Why Is Pacific Energy Up By 8.5%?

PEA

A power station and energy infrastructure owner and developer company, Pacific Energy Limited (ASX: PEA) announced that it would release its half-year results on 22 February 2019.

The Company also confirmed that its business units were functioning ahead of expectations and after reforecasting full-year EBITDA and witnessed a rise in full-year earnings guidance. The revised guidance for underlying FY19 EBITDA was $60 million – $61 million (previous guidance was $54 million – $55 million).  

On 15 November 2018, PEA notified about the signing of further 5MW of contracted capacity across 3 of its functioning locations. The contract expansions have been secured for clients of both its KPS and Contract Power subsidiaries: KPS – 1MW at Saracen Minerals’ Carosue Dam gold mine together with a two- year extension of the existing contract to 2023, the Contract Power – 2MW at Galaxy Resources’ Mt Cattlin lithium mine and KPS – 1MW at Millennium Minerals’ Nullagine gold mine.

On 22 October 2018, PEA published its annual report for the year ended 30 June 2018. The Group recorded a 10% increase in underlying EBITDA for the year ended 30 June 2018 to $44.1 million. It was slightly above the guidance range of $43 million to $44 million. For 2019 its guidance range was $54 million to $55 million of underlying EBITDA, and it expected revenues to surpass the $100m level. Reported EBITDA was down 23% and reported NPAT was down 59%, largely due to impairments and non-recurring items that the Company recorded during what was a transformational year due to acquisition activity. The acquisitions of Contract Power and NovaPower were completed during the year and were largely debt-funded from a new $140 million bank facility, supplemented by an over-subscribed $21 million rights issue. There were several acquisition-related costs which, together with impairments recorded on idle assets, negatively impacted reported EBITDA by $14.5 million.

The increased $44.1 million of underlying EBITDA represented a record level for the Company, with growth generated primarily from the commencement of several new power stations and expansions, as well as benefiting from a full year’s contributions from investments in new capacity commissioned part way through the previous year.

During the year, the Company’s KPS business secured several new contracts and contract expansions totalled 25MW. These amounted to a 9% increase in contracted capacity to 297MW for KPS. Almost all the work required to install the additional capacity was completed by 30 June 2018 and the full year’s earnings contribution from the new capacity would be realised in the 2019 financial year.

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The Company was very well- positioned to capitalise on future opportunities with its balance sheet in a solid position following the completion of its oversubscribed $21 million rights issued, and the new $140 million bank facility provided by NAB and ANZ at an attractive cost of funds. Operating cash flows in 2019 was forecasted to exceed $45 million, which was more than adequate to service annual principal debt repayments of $11 million before meeting any capital expenditure requirements.

At the end of the trading session, the stock of the company stood at A$0.640 on 12 February 2019, up by 8.475% or 0.050 points.


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