Good day, and welcome to the Fiscal Year 'twenty one Half Year Results Briefing Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mark England. Please go ahead, sir.
Good morning and welcome to Genesis Energy's half year result presentation for the financial year 2021. You've got myself, Chris Jewell, our CFO here and Steve McSweeney, Investor Relations and a number of others listening in. I'll take you through the first couple of slides, hand over to Chris and then come back and talk about operational and strategic updates. Today, we have the pleasure of delivering a really strong first half result to you, which we're extremely pleased with. There are some market headwinds ahead, but we're confident of beating the strategic EBITDA goal of $400,000,000 that we set out to deliver in 2016 and as you'll have seen upgrading our guidance for the full year this morning.
If I can start with Slide 4 and just cover some of the highlights from my perspective, I won't leave it all. In summary, the business has come a long way in the last few years. We've turned ourselves into a resilient and technology focused company, always seeking new and innovative ways of engaging our customers, operating our assets and working smarter. Amongst the retail highlights, many of these are attributed to the embedded in the business as it continues to innovate and become more efficient. Many of the successes we're calling out today were started a number of years ago and we're seeing the fruit of that labor and really pleased with the hard work that many Genesis people have put into it.
Of note, customer uptake of our digital tools continues to develop and we're giving them more control of their energy and more things they can think about around how they control their home or their business. As of January, we had more than 229,000 customers using our app, which doesn't seem very long ago. When we relaunched it, we were just up to 100,000. And Energy IQ has now become the tool that many of our customers use to engage themselves in their energy way beyond just looking at their bill at the end of the month. Energy IQ's tip center which gives customers idea to reduce their energy usage has had more than 380,000 interactions since July 2020.
And we're also significantly improving our customer care packages and processes resulting in lower bad debt. In fact, that's probably one thing we're most pleased of coming off the back of COVID last year. It was a catalyst for us to double down on our efforts to support our customers who are struggling, some of whom had really good payment histories and then had short periods of pain. And the program we call Menaki Kennehy, we've worked with them and with government agencies to be fair, he deserves some of the credit for it to make sure that they stay with us, remain loyal and we help them through difficult times. This half, we've also seen the benefits of some long term planning investment come through on several fronts, notably in our wholesale division, which puts us in a strong position for the future.
You'd have noticed that we've put a significant investment into the Tekapo intake gate this year or last year. That's now finished and complete, giving us a level of seismic protection that we've just never had and Tekapo has never had since inception. While we were doing that, we did a number of improvements to a number of different generators and units across the Tekapo scheme and it's now in great shape and running at full pelt right now down in South Island. So really pleased with the effort that our people put into that. And also as we may have called out last year, worked through COVID alongside contractors to make sure we get the work done in good time.
Also very proud of the Waipi wind farm, which is the first energy to the grid late last year and is now fully online. That's adding an extra feather in their portfolio for us and enabling us to have more renewable energy in the system and displace or would otherwise be carbon emitting energy. We've also started the rollout of advanced gas meters, which we're proud of. It's a nice retailer in New Zealand to do that. And that's been an investment that we've been working on for a couple of years, which will start to give gas customers the same insights electricity customers have.
And you'll have noted we made a recent announcement about an investment in Ecotricity, which is New Zealand's only 100% certified renewable electricity retailer. It will be an arm's length arrangement for us. They will continue to operate independently and some of you who know them may have some questions later on it. As a side say, our EBITDA for the half was $217,000,000 and impact was up to 53,000,000 dollars Cash flow is down versus sorry, cash flow is also up versus the same comparable period and net debt and EBITDA interest costs are down. So and altogether, great result, which we're very proud of and Chris will take you through it in more detail shortly.
If I could just direct you to Slide 5 briefly. Just want to make the point that we're planning for the future too, not just sitting there enjoying the fruits of the last 4 or 5 years labor and we see ourselves playing our role to empower New Zealand's sustainable future. Partnerships with companies like ETRICITY, the RFP process around future gen to build new renewable options and many other activities are part of that today. And you'll have noted that the RFP that we've talked about in market for 1,000 gigawatt hours of renewable generation options will be assessed over the next few months and we're reasonably optimistic that there are plenty of opportunities out there to continue to displace our base of thermal, while also empowering us in a sustainable future by standing up for the need for backup thermal to backup as reliable stable electricity market that can help the economy decarbonize in other areas. We've been prepared to back up our Future NIM program with a bold commitment around carbon emissions to the science based target.
I'll talk about that a bit later. And we just we've committed to removing at least 1,200,000 tons of carbon annually by the time we've delivered our FutureGen program and in meeting that science based target for 2025. You'll all know that that target is internationally recognized and verified. So it's not something we just came up with and we didn't announce it until we were reasonably confident that we knew how we were going to deliver it, albeit we've got some new build projects that we need to work with partners to get up and running in order to actually fulfill it. I'll touch on some of that more in detail on the strategy section.
