Genesis Energy: Lower Earnings as Normalizing Rainfall Offsets Higher Retail Prices

Genesis Energy's September-quarter update shows it is tracking broadly in line with guidance for fiscal 2024 EBITDA of NZD 430 million. We estimate that September-quarter EBITDA was about 12% below the previous corresponding period, excluding insurance proceeds relating to the Huntly power station outage. We maintain our earnings forecasts and NZD 2.60 per share fair value estimate. The narrow-moat-rated firm's share price is down nearly 40% from early 2021 highs and now trades at a small discount to our valuation. While the forecast dividend yield of 7.2% appears attractive, Genesis faces long-term earnings headwinds from the gradual depletion of the Kupe oil and gas field and the closure of coal and gas power stations. Overall, we forecast a five-year EBITDA CAGR of negative 2%.