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the way we live
Genesis Energy is transforming itself into an energy business with its customers at the centre of the company.
How are we doing this? Simple. We asked our customers what they want. They told us they want tools and incentives to manage their energy use better. They want to save energy and save money. They want to deal with an energy company that is relevant and easy to communicate with.
So we have shifted our focus. While we maintain a generation development team, we are no longer so concerned with building new power stations. We are more focused on getting closer to our customers. We are finding the best tools in the world to help our customers shift their consumption to lower price periods, control their energy use with the latest technology and, ultimately, save money.
The rapid adaption of smart phones and tablets has already given energy consumers the expectation that they should be able to control and enhance many aspects of their lives via their mobile device. Control of their energy use should be no different.
So we have installed Advanced Meters in 268,000 customer properties. Advanced Meters are just the beginning. They are the hardware and data providers. The real customer benefits come with the information and energy management tools built on the back of the data platform.
In 2011 we introduced Energy Usage – a customer portal on the web that gave our customers access to their hourly, daily and monthly electricity usage derived from the Advanced Meter data. The next step was the release in March 2012 of My Meter, the same data now available on the customer’s smart phone. With this iPhone and Android application, customers can see what they are using and how they are tracking against their monthly average and against pre-set budgets.
Find out how we're transforming the way we live.
Having provided more than half of our electricity customers with free access to their consumption data via the web or smart phone, the next step from Genesis Energy was to start testing and trialling new technologies and new tools with customers.
We’ve worked hard to identify technologies emerging worldwide that we feel are set to change the face of energy management in the home and business. To test these innovations in local and real conditions, and not in an engineer’s lab’, we created an advanced energy neighbourhood in Auckland called Tomorrow Street.
We invited 15 households on the North Shore to partner with us and be our research assistants. They represent a mix of New Zealanders, householders and house types. The Tomorrow Streets live in typical older Auckland bungalows, cottages and villas – some renovated, some not. Our first action in Tomorrow Street was to conduct comprehensive energy assessments on the houses. Unsurprisingly, we found that most of the 15 houses were poorly insulated and leaked energy. We fixed that with insulation and then installed the HomeiQ energy management system we have sourced from GreenwaveReality in the United States.
HomeiQ is retrofitted between the wall socket and an appliance. It communicates wireless to a central control box and is connected to a web portal. The system allows householders to monitor and control the energy usage of individual devices and appliances room by room and throughout the home. Residents of Tomorrow Street are using smart phones and tablets to switch appliances on and off remotely, programme them all to certain modes and to track their energy consumption.
Tomorrow Street residents are also trialling the combination of other energy saving appliances such as solar hot water, heat pump hot water and new smart fridges.
Tomorrow Street is a new method of involving customers in our business. They have the opportunity to test new products and provide feedback on how to make them simpler to use. Ultimately, if the products in Tomorrow Street work and provide meaningful savings for the residents, Genesis Energy will be more encouraged to roll them out to the mass-market.
Find out how we're transforming the neighbourhood.
While collaborating with customers directly through initiatives such as Tomorrow Street may be a new concept for Genesis Energy, engaging with our communities has been part of the Company’s culture and values for many years.
Over the past year the Company has continued to support many community and environmental organisations as we seek to engage and contribute to better social and environmental outcomes.
Genesis Energy’s community investment strategy has been refined in the past 12 months to focus on addressing the various impacts of its operations and to help develop solutions that improve community wellbeing, local economies and environments.
One of the strengths of Genesis Energy is the scale, breadth and depth of our community engagement and investment activity. Successful community engagement programmes require not only breadth and depth but longevity.
Genesis Energy created and has supported the Genesis Oncology Trust for almost a decade. The Trust also enjoys the support of 80,000 Genesis Energy customers. Into its eighth year, the Trust awarded 62 grants totalling $1,150,000 to those working on the front line in the fight against cancer.
In education the Company created and continues to grow the Schoolgen solar education programme. In the period under review, four schools in Christchurch and Lake Tekapo township were selected to receive 2KW photovoltaic panels. Lake Tekapo School also received a battery system which will enable the school to operate independently of the National Grid and act as the district’s regional emergency centre if required.