In the meantime, though, I'd like to hand over to Chris to talk you through our financial results in more detail.
Mark? So I'll start on Slide 7, the half year financial summary. This just summarizes all of our key metrics and we'll dive into the drivers of each of these in a bit more detail. But just to repeat at a headline level, EBITDA is $50,000,000 up on the prior comparable period. NPAT underlying earnings, operating cash flow, free cash flow, all up on TCP and net debt is $65,000,000 down on PCP.
Operating expenses are slightly up as is capital expenditure for good reason and we'll talk to those. So Slide 8, dividends. This covers our dividend history and puts in context a half year dividend announcement. Today, we announced a half year dividend of $0.086 per share, which is half the FY 2020 full year dividend and a similar trend to what we've done over the past 4 years. It's also consistent with honoring our dividend policy of growing dividends in real terms over time.
The dividend remains 80% of the unit and we continue to pay a supplementary dividend to non New Zealand residents to ensure tax equalization. Notably and importantly, the dividend as a percentage of free cash has reduced to 56%. This year, we, USHaki, have decided to suspend the dividend reinvestment plan. This has been an important tool for us over the past 3 years in raising some capital to support our balance sheet following the acquisitions in 2017. The recovery of our payout ratios as we had anticipated and also our balance sheet metrics directors felt now was the right time to suspend this plan.
So Slide 9, half year EBITDAF. This just breaks down the improvement in EBITDAF between the various segments, but it also shows the EBITDAF trajectory since our IPO in 2014. Whilst half year is 50,000,000, it is worth noting that the half year 2020 had some one offs that dampened that result. So more importantly for us is the trend since the IPO. And half year 2021 shows a $38,000,000 increase since our IPO.
And I would say this increase has exceeded our expectations and has been delivered through value uplift in each of our segments. So if I flip to Slide 10, looking in a bit more detail at each segment. So our retail segment includes all our sales of electricity, gas and LPG customers and also those now purchasing energy services. And here we saw a $24,000,000 uplift on PCP. This has been driven by a lower cost to serve, a lower cost to deliver, improved pricing and pay the volume growth in LPG sales.
The wholesale segment covers all our spot market activities and all of our wholesale sales to large customers and some of our competitors. And we're now through the peak of commodity pricing and our weighted average fuel costs are falling, the predictiveness, and it will continue to fall with the roll off of large gas contracts from the 1st January 2021. This affects both margins on sales contracts and the cost of fuel for our thermal plant. Combined with the very strong plant reliability and in a contribution from the Waipipi wind farm, our wholesale segment has seen an uplift of $23,000,000 on PCP. Lastly, CUPE has seen an uplift of $7,000,000 on PCP, largely due to not having a significant planned outage this year as a result of gas sales.
As a result, gas sales were up 16%. But importantly and again, very pleasingly, plant reliability at Coupe remains a standout, 99.1% availability through that time for Coupe. Turning to slide 11, NPAT and underlying earnings. This breaks down the improvement in NPAT and NPAT does show a similar trend to EBITDA. The majority of the $44,000,000 improvement in NPAT relates to the improvement in EBITDA.
However, there are also 2 other very important contributors to NPAP. Net finance costs, I. E, our borrowing costs are down $7,000,000 due partly to reduce debt, but largely due to lower interest rate environment flowing through our average cost of debt. Our legacy higher cost debt continues to roll off. And this year, we launched a commercial paper program, which allows us to offset or offer short term debt to the markets, typically 90 day debt at a deep discount to our bank debt.
And as of 30 December this year, we had $150,000,000 of commercial paper on issue. The second factor that relates to India being up is the coupe depletion charge. In this half, we announced a 21.5 petajoule reserve upgrade for Kupe. The field is expected to last longer than previously expected and this is the 3rd significant upgrade over the past 8 years. The impact of this is that we deplete the balance of the remaining reserves at a slower rate.
Just looking at the underlying earnings, we monitor underlying earnings as a better measure of our profitability as our reported NPAT numbers regularly hear noise resulting from changes in forecasted asset values. And this year, we did have another asset revaluation, which we do tend to have given assets asset values are based on a long term outlook of pricing or prices. But the key differences in impaired and underlying earnings are fair value adjustments that flow through the CFEs and asset values. So flicking to slide 12, controllable operating expenses. They are up $9,000,000 on PCP.
The key drivers of this increase include cyclical investment in generation maintenance projects. So as a consequence of having a few more outages, particularly around Teekapo, we've managed to push through some important maintenance projects at that time as well. Insurance premiums are increasing right across the sector and we have seen that also for Genesis. We do have some costs for the CUPE strategic review. And we also continue to invest more money in a number of our strategic initiatives including standing up our FutureGen program.
