Transcription of Finance News Network Interview with Energy Developments Limited (ASX:ENE) Managing Director, Greg Pritchard
Lelde Smits: Energy Developments Limited
(ASX:ENE) is one of Australia’s biggest listed clean energy businesses. The Company provides low greenhouse gas emissions energy and remote energy solutions through managing power generation facilities, using a number of fuel sources. I’m Lelde Smits and joining me at ASX Investor Series in Sydney is the Company’s Managing Director, Greg Pritchard. Greg welcome.
Greg Pritchard: Thank you Lelde.
Lelde Smits: How does Energy Developments make money and which sectors and nations have you identified, have the greatest demand for your services?
Greg Pritchard: We make money by providing power solutions, which are primarily building and owning and operating power stations in remote regions in Australia. And also clean energy power generation using landfill gas and natural gas. The countries we operate in are Australia, the UK, the US and in Greece. So we’ve been in operation for 26 years.
Lelde Smits: What is the Company’s current power generation capacity?
Greg Pritchard: Our current capacity is 900 megawatts across 83 projects. The majority of those projects are in Australia. And it’s split roughly 50/50 between our remote energy business in Australia, which is about 390 megawatts, and the remaining clean energy business across those countries including Australia. So we actually take power, produce energy from a range of fuel sources, landfill gas, waste coal gas, natural gas, diesel, LNG, CNG. So we’re agnostic as to the type of power generation we use.
Lelde Smits: What are the Company’s growth targets and how do you plan to reach them?
Greg Pritchard: Over the course of the last four years, we’ve invested $500 million in energy projects, a combination of expansions and extensions to our existing projects. We operate with large global players such as BHP Billiton Limited
(ASX:BHP), Rio Tinto Limited
(ASX:RIO), AngloGold Ashanti Limited
(ASX:AGG) and also with State governments. So we’re a large provider of power to Horizon Power for the State governments.
As we look forward, we see distributor generation which is really what the sector that we’re in, growing quite substantially as the old power generation networks break down, through disrupted technology. And certainly we see that as being a focal point of our attention. So in clean energy we see, which we use, waste coal gas from coalmines, underground coalmines. We see continued growth for steel production into Asia requiring more iron ore, more coking coal and to remove the gas from underground, which provides us with power.
Lelde Smits: Energy Developments has made a number of acquisitions this year. How and when do you expect to reap the rewards?
Greg Pritchard: We’d expect to see the earnings pull through in the current year. And our current market guidance for this 2015 year is 10 per cent higher than last year. So it’s reflecting the acquisitions that we’ve made in the last year, which includes the 43 megawatt waste coal gas portfolio called Envirogen. We’re able to achieve a 65 per cent uplifted generation from that portfolio, within three months of acquisition. So that’s naturally flowing through to earnings.
Our second acquisition was upstream LNG powered assets which were provided into the Surat Basin, because the poles and wires provided by the State government couldn’t get there on time. So we provided an islanded power solution, which will continue to earn monies for us as we go forward.
Lelde Smits: On an industry level, how has the repeal of the carbon tax impacted your business and, what risk mitigation do you have in place for the impact of future regulation?
Greg Pritchard: We’ve got two businesses; our remote energy business is not affected by the recent change in the carbon tax, because we had a carbon pass through. So it was passed through to our customers, so it has no impact on us at all. With respect to our clean energy business, there was a small impact on our earnings this year, which we’ve reflected in our market guidance. But that’s now passed through. So we’re quite pleased to see direct action has been passed by the Senate. That’ll allow us to sell carbon credits to the Federal Government under its Direct Action Policy.
With respect to the renewable energy target, we expect that the Federal Government and the Opposition will resolve their current discussions at the present time, and it won’t have a material impact on our business. With respect to future regulation, we always respect the right of governments of the day to change policy. What we ask though, is that for industry, that if gut companies have invested in good faith on the long term for that, those investments be grandfathered through.
Lelde Smits: Finally Greg, in the future where will energy developments be focused for expansion and potential acquisitions?
Greg Pritchard: We’re in a very fortunate position that our business really services large global mining companies that are looking for increased productivity, looking to outsource non-core activities, such as backup supply of diesel. And also in the remote energy space, looking for newer and innovative forms of technology. So that’s our core business, distributor generation. So we expect that that will provide the bulk of our future growth, primarily in Australia, but we have elongated options in the US market as well.
Lelde Smits: Greg Pritchard, thank you for the update from Energy Developments.
Greg Pritchard: Thank you.
Ends
