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Genesis Energy Limited, well in line with the long term strategy

Team Veye | 21 Jan 2021 ASX - GNE
Genesis Energy Limited, well in line with the long term strategy

Genesis Energy Limited (ASX: GNE)

Genesis Energy Limited (ASX: GNE) on 9 December 2020 presented its strategy on Stakeholder day.

Highlights

GNE has performed well and maintained the positive momentum between FY18-FY20

  • Reduced cost-to-serve from $160 to $140 per ICP
  • Expanded LPG business, now #3 with 26% market share
  • Increased the proportion of dual fuel customers from 20% to 25%
  • Digital interactions increased from 47% to 65%
  • Maintained market share: 23% of electricity ICPs and 35% of gas ICPs
  • Reduced net churn from 18.8% to 14.8%
  • Grown Retail EBITDAF from $110m to $134m

(Chart source: TradingView)

The strategy plan spans two horizons

Horizon 1 – FY22 to FY24 & Horizon 2 – FY24 and beyond

Key Goals for FY22-FY24

  • Uplift total Retail EBITDAF Uplift to $15 million by FY2024
  • Grow by 3900 ICPs
  • 2% churn reduction
  • +7% growth of SME book (elec & gas)
  •  Volume increase by 35%
  • Create residential experiences that build customer loyalty
  • Grow our market share of small business customers
  • LPG #1 or #2 in every region
  • Unleash Energy Online in the tier 2 market Design products for emerging energy management needs
  • Invest in technology and data to create consistent and distinctive end to end customer experiences

 

Key metrics by 2030

  • 2650GWh of new renewables displacing baseload thermal
  • Secure110TJ/day gas flexibility through contracts and20PJ storage
  • Emissions abatement from forestry with 500,000 tonnes of carbon credits
  • Improved plant efficiency and MW capacity

On 27 November 2020, the company had undertaken a strategic review in relation to its interest in Kupe.

  • Genesis holds a 46% stake in the Kupe oil and gas field. The asset has attractive cash flow and a strong growth outlook.
  • The Kupe joint venture is now considering further development, including drilling an additional well and further exploration, which changes the risk and opportunity profile of the asset for Genesis.
  • The board considers it an appropriate time to review Genesis’ ongoing ownership of its 46% interest in Kupe.
  • The review will take into account varied factors including the returns and risks of a potential drilling programme, the optimal capital structure for the Company and whether there are more strategically aligned capital investment opportunities.
  • The Board will assess whether to continue with the ownership or a sale, whichever is in the best interest of shareholders
  • The outcome of this strategic review will not impact its ability to maintain the current level of dividends or our long-term contractual rights to all gas associated with the Kupe asset.
  • An announcement regarding the outcome of the review is being targeted for mid-2021.

Strategic partners Genesis Energy and Tilt Renewables made an announcement on 17 November 2020, regarding the Waipipi windfarm in South Taranaki. It has started generating 100% renewable, zero-emissions electricity to the national grid. Once fully commissioned Waipipi’s 31 wind-turbines will generate 133.3 megawatts and produce an expected 455 GWh per year. (Data Source – Company Reports)

 

Veye’s Take

GNE is well on track for the $400m target set in FY16 with its consistent focus on growing smaller segment markets and investing in technologies to create a distinctive customer experience. The stock is maintaining the uptrend from the month of September and making a “Higher High” on the price charts. The stock experienced a minor bearish move with RSI pointing to negative divergence. MACD holding strongly in positive territory and RSI at the levels of 60 along with price above major EMA’s indicate upside potential in near term. Veye maintains a “Hold” on “Genesis Energy Limited” at the current price of $3.41

Disclaimer

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