We also have taken another provision or taken a provision for reinstating leases and the termination of the Mary Mary lease. So looking at Slide 13, capital expenditure. We do distinguish our capital expenditure between stay in business and growth. A number of very important projects were undertaken this half, and it's pleasing to report that the $26,500,000 Pequipour 8 gate project was completed. This was a significant safety upgrade to reduce asset staff and community exposure to seismic risk.
Additionally, Unit 2 at pickable B was upgraded to restore its design capacity after a number of years of below design output. And the upgrade also resulted in efficiency uplift of 2.5%. We continue to invest in projects that create growth also. The Kupe compression project is well underway and due for completion in the Q1 of financial year 2022. We've also commenced the rollout of advanced gas meters, which is a project that's had been a number of years in the making and will allow us to start to deliver a similar level of insight to our gas customers that our electricity customers have been enjoying for some time.
Additionally, this will allow us to more fully integrate the gas and electricity experience. We've also invested in software that allows us to optimize LPG delivery routing. The LPG business continues to transform from what was largely in manual operation to a more sophisticated digital operation. And our new dispatching technology has been critical in allowing us to remove over a 1000000 pieces of paper out of the LPG delivery network and also supporting a 13% productivity increase in delivery volumes versus the prior year. So looking at Slide 14, capital structure.
The strong improvement in EBITDA from subsequent reduction in debt is transitioning our balance sheet back into a zone that provides us future investment options. This has been predicted for some time, so it's not a surprise. Debt to EBITDA is now 2.5%. And importantly, Santa De Pors reaffirmed our BBB plus rating in February 2021. Importantly, our interest costs continue to decline, and we are increasingly able to take advantage of lower interest rates.
So I'll hand back to Mark, who'll talk a little bit more about the operations and strategy before we come to our outlook and guidance.
Thanks, Chris. So Slide 16 on our flexible generation portfolio. The portfolio demonstrated consistent and yet diverse generation this year. It's great to see as we've said YPP come into the portfolio driving lower carbon and lower cost energy in and driving some thermal generation out. We did end the year on lower storage in the prior year.
However, we had some massive rainfall late in December and that's why you see some of the PCP difference. We use a bit more water in the prior year despite the low inflows. As we moved into this last 6 or 7 weeks, the first part of the second half, the trend has continued. We've got a very dry South Island and a dry North Island. However, we are relatively well positioned in South Island because of our outages last year.
The Teckle Pool scheme is relatively well stocked compared to many other South Island lakes. The introduction into the market of a 3rd ranking unit from this week until the end of September in various capacities is recognition of the ongoing constraints on gas and hydro in New Zealand. And we are a little bit worried about winter, but we feel reasonably well prepared. And we think the 3rd ranking despite the trauma of the additional emissions it creates is the right thing for the New Zealand market. Looking to 2017 and talking about fuel and carbon related to that, stockpile costs have fallen, which is a big driver of the year over year improvements Chris has said.
And we've been able to take advantage of some of the cyclical lows in coal costs and we ended the year with a stockpile around about 500,000 tons, which I think was a record high. However, we do expect international coal prices to increase. They already have some extent. And as we bring more in at the following months, we will end up with a higher weighted average cost of coal going into FY 2022. The wholesale gas sales roll off much predicted, we've been talking about that for a number of years is happening and that's turning a headwind into a tailwind for the Genesis P and L and we expect that to continue through FY 2022 and 2023.
And then just a note on our carbon hedge position, that the it's fully hedged until pretty much fully hedged until 2025. Price is well below market. The current market price of carbon is 39 dollars and Genesis always retains the opportunity to use the fixed price option for our 2020 emissions, but we've made no decision to do that at this stage. I could flick you to Slide 18. Message here is that positive financial impacts come from being cracked with customer care.
As I touched on earlier, COVID was a catalyst for us to double down on our efforts. We've worked collaboratively with multiple government agencies on this And the team is really proud of how they've supported customers through difficult times. And that can be they were in situations where our customer was a particularly good payer for a number of years and then came across some difficult personal circumstances, maybe due to COVID, maybe not. And we've supported them by keeping them paying, but helping them spread their payments out over longer. The outcome of that is greater loyalty and in the end, less disconnection and less bad about the debt.
So you can see the trends on the right hand side and moving in the right direction. Brand net promotion score, which is not an interaction score, but it's asking a group of random customers the chances and or the likelihood of them recommending Genesis, that took a bit of a dip in Q1 FY 2021 after being at a high during the COVID lockdown period, but it's now ticking back up again and we're looking forward to that continuing to rise. Quickly on to Slide 19. Again, better customer service at a lower cost and the message is clear. We've shown you these 2 charts a
number of
years in a row now and we continue to invest in digital interactions over manual interactions and we continue to increase the proportion of digital interactions. Our retail vision of being first choice for energy management is always about engaging customers, but of course when we engage customers, we want them to be seamless digital experiences that don't have a high cost to serve. We continue to invest in that while also removing the pain points and the things that cause customers to call us. And that have a high cost to serve where we may have got it wrong and we haven't made the experience great for them. So a lot of work to go into that.