The whio, or native blue duck, is not only an endangered species but is an important indicator of the health of our rivers, many of which feed water into Genesis Energy’s hydro schemes. In September 2011, after a long-running and successful mitigation programme to provide secure sites for whio in the central North Island, Genesis Energy and the Department of Conservation entered into a five-year partnership to create the National Whio Recovery Programme. This programme, dubbed Whio Forever, will create eight predator-controlled security sites in the North and South Island and each will target to house at least 50 pairs of whio.
Find out how we're transforming our communities.
Our community involvement continues to grow
Hon. Dame Jenny Shipley
I am pleased to submit to you Genesis Energy’s Annual Report for 2011/2012, a financial year in which we demonstrated our business strategy – based on customer focus and asset optimisation – is delivering sustainable results, against a backdrop of volatile market conditions.
Our long-term business strategy is unique in New Zealand. We are focused on transforming Genesis Energy into the leading New Zealand energy company with our customers at the centre of the business. The Company plans to grow its fundamental value through optimising margins, reducing customer churn and using innovation throughout the business to achieve this.
While the Company is developing a range of new lower-cost and low-emission generation options and successfully gained resource consents for the Castle Hill Wind Farm on 11 June 2012, it is taking a more holistic approach to business development. The innovation and business development team is investigating a wide range of development options on both the supply and demand side of the business.
The Company achieved three significant milestones in the financial year 2011/2012. Firstly, the integration of the Tekapo A and B hydro assets (acquired in June 2011) into our generation portfolio was completed with full operational control of the stations moving to Genesis Energy in August 2011.
Secondly, we launched the Tomorrow Street advanced energy neighbourhood initiative. Tomorrow Street is a demonstration of our commitment to get closer to our customers and to develop a pipeline of innovative products and services that deliver true customer value.
Thirdly, and indicative of the Company's approach to stakeholder engagement and resource consenting, Genesis Energy secured renewed resource consents for the Huntly Power Station without a formal hearing being required or an appeal to the Environment Court being registered.
Strong financial performance
The Company is pleased to report a Net Profit After Tax of $90.25 million compared to the Net Loss After Tax of $16.6 million in 2010/2011. This is a strong result that endorses our strategy to derive the greatest value and efficiency from a generation fleet that is matched to our customer demand profile.
Revenues increased 24 per cent from $1,834.5 million to $2,270.2 million and Earnings before net finance expense, income tax, depreciation, amortisation, fair value changes and other gains and losses (EBITDAF) were up 34 per cent from $292.7 million to $392.6 million.
Revenue increased primarily due to higher generation volumes, higher wholesale electricity revenues, high gas sales in both the retail and wholesale markets and a stronger contribution from the Company’s 31 per share of production from the Kupe Oil and Gas Field. The gains in EBITDAF reflected higher wholesale prices and generation volumes, which were partially offset by higher wholesale electricity transmission and distribution costs and the costs of selling surplus gas contracted. arrangements with Kupe.
The improved financial performance was achieved against a backdrop of volatile wholesale electricity market conditions. The latter part of the year was characterized by low water inflows and low hydro storage lake levels. However, the financial year ended with a near return to average storage as several large rain events impacted both the North and South Islands at the beginning of winter. The variable weather also impacted our business as temperatures fluctuated from extreme cold to warmer-than-average conditions at times during the year.
Wholesale market conditions driven by hydrology and fluctuating demand are largely beyond management control. Therefore, the strategy of focusing on building long-term value for the business by creating value for our customers remains sound.
At the same time, the Company has the generation capacity and fuel reserves to capitalise on opportunities in the generation market. The geographic spread of its generation assets and diversity of fuel supply added to the Company’s ability to respond to varied market and weather conditions, and has underpinned the Company’s strong business performance.
In a year of intense competition for electricity customers, Genesis Energy has held its market share in the retail electricity market and experienced a slight decrease in the retail gas market. Its bottled LPG business continues to grow year on year with an annual customer number increase of 45 per cent.
Board and people
I would like to extend my gratitude to my fellow Directors, and in particular to the three directors who retired during the year: Nicki Crauford, Barbara Elliston and Denis Wood. During the year the Board met 12 times and participated in several workshops to consider the strategic future of Genesis Energy.
