Latest / Best of Business / Malcolm Johns: Genesis Energy CEO on what the latest operating reports mean for the winter season

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Malcolm Johns: Genesis Energy CEO on what the latest operating reports mean for the winter season · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk zed B.
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  Speaker 2: Let's go to some operating reports from power companies. I
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  Speaker 2: know how sexy does that sound? Don't worry. It is
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  Speaker 2: been some very interesting tidbits in the latest reports from
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  Speaker 2: both Contact and Genesis. First interesting thing is water hydro
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  Speaker 2: storage up, meaning we've got good supply to power the grid.
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  Speaker 2: Second interesting thing prices, not necessarily the retail price, but
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  Speaker 2: Ford prices falling by as much as fifty percent in
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  Speaker 2: the past two weeks. What does this mean? Malcolm John's
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  Speaker 2: is Genesis Energy chief executive with me tonight, Malcolm, Good evening.
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  Speaker 3: Good evening. Operating reports are always sexy, Ryan.
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  Speaker 2: You have to say that, you have to say that, Hey,
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  Speaker 2: tell us what's going so? Hydro is this? Are we
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  Speaker 2: in a better position than we would normally be?
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  Speaker 3: Yes? The short answer is yes. We've had fairly consistent
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  Speaker 3: rain events in the key catchments since really the end
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  Speaker 3: of spring last year, and we started Lake Tekapo in
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  Speaker 3: November because it was at its maximum, and others around
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  Speaker 3: the system are also in a position now where they're
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  Speaker 3: having to spill their lakes as well, so it's a
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  Speaker 3: regularity of rain. Notwithstanding the rain event that's just been
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  Speaker 3: through the Upper North Island over the last twenty four
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  Speaker 3: hours or so, it's the consistency of the rain events
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  Speaker 3: that have led to the position we're in.
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  Speaker 2: Does that mean that we're going to be all good
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  Speaker 2: for winter?
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  Speaker 3: Look, basically, it's between six and eight weeks between a
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  Speaker 3: wet and a dry sequence in New Zealand, so we
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  Speaker 3: don't store an enormous amount of water. Less than five
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  Speaker 3: percent of our total annual demand is stored in water,
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  Speaker 3: and so it really depends on how it rains over
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  Speaker 3: the next three to four months. But the key thing
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  Speaker 3: is the reserve fuel positions are very healthy. Gas storage
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  Speaker 3: is near the top of its capacity and the coalstock
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  Speaker 3: pilot Huntley is sitting well over a million tons now.
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  Speaker 3: So not only do we have our primary fuel position,
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  Speaker 3: but we have our reserve fuels in very good positions
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  Speaker 3: as well.
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  Speaker 2: And the Huntley sorted for ten years right.
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  Speaker 3: Yes, the contracts that we signed with the other gent
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  Speaker 3: tailors means that the investment in the ranking units to
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  Speaker 3: extend their life out to twenty thirty five is now
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  Speaker 3: well underway.
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  Speaker 2: Good now, as you're talking. Lots of people are texting
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  Speaker 2: Malcolm Michael says Ryan every January. The lakes are always
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  Speaker 2: spilled in order to drive the prices high for winter. True, no,
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  Speaker 2: so what's going on.
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  Speaker 3: The volume of water. We have both minimum and maximum
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  Speaker 3: operating ranges for the lakes. The maximums are driven by
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  Speaker 3: the Hyder dams, and most engineers will tell you that
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  Speaker 3: water spilling over the top of dams in an uncontrolled
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  Speaker 3: way is quite dangerous for the stability of the dam,
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  Speaker 3: and so the spill ways are put in place so
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  Speaker 3: that when you meet reach the maximum that you have
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  Speaker 3: to start spilling the water. And so we didn't spill
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  Speaker 3: last summer, and I don't think we spilt the summer before.
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  Speaker 3: But this year we are.
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  Speaker 2: So we've got water in the lakes, We've got Huntley sorted.
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  Speaker 2: What's going to happen to prices spot prices this winter.
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  Speaker 3: Well, the forward curve is indicating quite a retreat from
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  Speaker 3: where we've been in the last couple of winters. And
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  Speaker 3: the reality of the New Zealand pricing system is that
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  Speaker 3: over a short short period six to twelve months, you know,
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  Speaker 3: hydrology and the amount of rain we get when we
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  Speaker 3: get it as a huge driver of those those spot prices.
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  Speaker 2: Did you pay any attention? Do you pay any attention
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  Speaker 2: to what's happening in New South Wales? You know the
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  Speaker 2: big well, their biggest power plant, cold fired power plant
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  Speaker 2: over there, they're extending the life for two years.
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  Speaker 3: We certainly do pay attention to those. And we have
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  Speaker 3: to remember in New Zealand that you know, we've just
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  Speaker 3: extended the life of Huntley's coal generation by a decade.
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  Speaker 3: And the reality is that as a small nation where
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  Speaker 3: our weather is highly correlated, you know, we don't store
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  Speaker 3: enough water for the lakes to be able to last
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  Speaker 3: long periods of time without rain, and so we do
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  Speaker 3: have to have a reserve generation system and Huntley's the
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  Speaker 3: majority of that, It's about seventy five to eighty percent
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  Speaker 3: of that.
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  Speaker 2: What's the situation with gas? I mean, and everyone says
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  Speaker 2: we're running out and that we might lose a field
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  Speaker 2: or two in the coming year. What's the situation and
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  Speaker 2: what do people need to do to prepare for it?
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  Speaker 2: What are you saying?
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  Speaker 3: Well, gas plays two roles in electricity. One is baseload
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  Speaker 3: or consistent generation, and the second is backup generation for
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  Speaker 3: cold winter nights and dry periods and the like, and
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  Speaker 3: with the amount of renewables that all the companies in
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  Speaker 3: New Zealand, the building baseload gas generation is in decline
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  Speaker 3: and will ultimately reach an expiring point sometime between now
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  Speaker 3: in twenty thirty or twenty thirty two. But the need
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  Speaker 3: for gas as a backup generation fuel for cold winter nights,
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  Speaker 3: low wind periods and low rain periods remains. I think
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  Speaker 3: the gas situation remains challenging. There's no two ways about that.
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  Speaker 3: It doesn't matter whether you're generating electricity, you're an industrial
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  Speaker 3: or a home user. The reality is that the availability
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  Speaker 3: of gas is becoming less and that's having an impact
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  Speaker 3: on the price of it.
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  Speaker 2: Malcolm, appreciate your time. Always good chat. Malcolm John's Genesis
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  Speaker 2: Energy Chief Executive with us tonight.
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