And if you flick to Slide 20, we're showing you a breakdown of our churn numbers between Genesis and EOL, which I think is the first time we've shown it in that detail. And you can see churn has ticked up a little bit in the first half of twenty twenty one. So we're keeping an eye on that. There's a number of factors to that, including the fact that during the COVID lockdown churn fell across the market. So that second half FY twenty twenty is probably unusually low.
But nevertheless, we're keeping an eye on churn and we're investing back in and I'll share in the strategy slide in a second into improving the experiences customers receive as they join us and when they move house, so that we give them less reasons to shop around and less reasons to consider leaving. Unlike our competitors, we continue to show 2 types of churn, gross churn and net churn. Everyone else just reports net churn. The gross churn for us is a really important metric because it tells us how many or what percentage of our customers consider leaving Genesis even if we convince them to stay or they don't leave in the end. And so it's a harder measure, but it's one we keep our eyes on because every interaction up to the point they consider leaving whether it's through a home move journey experience or another is a cost to us and we're focused on minimizing those costs as you can see.
On Slide 22, we continue to drive value in the portfolio in retail and you've seen that through the net backs. You can see a breakdown here slightly different how we sent you in the past showing the sales volume over the last three halves and the net back as a consequence. Of note on the top right hand corner is the C and I net backs and the C and I volume. We took a very rational approach last year to pricing C and I customers and made sure that we were rational from an ASX perspective. We have a relatively balanced portfolio from a generation to retail perspective.
We're not long generation except sometimes in high wholesale price markets. And so we always price our AR, C and I customers to an ASX forward curve, Very rational, but with our energy services proposition and the relationships we've built over the years, we're able to sign more customers back up at regional margin. And so we're proud of that progress. Ups and downs across residential and SME as you can see and of course the charts here in electricity. But as you can see from the 3rd bullet point, both LPG and gas netbacks are also up across the board.
Moving on to the strategic outlook and I've mentioned our purpose and those of you that attended our stakeholder day in December would have heard that in spades. We entitled the conference Empowering New Zealand's sustainable future, but we knew that was our emerging internal purpose for our employees. And when we talk about empowering Usuna's sustainable future, what's important to us, you can see on Slide 23 is it's not just about the macro environment, it's also about many other things. We've chosen 5 of the UN Sustainable Development Goals to focus on. Some of the activities underneath them will be familiar to you, some of them won't be.
But across the board, we see employees increasingly engaging with that purpose around some of these initiatives. Some of them are obviously focused on climate change, but others are focused on maintaining our right to operate in the areas we work, ensuring that our employees are treated fairly, whether it's through the gender pay gap program we have or whether it's living wage and making sure that we're partnering, particularly that blue one number 17, with other organizations out there to achieve outcomes that we couldn't do on our own and they couldn't do on their own, but together we can actually achieve more. So a number of things going on here, I won't dwell on them all now, but the point of the slide is to point out when we say we're empowering New Zealand sustainable future, it's a broad based purpose, not just climate change focused. However, as you can see on Slide 24, as you have been picked up in December, we have committed to a science based carbon reduction target, which will limit is tied to limiting global warming to less than 1.5 degrees Celsius. It's a bold goal.
We picked 2025 as the year we will have delivered it by. We didn't sign up to it without any insight as to how we're going to deliver because the FutureGen strategy, which has been a couple of years in the making is the key enabler here. But as you all know, we don't have all the projects lined up, but we're pretty confident that we can line them up in time to achieve it. And it will see a 36% reduction in scope 1 and 2 emissions and a 21% reduction in scope 3 emissions, which equates to an annual reduction of at least 1,200,000 tons of carbon for New Zealand. As we deliver that and we continue with the future and strategy into late 2020s, we expect New Zealand's electricity system to become 93% to 95% renewable.
And obviously, some of that will depend on what others do. And we're still maintaining our position that the lowest cost opportunity for New Zealand to decarbonize energy more broadly is not to rush to 100 percent renewable electricity, but to accept that one of the biggest assets we have as a country is our highly renewable electricity system. We should be using it wisely to decarbonize other sectors. So with that, on to Slide 25, where we lay out some of our very high level thinking on the Climate Change Committee's draft report. We still believe that New Zealand needs a national energy strategy.
