2019
SECURITY CODE: GNE050
RANGEHOLDER% OF HOLDERSNUMBER OF BONDS
% OF ISSUED CAPITAL
% OF BONDS
5,000 to 9,999124 6.77718,000 0.30
10,000 – 49,9991,290 70.4127,417,000 11.42
50,000 – 99,999248 13.5414,390,0006.00
100,000 – 499,999147 8.0222,982,0009.57
500,000 – 999,999110.607,147,0002.98
1,000,000 and over120.66167,346,00069.73
Totals1,832100.00240,000,000100.00
Head/Registered Office
Genesis Energy Building
660 Great South Road,
Greenlane, Auckland 1051
P: 64 9 580 2094
F: 64 9 580 4894
E: info@genesisenergy.co.nz
investor.relations@genesisenergy.co.nz
board@genesisenergy.co.nz
W: genesisenergy.co.nz
energyonline.co.nz
Hamilton
94 Bryce Street, Hamilton
Huntly Power Station
Cnr Te Ohaki and
Hetherington Roads, Huntly
Tokaanu Power Station
State Highway 47, Tokaanu
Waikaremoana Power Station
Main Road, Tuai RD5,
Wairoa 4195
Tekapo Power Station
167 Tekapo Power House Road,
Tekapo 7999
OFFICE LOCATIONS
Bryce Henderson
of Deloitte Limited
has been appointed to
perform the audit on behalf
of the Auditor-General.
B A N K E R S
Westpac
BOARD/EXECUTIVE PHOTOS
Scott McAulay Photography
PRINTED REPORT PAPER STOCK
Our Annual Report is printed on Tauro Offset
paper stock, which is made from material from
well-managed, FSC® -certified forests and
other controlled sources. The fibre used to produce
Tauro Offset is elemental chlorine free (ECF).
AUDITOR
---
Results announcement
Results for announcement to the market
Name of issuer Genesis Energy Limited (GNE)
Reporting Period 12 months to 30 June 2019
Previous Reporting Period 12 months to 30 June 2018
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$2,700.7 17%
Total Revenue $2,700.7 17%
Net profit/(loss) from
continuing operations
$59.2 201%
Total net profit/(loss) $59.2 201%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.08600000
Imputed amount per Quoted
Equity Security
$0.02675600
Record Date 17 October 2019
Dividend Payment Date 31 October 2019
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.74 $1.56
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the FY2019 Annual Report attached to this
announcement for Genesis’ audited financial statements.
Authority for this announcement
Name of person authorised
to make this announcement
Cameron Parker
Contact person for this
announcement
Cameron Parker
Contact phone number +64 9 951 9311
Contact email address cameron.parker@genesisenegy.co.nz
Date of release through MAP 28/08/2019
Audited financial statements accompany this announcement.
---
Distribution Notice
Section 1: Issuer information
Name of issuer Genesis Energy Limited (GNE)
Financial product name/description Ordinary Shares
NZX ticker code GNE
ISIN (If unknown, check on NZX
website)
NZGNEE0001S7
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 17/10/2019
Ex-Date (one business day before
the Record Date)
16/10/2019
Payment date (and allotment date for
DRP)
31/10/2019
Total monies associated with the
distribution
1
$88,033,603.82
Source of distribution (for example,
retained earnings)
Retained Earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.11275600
Total cash distribution
3
$0.08600000
Excluded amount (applicable to listed
PIEs)
$0.00000000
Supplementary distribution amount $0.01214100
Section 3: Imputation credits and Resident Withholding Tax
4
Is the distribution imputed Fully imputed
Partial imputation
No imputation
If fully or partially imputed, please
state imputation rate as % applied
80%
Imputation tax credits per financial
product
$0.02675600
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident W ithholding Tax (RWT).
3
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RW T.
This should include any excluded amounts, where applicable to listed PIEs.
4
The imputation credits plus the RWT amount is 33% of the gross distribution for the purposes of this form. If the distribution is fully
imputed the imputation credits will be 28% of the gross distribution with remaining 5% being RW T. This does not constitute advice
as to whether or not RW T needs to be withheld.
Resident Withholding Tax per
financial product
$0.01045348
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
2.5%
Start date and end date for
determining market price for DRP
16/10/2019 22/10/2019
Date strike price to be announced (if
not available at this time)
23/10/2019
Specify source of financial products
to be issued under DRP programme
(new issue or to be bought on
market)
New Issue
DRP strike price per financial product
$
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
18/10/2019
Section 5: Authority for this announcement
Name of person authorised to make
this announcement
Cameron Parker
Contact person for this
announcement
Cameron Parker
Contact phone number +64 9 951 9311
Contact email address cameron.parker@genesisenegy.co.nz
Date of release through MAP 28/08/2019
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.