Genesis Energy has terminated an off-shore coal import contract for its Huntly power station and has announced the extension of its supply agreement with Solid Energy in New Zealand.

Both moves are part of the company’s decision to place a second of the Huntly power station’s units into storage at the end of 2013 and will result in a reduced supply of coal for the power station.

Currently, the Huntly power station is operating two older 250MW dual fuel units and two modern gas turbines of 400MW and 48MW.

Of the two other original coal/gas units, the company will place one of the units in long term storage and will decommission the second unit.

The company will now use its own stockpiles supplemented by deliveries of coal from Solid Energy and other North Island suppliers to fuel its power station.

Genesis Energy, however, may re-engage with international suppliers for the coal supply in case of fuel requirement.

"Genesis Energy, however, may re-engage with international suppliers for the coal supply in case of fuel requirement."

Genesis Energy CEO Albert Brantley noted the decision to close a second unit and end the imported coal contract was made in order to meet the changing New Zealand electricity market and ensure the company is well placed to meet the future.

Brantley said,"We have a clear focus on reducing our costs over the longer term. However, we also want to ensure that the Company can produce enough energy for New Zealand should there be extended dry periods that reduce the ability of hydro stations to operate."

The company expects to continue to run the two operating coal and gas fuelled units at Huntly. To do this effectively, the company plans to manage its fuel supply contracts on much shorter time frames than it has done in the past, giving the company more flexibility in the wholesale electricity market.

"Although we are winding back our use of coal, ending the international coal contract is good news for New Zealand and good, in the long term, for the environment. Our reduced reliance on coal is reducing our carbon dioxide emissions, and subsequently reducing our New Zealand Emissions Trading Scheme obligations and that will result in a lower carbon cost to our business," Brantley added.