We've got to protect against siloed thinking in certain parts of the energy system and focus on what are the interdependencies between different parts of the energy system and make sure that New Zealand is moving forward collectively in the best way to reduce emissions overall and not cherry picking certain aspects of it. We agree with a lot of Climate Change Commission recommendations, and I won't go into detail on everything. The one where we have concerns and we've already fed back when we were doing our response is we think that electricity price path is overly optimistic. And there's a number of things driving that. The main one is there's an assumption that TY will leave at the end of 2024.
We think that's driven by a high degree of recency bias around the recent negotiation of $1,000,000 and it just happens contract till 2024 for electricity. But our view, when you look at global aluminium dynamics and you look at the future for aluminium and you look at the future for New Zealand South Island electricity, there's a very high chance that is staying. And so we think the Climate Commission should be paid their base assumption should assume TY stays. We also think their base assumption should assume Methanex stays just because they have gas contracts in 2029, doesn't mean they won't have gas contracts beyond that. And that will be a tougher base case to Climate Commission and will then ensure we have the right discussion around the right policies and don't need ourselves into thinking that it's going to be easy.
We also think not enough is understood around the consequence of the emissions trading scheme on the short term electricity price and by short term we mean 3 to 5 years. In the end when the electricity system is even more renewable carbon pricing will have less impact. But in the transition right here right now carbon pricing is roughly adding $1 per megawatt hour to electricity prices for every $1 per ton of carbon because of the way the energy earning market works vis a vis the costs of running a ranking unit. So we think that needs to be considered and we'll be feeding a lot of that back. Beyond that, we do think emissions trading scheme should be the principal lever for change, but we're supportive of some additional policies around the edges that help ensure a fair and just transition.
And in talking to others, we're quite taken by the idea of a carbon dividend, which could help the New Zealand population buy into some of the changes that are needed to affect change. So with that, I'll move on very briefly. I won't cover these next few slides in detail just to reinforce for those that didn't make it to our strategy there in December, what our strategy actually is. So you've heard me talk a lot about future gen, which is clearly about navigating the transition. There are 4 components to it.
1 is displacing base of thermal, which is right here, right now, we're out in market with RFP around that. But the other part is also around securing gas flexibility, emissions abatement through our guidance, carbon and other initiatives potentially in the future. And a reasonable amount going on to improve plant efficiency and megawatt capacity. We've had some success recently down in Tekapo, where we've improved the efficiency of 1 that generates by 2%, for example, and we're focusing on a number of different activities across our fleet to ensure we can get the most out of it at the next few years. Slide 27 briefly covers the timeframe for the current RFP and future gen, and we're expecting responses back by the middle of March.
The expression of interest we put out there late last year brought back about 12,000 gigawatt hours of potential opportunity. We've drifted through that and we've gone back out to 11 organizations that covers about 6,000 gigawatt hours of opportunities where we think they're plausible build options and we're seeking pricing and commitments that we can then go into detailed negotiations on. Reasonably optimistic around that, just for reference, the 6,000 gigawatt hours is the total Genesis portfolio, but we only need another 2,200 gigawatt hours to fulfill our science based target and the first phase of FutureGen. And so we're weighing up different opportunities between wind, solar and geothermal, different impacts that will have on our overall portfolio and where that may take us beyond that. In our retail business, we've got 6 initiatives on Slide 28.
They're more about delivering more from the core as well as some building for the future. I've talked about residential experiences. That's really important to us. We continue to grow our share of small business, less so medium to large. And we want to be number 1 and number 2 in every region for LPG.
And you hear more from Energy Online, those of you that follow it, where we're going to unleash it as a real true competitor to some of the other Tier 2s. And we continue to focus on number 5 and number 6, which is really our energy management strategy around new products, new technology and eventually a new platform to transform the retail business into a retailer of the future, which you'll hear more about in due course. Slide 29 just articulates how we see the 3 brands we're now involved in. Ecotristy is very much arm's length. They're independent, able to run how they want and we're not going to interfere in how they operate.
But together, we believe EcoTristy can grow in a segment that otherwise wouldn't naturally consider Genesis as their supplier. And EcoTristy have later been very successful with a number of businesses seeking to achieve their own ESG goals, particularly around the scope to emissions. And EcoTristy being New Zealand's really only certified wholesale carbon zero retailer gives businesses that opportunity. And so we see them growing quite fast from here, backed by our hedges and tied into our Waipi wind farm initially and then also other new builds as we go forward. And that excites them around the transition that they can help to make happen in our sector with new renewables and attract customers who are motivated by that.
Meanwhile, we've got a very clear brand promise and proposition for Genesis customers and Energy Online, as I said, will be unleashed a bit more. But again, it targets a different market, much more of the young professional than the Genesis traditional young family. So we're excited about that pre brand strategy and we'll tell you how it goes as we go. So with that note, I'll hand over to Chris to talk about outlook guidance and why invest in Genesis, which we always love to talk about.