In order to develop and implement the Company's strategy, the senior management team has been augmented with new, high-calibre executives.
The future of Genesis Energy is assured. The Company enjoys strong and diversified earnings growth, has a highly disciplined approach to capital expenditure, well managed risks and a sound balance sheet with a BBB+ rating by Standard and Poor’s.
Genesis Energy, as one of the four State-owned energy companies that the Government has indicated will be partially sold down in the near future, continues to engage as appropriate with Treasury and the investment community in readiness for such as event and is well advanced in its preparation for partial listing. Genesis Energy remains committed to its current business plan and strategic direction with the intention of further building shareholder value.
Genesis Energy is pursuing a number of opportunities and innovations which will expand the diversity of the Company and provide stable and consistent earnings growth in the medium-to-long term.
Dame Jenny Shipley DNZM
“Transformation” is the main theme in this annual report and is also central to our business activities in the past year as we position ourselves for the future. We have been on a transformative path for the past 18 months but our journey towards becoming the leading New Zealand energy company is far from complete.
The transformation is about thinking from a demand-side point of view rather than from the supply-side, and this change applies to our generation plant and electricity traders as much as it does to marketers and customer service representatives.
The shift in mindset is about giving our customers the ability to make choices and the tools to control their energy consumption and save money.
It is also about providing a supply of energy to our customers at the lowest cost. We are determined to run our generating assets as efficiently as we can and, if we can purchase from others in the wholesale markets cheaper than it costs to run existing or build new plant, we will.
In April 2012, Genesis Energy was voted Utility Gas Provider of the Year and our subsidiary, Energy Online was voted Electricity Provider of the Year in the Roy Morgan Customer Satisfaction Awards New Zealand 2011. As this is an independent award based on customer research, this was particularly pleasing and indicated that our focus on customer experience is heading in the right direction. Another positive indicator was the 93 per cent customer satisfaction rating at the end of June 2012.
Holding market share
The electricity and gas market for domestic and commercial users has been characterised by intense competition between suppliers. New Zealand has one of the highest electricity customer churn rates in the world. Our business target is not to acquire customers for number’s sake, but to improve margins and to grow or at least maintain market share.
Genesis Energy’s electricity and gas market shares at 30 June 2012 were 26.6 per cent and 42.7 per cent respectively. Market shares for this period are slightly lower than the same period last year (electricity at 26.8 per cent and gas at 43.5 per cent). Our total customer churn for the year was 18 per cent.
Innovating for customers
We have embarked on installing Advanced Meters into our electricity customers’ properties – we have now more than 268,000 such meters installed in the properties of about 50% of our customers. The Advanced Meter roll-out provides the platform for the customer-focused strategy, much like a cell phone and network provides a platform for customer applications.
All customers with Advanced Neters can access their hourly, daily and monthly Energy Usage data through the My Account portal.
In a new collaboration with our customers, we are testing homeiQ in New Zealand households in a project called Tomorrow Street. Tomorrow Street is a way of involving customers in our business and giving them the opportunity to test things and tell us if they work, how we can make them simpler and most of all, if these innovations help them save money and energy. Tomorrow Street will be the home of some of the things we think the future of energy holds for New Zealand. Once we demonstrate the usefulness of those innovations, we will roll them out to the balance of our customers.
Optimising our portfolio
Genesis Energy maintains and operates its flexible, diverse and strategic generation asset portfolio on a commercial basis to maximise profitability and to meet customer needs. The geographic and fuel-type diversity of our portfolio is enabling the Company to operate a balanced business model and deliver consistent results despite the variety of trading conditions.
During the year under review, our total generation volumes increased 30 per cent and thermal generation from the Huntly Power Station was up 29 per cent. Renewable generation increased 32 per cent, reflecting a full year’s contribution from Tekapo A and B. The average wholesale price we received per megawatt hour increased 53 per cent from $59.67 to $91.10.
The addition of new baseload renewable generation has continued to impact the market, resulting in a significant excess of thermal capacity and the continued declining utilisation of the older Huntly Units 1 to 4, notwithstanding freequent dry conditions.
In February 2012, we announced that Huntly Unit 3 would be placed into long-term storage from the end of November 2012. The Company intends to keep the remaining Huntly Units available to meet market needs for as long as they are commercially valued.
