Genesis Earnings Face Headwinds in Fiscal 2024 but Strong Medium-Term Growth Expected

Genesis operates a mix of thermal (coal and gas) and hydro generation, with total annual production of approximately 7,000 GWh. The company's hydro generation provides it with low-cost generation during times when there is sufficient rainfall and/or snowmelt. Conversely hydro generation can fall sharply when inflow to the firm's lakes recedes because of insufficient rainfall. During such times, production from its thermal power plants can be ramped up to make up for the shortfall in hydro generation. Spot prices can increase dramatically during periods of low rainfall, reflecting the demand-supply mismatch caused by lower nationwide energy output. Such times tend to favor Genesis as the excess generation is sold at higher prices. Consequently, Genesis' profitability and margins can increase during periods of low rainfall and high electricity prices.