Thanks, Matt. So just the kind of operational and strategic update. I just thought I'd pause very briefly on the picture that's on that Slide 30 of one of our customers in the supporters T shirt there, the ETNZ supporters T shirt. So it's going to be an interesting few weeks ahead of us. And I just even mentioned that it is a very proud sponsorship for us sponsoring the ETNZ base and it's going well.
We're going even better if
ETNZ wins. Anyway, Slide 33 outlook. We've updated our FY 2021 EBITDAF guidance to $415,000,000 to $425,000,000 The second half FY 2021 will start the benefit from the expiry of the out of the money gas contracts that have been in our portfolio for some time. The narrowing of the range is consistent with previous years. And lastly, there is no change to our capital expenditure outlook.
So I'll just say whilst Genesis is well positioned for the second half and we've obviously got an outage, a Unit 5 outage and we've organized ourselves well around that. The gas market doesn't appear to be quite short over the next 12 months, which is something that the industry should be aware of and should be planning for. The strategic review of coupe is progressing well. We've had multiple parties sign the NDA with us to review details about the asset. And we do expect to be able to update the market again in midway through this calendar year.
So just looking at Slide 31, we presented the slide in December where we laid out some of the key uncertainties that exist in the market today. I'll just mention these again, industrial closures. This risk has diminished with TY, but does remain present for others. And we are mindful of the very firm forward prices that we're seeing in the market and the challenges that that does create. So our fuel book is declining and thermal is essentially discretionary for us.
Gas availability, there remains some discussion about this particularly for this winter. Genesis is fully contracted and has multiple fuels to support our position. The pace of electrification clearly an uncertainty. We think about that when we think about the FutureGen strategy. And we also think about the opportunity that creates for the sector and for Genesis.
Then largely carbon pricing, we do expect carbon to largely pass through the wholesale market as has been proven to date. In addition, our future gen strategy is important to reducing our long run carbon exposure. So just to wrap up on Slide 32, these are a strong set of H1 results that our team is very proud of. There are some market headwinds ahead, but we're confident of meeting the strategic EBITDA goal of $40,000,000 that we set in 2016. In fact, I'll clarify we're confident of exceeding that as is reflected in our guidance.
The business has come a long way in the last few years. But this we've really seen the benefits of long term planning and the investment and it's come through on several fronts that Mike and I both talked about. We are planning for the future and playing our role in empowering New Zealand's sustainable future. FutureGen is one key proof point, probably the most visible proof point, but we've also laid out a number of other proof points today. We are prepared to back up our FutureGen program with bold commitments to reduction in carbon emissions.
And as we talked about in December, we've signed up for science based targets. So hopefully, as you can see, it's been a very busy and successful half year for us. And just lastly, the commitments we made to our investors in December, I've just replayed these, but I'll just leave you with four reasons to invest in Genesis. We continue to have a very attractive dividend, and we do see earnings growth over the next decade. We are a company highly focused on reducing our carbon exposure and delivering your de risked investment proposition.
And we do believe we've got a very strong team with a strong innovative culture. So with that, we'll open up for questions.
And we do have a few. Caller, you may go ahead. Your line is live.
Good morning, Chris, Mark. A few questions for me. First one, just on OpEx, the moment you had an uptick in first half, should we expect to see that increase in the second half?
Sorry, Grant. It's I think the question was should we expect to see more OpEx in the second half. Look, our OpEx will be up in FY 2021 relative to FY 2020. But we haven't guided OpEx specifically other than to say you should reflect OpEx as affected into our EBITDA guidance, Grant. So we're not reguiding OpEx in the second half.
Thank you. Next question, just on your outlook of $415,000,000 to $425,000,000 Does this assume that the wholesale pricing tracks the forward curve at around about $200 through to year end?
Yes. Look, our portfolio obviously performs in a range of wholesale price scenarios and has different impacts depending on different scenarios. So we do a range of scenarios and we're comfortable that our guidance of the top end and the bottom end considers all of those scenarios realistic scenarios.
Okay. Thanks, Chris. And then on your future gen strategy, how many of the 15 projects that you guys mentioned are actually of new entrants into the New Zealand market?
I think we said 11. And most of them when you say new, there's a range of ways I could interpret that Grant. But if you mean not yet announced projects by other parties than the majority of them, but not all of them. Some have been in training, some
Sorry, Mike. What I'm looking for is people who haven't actually built any form of electricity generation in New Zealand before.
Yes. I'm not going to give you the exact number, but we filtered out a lot of the long shots or moon shots. So in the original 12 thousand we received from the expression of interest, we obviously if we thought they weren't plausible builds in the timeframe we're talking about, then we didn't go back to them with the RFP. So we've only gone back on the RFP on where we see plausible builds in the timeframe we're looking for.
