Renewables incentives are tailwinds for Genex

By 2030, Victoria, New South Wales, and Queensland are all aiming to source 50-60% of their power from renewables. At the moment, however, only around 20% of the eastern states’ energy is renewable. In order to hit those lofty targets, the sector will need substantial private investment, and the state governments are getting the ball rolling through billions of dollars in incentives.

Genex Power Limited (ASX: GNX) is a renewable energy company that is “well-placed to benefit from those strong tailwinds”, said Genex’s Executive Director, Simon Kidston during Reach Markets’ The Insider webcast.

Genex has already constructed two solar plants at its flagship site in north Queensland, Kidston Renewable Energy Hub. The focus is now on building a hydroelectricity plant at the same site. The project is set to generate steady cash flow thanks to a government contract that means Genex will sell the electricity at a fixed price over the project’s 80-year lifetime.

“So far we’ve achieved $1 billion of project funding which goes to the point the business now has scale and diversified revenue streams which really built a really robust business that enables us to take it to the next phase of growth,” said Kidston.

Ed Prendergast, Senior Fund Manager from Pengana Capital Group, has been watching Genex since before it was listed. The fund recently invested in the company. 

Pengana Capital Group is careful to invest only in companies that are set-up to perform well regardless of market conditions.

Being an essential infrastructure company armed with a very predictable cash flow coursed from long-term government contracts, Genex ticked all of the fund’s boxes. 

“We think once it’s built, over the next year or two, it will make $40 or $50 million every year, and it will support a dividend yield of well over 10%,” said Mr Prendergast.

“We think the market is taking a wait-and-see approach to see it getting built. We’re happy to invest ahead of that because we’ve ticked through that the risks have actually largely passed,” he concluded.

Click here to view more videos from Ed Prendergast’s ‘Meet the Fund Manager’ session, or click here to view the full ‘ The Insider: Meet the CEOs’.

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