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Genesis Energy has reached a contractual arrangement with Meridian Energy that will extend the life of the massive Huntly thermal power station.

Delivering its annual results today, Genesis emphasised the issues involved in keeping open the older units 1-4 at Huntly.

Genesis chief executive Albert Brantley said the company had developed a retirement profile for Huntly units 1-4 but that raised long term issues about security of supply, and Genesis was looking at alternatives.

The deal with Meridian announced today was only part of a solution, Mr Brantley said.

"We're very pleased about the Meridian transaction. It doesn't solve the problem. It only buys us additional time to address it."

Genesis chairman Brian Corban said the arrangement would improve considerably the prospects that Huntly generation capacity would be available to the electricity market for some time to come.

Huntly is this country's largest power station with a total capacity of 1448 megawatts. Units 1-4 have a capacity of 250MW each, while the new combined cycle gas turbine Unit 5 has a capacity of 400MW.

Mr Brantley said Genesis had flagged the potential policy issues around security of supply regarding Huntly with shareholding ministers, the Electricity Commission, and the minister of energy, and was actively engaged in discussions looking for a solution.

To some extent it was also necessary to wait to see what came out of the ministerial review into the electricity sector, he said.

Genesis' other generation includes the 362MW-capacity Tongariro hydro scheme and the 138MW Waikaremoana hydro scheme.

In the annual report Mr Corban and Mr Brantley said Genesis was the company in the electricity sector most challenged by changes in the energy market place.

"There is no escaping the real pressure on our operating costs and particularly of the future impacts of the emissions trading scheme on our trading activities," they said.

The company also had to respond to competitive pressure form newly commissioned lower cost or "must run" generation.

If commercial arrangements were not concluded to ensure the continued availability to the market of Huntly Units 1-4, Genesis would start the retirement programme to remove them from the market.

Meanwhile, more progress had been made in Genesis' renewable development programme than may have been expected a short time ago, they said.

Two wind farm sites in the Wairarapa had been agreed with landowners, with wind-monitoring masts in place and environmental and engineering assessments under way.

Investigations were being carried out into small to medium-sized hydro prospects in both the North and South Islands.

Mr Brantley said Genesis was also continuing to look at development of gas-fired generation, with consent of a proposed project at Rodney "virtually complete" although significant further technical studies were still to be carried out.

There were too many variables to say when a decision on whether to go ahead with Rodney might be made, he said.

State-owned Genesis Energy reported a net loss after tax of $136 million for the year ended June 30 compared to a profit of $99m the previous year.

Excluding asset revaluations due to account rules the underlying position is a profit of $82m.

Genesis is paying a final dividend to the Government of $10.4m, bringing total dividends in the 2009 financial year to $20.8m.