A second Huntly Unit remains scheduled for entry into long-term storage in December 2014. However, we will maintain a degree of optionality over the storage schedule for the second Unit to respond to any changes in anticipated supply or demand.
Positioned for future
On 27 April 2012, Genesis Energy was granted replacement operating consents for the Huntly Power Station site by the Waikato Regional Council for a further 25 years. No appeals were received against the Council’s decision. Achieving the renewed operating consents for Huntly represents a significant achievement, as these consents authorise the full present output capacity from the site, which will support its continued long term role in supplying firm and controllable electricity.
Genesis Energy has a number of new generation developments in the pipeline, the highest profile of which is the Castle Hill Wind Farm project. Resources consents for the project were announced by independent commissioners on 11 June 2012. Subsequently, the Company has appealed certain conditions within the consents to the Environment Court, as have others.
Operational monitoring at the Tekapo Canal has been undertaken as a continuation of activity by Meridian Energy, previous owners of the Tekapo assets. This monitoring has indicated that the canal has deteriorated since August 2011, with new leaks appearing.
The Company views the Tekapo Canal remediation as a priority and has allocated in excess of $125.0 million for remediation work to address long-term stability and serviceability of the canal, as well as known occurrences of any leakages. The remediation programme is expected to be completed over a two-year period, and will involve two 14-week outage periods for the canal, the first commencing in January 2013.
Genesis Energy’s 31 per cent interest in the Kupe oil and gas field provides the Company with a strategic position in the gas industry and an important advantage when contracting fuel. This upstream integration strategy is consistent with the strategic approach of energy company peers in Australia and United Kingdom. The Company has contracted to acquire 100 per cent of the Kupe gas supply.
Kupe also plays a significant role in the Company’s overall financial performance delivering strong cash flows and an excellent return on investment. Kupe earnings provide the Company a potential buffer against adverse hydrological conditions and assist in reducing potential performance volatility.
Our People, Stakeholders and the Environment
The health and safety of employees remains the number-one priority within Genesis Energy. A strong safety culture and relentless safety leadership in Genesis Energy are key planks that support the Company's zero-harm philosophy. It is pleasing to report a 76 per cent decrease in our Total Recordable Injury Frequency Rate (see Our Workplace for details).
While this is a significant improvement, we will be satisfied only when none of our people are injured at work. We have recently introduced Zero Incident Process (“ZIP”) training for all staff to expand consideration of safe working practices to all the Company’s activities.
Genesis Energy intends to continue to support and add value to the communities in which it operates. This will include localised community sponsorships and initiatives. The Company also has a range of broad-based community initiatives which include the Genesis Oncology Trust, Schoolgen and support for four Curtain Banks.
During the year under review we agreed upon a major partnership with the Department of Conservation (DOC) to support and fund a five year National Whio (Blue Duck) Recovery Programme. This was the first such agreement that DOC has signed with a commercial entity and indicated the high quality relationship between the Company and DOC.
Genesis Energy seeks to have proactive and constructive relationships with iwi where we operate. Like all of the Company’s relationships, its engagement with iwi is based on trust and mutual respect. A joint funding application with Huntly iwi to the Waikato River Authority to clean up Lake Waahi was an example of the close relationship between Genesis Energy and iwi.
The 12 months to the end of June 2012 have been very busy months for Genesis Energy as we transform the Company into a leading energy business. In all sectors of the business, projects are underway to improve customer experience, reduce our costs, improve margins and create both supply and demand-side growth opportunities.
Low growth in electricity demand is expected until the end of the 2012 calendar year, with modest growth expected in 2013 and an improved outlook beyond. Strong levels of competition in the energy retail markets are expected to continue with high rates of customer churn over the near to medium term. Genesis Energy is working hard to reinforce customer loyalty and protect its market share.
The financial and business performance of the Company in 2011/2012 was extremely satisfying. It has been a strong year for the business and we have improved performance against a wide range of measures. Genesis Energy is well positioned to deliver similar and consistent earnings next year and is well positioned for the future.