Okay. Thank you. That leads me to my next question on that topic is, how do you view taking on 13 50 gigawatt hours of PPAs that's starting in 2024 when you still have this potential 5,000 gigawatt hour hole in 2025 from KY exit?
Well, from our perspective, one way you should we'd like you to look at FutureGen is it's a wholesale generation cost reduction initiative. So we look at it as versus our current forecast for cost, input costs. So at the worst case, let's say TY does leave, but I don't think it will. Let's say TY does leave in FY 2025, then we're still better off than we would have been if we hadn't done it. So you're talking about an opportunity cost or an opportunity that's been missed if the wholesale price falls dramatically in 2025.
As we go forward, we will make decisions. We don't intend to contract with 2,000 10 gigawatt hours or 3,000 gigawatt hours in one go. We intend to phase it. And our optionality is to watch the market and see who else is building and see what demand side is doing and decide whether we want to be long or short in the second half of the 2020s. So we see the DG GEN program as giving us lots of different options as we go forward.
It's not one big blob.
Thanks, Mark. And then the final question just on Coupe. You did mention that you had multiple parties looking. That was the same comment from a few months ago. Are you still confident in generating interest in your 46% stake as a sale?
Thanks, Randy.
Thanks. That's all for me.
Thanks, Randy.
And we will go to our next question. Caller, you may go ahead. Your line is live.
Hi, Mark and Chris. Andrew here. Just a couple of questions. First of all, follow-up on grants just around the strategic review. Are you able to give us a sense of how many of those 11 projects already consented?
And I guess also related to that, are they all required to be up and running by December 2024?
Well, the 6,000 gigawatt hours of potential new builds in the RFP and we only need targeting 1300 by 2024. So that's a simple answer, but the potential is there. I'm not going to give you any more details on that at this stage, Andrea. I know everyone would love it, but we're in the middle of a process and a lot depends on what we get back from the RFP in mid March. There's a range.
Yes, okay. The next question I had was a couple just around, I guess, the guidance and outlook for the second half. In terms of bringing back the 3rd Rankin unit, have you contracted out any of that capacity or are you largely sort of intending it for Genesis use, I. E. Being long generation in the second half if required?
At this stage, we haven't contracted any of it out. There's different phases for it. There's 3 phases at the moment till 3rd week of March, it can only run overnight. And then from the beginning of April, through testing myself now through sort of July or it can run 5 days a week, 24 hours a day. And then in winter and through September it can run 7 days a week, 24 hours a day.
So we're building up the operational capacity. We're not saying we're not open for business, but we're being cautious about over contracting it until the point which we've got operational confidence and also we understand where the market is going.
Okay. And then in terms of the guidance upgrade itself, I mean how much of it is I guess around about the very strong first half results and kind of the flow through from that versus the second half outlook?
Well, it's a bit of both because we've had confidence from our first half results. But we're a momentum business as you know, so particularly in retail. That momentum coming out of first half will flow through in second half too. So it's a bit of both Andrew to give you a vague answer.
Yes. I wasn't expecting detail. That's all good. And the last question I just had at this stage was just around the Unit 5 outage. It's kind of unusual.
I know I struggle to actually remember Unit 5 going out in April. Normally, it's a sort of a November outage period. Is that related to Coupe at all? And are you able to give us a bit more color in terms of what wide the outage is taking place and what's actually going on?
Yes. It's historically been based on timing. It's often happened around November. And we're moving our asset management approach to be more about usage hours and the level of requirement in certain components in the units rather than just time. So we had some we built some confidence last year that we could delay that outage from what would have otherwise probably been November to April.
And we're confident it's still the right thing. So yes, it will happen in April. And that is something to be aware of when you're looking at half over half of H1. There was no outage for Unit 5, which historically there would have been.
Yes. It was about a 3 weeks outage or
A little bit longer than that, roughly that, between 34.
That's all for me. Thanks.
We will go to our next questioner. Caller, you may go ahead. Your line is live.
Hi, guys. It's Gan Paki here from Craig's. Congratulations on a great first half, excellent result. First question just on with regards to your PPA RFPs. Just what sort of proportion of the 1300 relates to existing Gentellers and what proportion is independent?
So is there any guidance you can give there?
Yes, nice to hear you Cam. No, we can't. Because we got 6,000 gigawatts out of RFP, some of it is with existing gem tailors with their new build options and some it's not. And it all depends in the end, the 1300 we end up going with will all depend on what they come back with and what price points they submit and whether the shape of their generation build suits what we need overall. So lots of different dynamics.
We're going through a fairly rigorous assessment process internally. And the outcome of that will be some choices we make about going into deep negotiations with a smaller number. But at the moment with the revenue out there, I can't tell you because they may drop off or they may be the primary player. Yes.
