A look at Downer EDI’s share price

Downer EDI Limited (ASX: DOW), based in North Ryde, Australia, offers engineering and infrastructure management services to the public and private enterprises across the rail, road, power, telecommunications, mining and resources sectors in Australia, New Zealand, Asia Pacific, South America and Southern Africa.

Its services include rolling stock services, drilling services for the exploration industry, mine planning and management services and highway maintenance.

With a market capitalisation of around AU$ 4.26 billion and approximately 594.7 million outstanding shares, DOW is trading at AU$ 7.150, down 0.14% (As on 30 May 2019, 12:50 PM AEST).

The stock settled the day’s trading yesterday at AU$ 7.160, diving 9.14%. Over a month, the stock has plunged by 9.71%, however it has generated a positive YTD return of 7.19% and a six-month return of 12.05% as on 29 May 2019.

On 28 May 2019, Downer EDI released an update to the market informing that the company and its partner Senvion GmbH (Senvion), a leading global manufacturer of wind turbines based in Germany, had entered into a contract for Stage 1 of the Murra Warra Wind Farm located near Horsham in Western Victoria.

The Stage 1 of the Murra Warra Wind Farm will include electrical, procurement and construction work, along with the installation of 61 wind turbines. As per the terms of the contract, Senvion will take care of the manufacturing, transport and commissioning of the turbines while Downer would be looking after balance of plant works. The entire Stage 1 is valued at around $ 380 million, with Downer’s share being $ 100 million.

While Downer and Senvion share the delivery scope of Stage 1 of the Murra Warra Wind Farm, they also share any liability under the project contract jointly and severally. In addition, Downer holds a substantial bank guarantee from Senvion.

On 9 April 2019, Senvion filed self-administration proceedings in Germany and announced on 17 April 2019, that its lenders and main bond holders had signed a binding loan agreement for a EUR100 million debtor-in-possession facility.

The construction and delivery of Stage 1 is in an advanced phase as:

  • ~ 95% of Downer’s balance of plant work has been completed on schedule and on budget;
  • 26 of the 61 wind turbine generators have been installed;
  • All remaining towers and blades are either at the manufacturer’s premises, port or at the Murra Warra site; and lastly,
  • Three of 61 nacelles are in the process of being manufactured, a further three have been completed and are at the manufacturer’s facility and the remainder are either in Australia or in transit to Australia.

As the works at the site is progressing, Downer is conducting discussions with Senvion’s court appointed Custodian and other key stakeholders, including Partners Group (the owner of the wind farm), to expedite the delivery of outstanding equipment and close Stage 1.

Downer will also be assessing whether there is any potential financial impact on Downer and consequently any impact on its guidance for the 2019 financial year due to the above activities. More can be read on its half-yearly 2019 results here.

Source: Company’s Macquarie Australia Conference Presentation


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