- Financial Statements and Notes
- Corporate Governance Statements
- Board of Directors
- Leadership Team
- Performance against statement of corporate intent
- About this report
- Auditor's Report
- Statutory Information
- Global Reporting Initiative Disclosure Index
- Disclosure of Management Approach
- Assurance Statement
- Contact us with your feedback
We appreciate and value your feedback; if you have any comments or suggestions, please use the feedback form (above right) or contact Genesis Energy’s Public Affairs Manager on +64 9 580 2094
If you require a printed version of the Genesis Energy 2011/12 Annual Report please email email@example.com
Chairman - Rt Hon Dame Jenny Shipley DNZM
Dame Jenny has been Chairman of Genesis Energy since November 2009. She is Chairman of Momentum Consulting Group Limited, the Financial Services Council, Seniors Money International Limited and Mainzeal Construction. She is also a director of the listed fortune 500 company, China Construction Bank. She is a Director of Trans Tasman Resources. Dame Jenny was Prime Minister of New Zealand from 1997 to 1999 and in the preceding seven years she was a Senior Minister in the New Zealand Government and a driving force in the successful decade of economic and social reform in New Zealand. She retired from New Zealand politics in 2002. She is Chair of Global Women NZ and Co-Chair of Women Corporate Directors. She is an active member of the World Women’s Leadership Council and is Vice President of the Club of Madrid, a group of former leaders who promote democracy and transparent economic development, globally.
Deputy Chair – Joanna Perry MNZM, MA Econ (Cantab) FCA (ICAEW), FCA (NZICA)
Joanna Perry is a professional director and her current appointments include Director of Kiwi Income Property Limited, Trade Me Group, the Co-operative Bank, Rowing New Zealand and Independent Adviser to the Board of Tainui Group Holdings Limited. She is also a member of the Interpretations Committee of the International Accounting Standards Board.
Graeme Milne BTech (Biotech) (Hons)
Graeme Milne is a professional Waikato-based director. During his career Graeme was the CEO of a number of companies including what was at the time the largest dairy company in New Zealand and also, for a period what was the largest meat company in the country, the NZX listed Richmond Ltd. He has worked at various times in Germany, the UK and Australia. Graeme was a director of listed lines company Horizon Electricity Distribution Limited. for seven years prior to joining the board of Genesis. Currently Graeme is the Chairman of several New Zealand-based entities, including Synlait Milk, New Zealand Pharmaceuticals, and the Waikato District Health Board, and holds directorships in others including Farmers Mutual Group.
John Anthony Dell BCom (Hons), CA
John is a professional director and is an active investor in high growth businesses. John has significant experience in executive finance and strategic management having previously held executive positions as Chief Financial Officer and Chief Executive Officer of Tenon Limited (formerly named Fletcher Challenge Forests Limited) and as Chief Financial Officer of Air New Zealand Limited. Prior to his corporate roles, John worked for international accountancy and consultancy firm KPMG. John’s current Board appointments include Viridian Glass, Higgins Group Holdings, Perpetual Capital Management, EGS Investments (formerly Euroglass) and Unimarket.
Rukumoana Schaafhausen LLB
Rukumoana has practised as a lawyer for a number of years specialising in the area of governance. She previously worked for a large-scale property development company. She is an executive member of Waikato-Tainui Te Kauhanganui Incorporated, Director of Regional Facilities Auckland Limited and Trustee for the New Zealand Centre for Social Innovation.
John Leuchars ME, BCA, FIPENZ
John is a professional company director. He was a consulting engineer who held director and managing director positions in international consulting engineering companies for 30 years. These included being Managing Director of Connell Wagner (NZ) Limited (now Aurecon) and of Connell Mott MacDonald Limited, London. He has experience in a broad range of industries including the design of power-generation projects in a hands-on design role or at a governance level. He is currently a Director of New Zealand Rail Corporation (KiwiRail).
Andrew Clements BCom
Andrew, known as Clem, is an investor and professional director. He is currently Chairman of Orion Health, New Zealand Assets Management, Amadeus Asset Administration Limited and Revera. He is a director of NZX-listed Ryman Healthcare and The New Zealand Refining Company and RDGP. He is a member of the IOD. Clem was Managing Director of Emerald Capital Limited, a Canadian-owned investment company, from 1998 until 2008. Prior experience included nine years with Goodman Fielder Wattie Limited in various financial and general management positions in New Zealand and Asia, following corporate money market and foreign exchange positions in New Zealand and London.
