Powering the continent
There are a number of South African companies building substantial businesses on the continent at the moment, and one of these is Consolidated Infrastructure Group, which has been active in 21 African countries already. The company, through its subsidiary Consolidated Power Projects (Conco), is one of the largest builders of substations and transmission lines on the continent, which encompasses the full spectrum of design, procurement and project management required to install these systems. Essentially to move bulk quantities of electricity from the point of generation to the point of consumption, you need to ‘switch up’ the voltage in order to transport it over vast distances. When the electricity reaches its point of consumption, the voltage needs to be ‘turned down’. The hardware (transmission lines, substations) and software required to do this is what Conco supplies. But the i nvolvement of Conco stops at the level of the substation – distribution to the end consumer is handled by municipalities or power utilities themselves. A cost breakdown shows that design and technical expertise make up 25%30% of the cost of a power station, 30% is construction (which Conco outsources), and the balance is for the procurement of equipment, for which Conco is supplier agnostic. Thirty-eight percent of Conco’s revenues now come from outside South Africa.
The intellectual property that the company has developed over the years, building and commissioning substations, has allowed it to create a separate business unit, called Protection and Automation, which will commercialise the so-called operating system of a substation. This will allow users – among other things – to drastically reduce the time it takes to commission a substation. There are also other opportunities Conco is pursuing in the renewable energy space as projects in SA (via REIPPP) begin to come on stream and must be plugged into the Eskom grid.
The inclusion of the Angola Environmental Services (AES) division for the first time added to the impressive interim results to the end of February, which saw revenue (R1.3bn) and EBITDA (R169m) climb 36% over the previous period. AES appears to have high barriers to entry in servicing the waste management needs of oil rigs off the coast of Angola where it is the only one of its kind operating in the port of Luanda. The division has plans to expand both in Luanda, and further up the coast at Soyo.
With plenty of demand for the group’s services, there is much work that requires funding. The company went back to the market in June and raised R324m by way of a general issue of shares for cash, to complement its existing medium-term note programme. This was money that shareholders, who have enjoyed a 527% increase in the company’s share price over the last five years, were no doubt happy to hand over.