The board of Genesis Energy is to conduct an independent review after the company unexpectedly lost a significant dispute with a supplier over the liability for gas it buys from the Kupe gas field.
On Monday Genesis, 51 per cent owned by the Government, said it would take a hit of more than $50 million in the year to June 30 after losing binding arbitration over the dispute with ASX-listed Beach Energy.
The arbitration process for Genesis' dispute related to the terms of its long-term gas supply agreement with Beach which "has concluded unfavourably", the company said in a statement to the NZX.
"Arbitration was based on whether carbon liability for the gas supplied was with the producer [Beach] or the buyer [Genesis]. The decision is final and binding," the company added.
"As a result, Genesis is required to meet the carbon liability for the gas supplied since 2018 and for the remainder of the unexpired term of the agreement."
Chief executive Marc England called the loss "disappointing and unexpected".
The board of Genesis, headed by former ASB chief executive Barbara Chapman (who is also chair of NZME, owners of the Herald) is to conduct an independent review of "the processes and decisions" which led to the situation.
Genesis said it would take a one-off hit of $53m for the year to June 30, 2021. The company today said its earnings before interest, tax, depreciation, amortisation and fair value adjustments would be $358m, down from the $405m-$410m it signalled in late June.
"The board are still to decide on the [full year 2021] final dividend, but this decision is unlikely to impact the final payment."
Shares in Genesis opened on Monday down 6c at $3.37.
For the coming years, Genesis emissions' obligations will increase by about 530,000 New Zealand units (NZUs) out to the end of the contract in 2025.
"The increased obligations will be met by Genesis' current stockpile of NZUs. Including the increased obligations, Genesis is now fully hedged through FY25."
The two companies had been professional throughout the dispute, Genesis said "and we look forward to continuing our relationship as joint venture partners in Kupe", England said in a statement.
"We had high confidence in a positive outcome, but the arbitrator didn't see it our way. We accept the result and will put the disappointment behind us."