Robert Fisher ONZM LLB DIPTe - Retired 20 August 2012
Rob was engaged under contract to the Auckland Transitional Agency (ATA) as General Legal Counsel. Rob is General Counsel of Watercare Services Limited. Prior to taking up the position with ATA, Rob was a partner in the Local Government and Environment workgroup of Simpson Grierson. He was Chairman of the firm for 10 years until 2009. Rob has provided strategic advice and expertise to both private and public bodies in the consenting of large infrastructure projects.
Alison Andrew BE (Hons), MBA
Alison has held leadership positions in industries that include chemicals, dairy, paper and forest products, and oil and energy. She has deep experience in operating businesses, growing businesses and turning businesses around. Based in Auckland she is the General Manager of Orica Chemnet NZ, a role she took on in October 2009 after almost two years as CEO of Lexicon Systems Limited, an Australasian marketing and advertising company. Previously she held a number of senior executive positions at Fonterra Co-operative and Fletcher Challenge.
Albert Brantley - Chief Executive - BSc, PGeol, FAuSIMM
Albert is responsible for the overall management and strategic direction for all of Genesis Energy’s business interests. He also serves as Chairman of the Genesis Oncology Trust and Chairman of Energy Online. His background has largely been in heavy industry, including oil and gas infrastructure development as well as the mining and power sectors. He has had more than 35 years’ experience both in New Zealand and internationally in technical, operational and senior management positions, concentrated particularly in the power industry over the past decade. He has had considerable experience leading businesses requiring political, regulatory and environmental management, both in New Zealand and overseas.
Andrew Donaldson - Chief Financial Officer - BMS, ACA
Andrew is responsible for managing the financial aspects of the Company along with associated risks and strategies. He has had a significant international career in leadership, including executive roles in both New Zealand and the UK, and also serving as a Director on a number of companies. Andrew was previously Chief Executive of Brightstar NZ, the largest mobile logistics and supply chain company in the world, having established their New Zealand operations. Other roles included Chief Financial Officer of Telecom Retail and Finance Director for multinationals such as Tiscali UK and Atlas Venture UK.
Michael Fuge - Chief Operating Officer - MCom (Hons), BEng (Hons), MIPENZ
Michael has taken overall responsibility for the operational divisions of the Company, including Energy Management and Customer Experience. In this role, he leads trading, generation and service delivery of energy and energy solutions to Genesis Energy’s customers.
Maureen Shaddick - General Counsel and Company Secretary - LLB, BA
As General Counsel, Maureen is responsible for management of the provision of legal services to Genesis Energy and legal compliance and regulatory support. She is the Company Secretary of Genesis Energy and Deputy Chair of the Genesis Oncology Trust.
Sheridan Broadbent - General Manager People and Transformation - BCom, MInstD
Sheridan’s role includes the management of information services and business improvement, Genesis Energy’s recruitment, development training, NZQA training, e-learning and performance, employee relationships, payroll services, health and safety, quality systems, remuneration and internal communication.
Nick Thomas - General Manager Strategy and Business Development - BA (Hons)
Nick manages business development, strategic and sustainability teams. He is also responsible for driving the strategic direction and execution of the business plan for Genesis Energy. In this role, his team leads the development of new generation, business, product and partnering opportunities for the Company.
Dean Schmidt - General Manager Corporate Affairs - BA (Hons)
Dean’s role includes management of Genesis Energy’s government relations, regulatory affairs, public relations, corporate brand, and community investment programmes. He joined the Company in August 2012 from a similar role at Television New Zealand.
Audrey Scheurich - General Manager Finance - BMS, CA
Audrey is a member of the New Zealand Institute of Chartered Accountants and was recently appointed the General Manager Finance to lead the financial and management accounting teams supporting the business. For the past seven years Audrey has been responsible for the financial reporting team and has been in senior secondment roles within the business.
Jamie Reid- General Manager Customer Delivery - CA
Jamie is responsible for the delivery of the customer experience at Genesis Energy. His role includes the management of all facets of customer service from the Contact Centre and Billing through to commercial relationships with network companies and third party service providers. APPOINTED TO LEADERSHIP TEAM ON 1 JULY 2012
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