Okay. Appreciate that. And looking forward to what comes out of it too. Second question, Carlin, your carbon hedge book, which is well below market prices at
the moment, how should we
be thinking about the timing of realizing that? You've got emissions probably. It's looking like it's going to be above 3,000,000 tonnes this year. Do you realize the lower carbon pricing you booked now? Or do you wait and then realize it later when carbon prices are potentially going even higher?
Yes. We at this point, we're not trading carbon, Ken. So we will realize it as it falls through. I mean, a lot of these contracts are time bounded and not endeavoring to create a big stockpile of coal carbon, sorry, to trade. However, we do have options this year.
Clearly, our book is cheaper than the carbon cap price and the forward price is higher than the current carbon cap price. So we do have some options around that. But you should just expect us to submit that carbon as it falls due as opposed to forming a long term view on carbon and whether or not it's more valuable in the long term.
Okay. All right.
Thank you, Chris. And lastly, just with regards to Kupe and the confidence around securing flexible gas at reasonable prices under the current market conditions. How are you guys feeling about that? And was sort of can you give us more color on where your head is at?
Yes. So our main contracts obviously are with Coupe, of which we own 46%. So we can clearly set the contracts up in a way that suits us for our own share. We've obviously got some other contracts that roll off with the other joint venture parties and we've given you a trajectory, a roll off trajectory in the past. So you can see those.
Look, I think that's always a negotiation. One thing I do know is when you've got coal and gas and electricity to trade, there's a trade off between all those 3 fuels and having multiple options gives you some negotiating or gives you walk away prices. So we've proven our ability to do that many times over the last 10 years and I'd expect we'll be able to continue to do that again in the future.
Okay. All right. Thanks, Chris. That's it for me. Thanks.
We'll go to our next questioner. Caller, you may go ahead. Your line is live.
Good morning, team. Jeremy Kincaid from UBS here. My first question just relates to the lower cost curve and how that's been declining over the years. Is that really a reflection of your strategy and the strategy before that? And therefore, we can expect that decline to moderate sort of as that strategy rolls off in FY 2023, 2024?
Generally, you're talking about wholesale or retail? I think it's about wholesale, so I'll answer it for that. I mean, what we've seen, the input costs of thermal fuel has fallen year over year, but we were at cyclical highs a couple of years ago with very high wholesale prices for oil and coal and gas costs across the piece. So that's fallen reducing our input cost for generation which is part of the reason for the growth in the wholesale P and L. The only difference FutureGen would make is it should further reduce our input costs or our weighted average cost of generation because we're only going to contract with new renewables if they're below the costs of base load thermal today and with a prediction of where base load thermal goes in future.
So you kind of got short term oscillations in coal and gas prices, but the medium to long term trajectory of our input cost is what we measure a future gen opportunity against. Hopefully that answers your question.
Not quite. The cost to ICP in the retail space was 160 3 years ago, now it's 134. I'm just trying to get an idea of how that might track over time.
Yes. So we don't expect material changes in that cost of certain number going forward. About $90 of the $130 odd is metering costs where we've had an impact to metering renegotiations of late, but that's a pretty stable base of cost. And if you compare competitors by the way some don't include metering costs and they cost to serve. So the addressable cost is limited.
However, our Rubik's program which is the next stage of systems implementation which we've talked about, we talked about, James and Gilbert have talked about the Strategy Day in December and we'll talk more about as we go forward is where we see we might get a step change in cost to serve going forward. But until Rubik's is implemented over the next few years, we don't see material improvements continuing, but we expect it to stabilize.
That's helpful. Thank you. And then just the last one for me, relating to carbon. I know it's probably a hard question to answer, but do you believe current wholesale prices reflect market carbon prices, I. E.
Around $39 per tonne or around Yes. What the ginsale is hit? Okay. All right. Thank you.
Yes. Which is one of the several reasons why we think the Climate Commission are not factoring in that transition risk of the ETF. So as we've said before, dollars 1 per ton of carbon equates to $1 per megawatt hour on the cost of money in Rankin. So as long as our ranking is in the market, everyone will price all their generation up to the cost of our ranking coming in. So that's the problem with the ETS and how it interfaces with the energy market today.
And so we keep calling that out and we're going to call out loudly in our response to Climate Change Commission. So I think there's a real transition risk for less electricity pricing. And actually we don't need any more carbon on electricity to incentivize new renewable build. So I think you're going to hear more from us on that.
Thank you. That's all for me.
And at this time, we have no further questions.
Thank you, everyone. I'm pleased you came along and glad you enjoyed the conversation. We're really pleased with the results And I hope you've taken away from this too that we're focused on the future as well as landing this year well. And there's lots of other things coming out of Genesis as we move forward. Thanks for your time.