Pacific buys Contract Power
POWER generator Pacific Energy has struck an agreement to acquire Contract Power for $90 million. Contract is a remote power generation specialist with customers in the hard rock lithium sector including Pilbara Minerals, Galaxy Resources and Tawana Resources; and Pacific, through its subsidiary Kalgoorlie Power Systems, is WA’S largest power supplier to the gold sector. The deal will give Pacific an additional 82 megawatts (MW) of installed power generation, taking its total capacity to 245MW across 16 projects. “The transaction with Contract Power gives Pacific Energy significantly more scale and reach, now with over 30 long-term power generation contracts for remote mines and townships and a weighted average remaining contract duration rising above four years across the entire portfolio,” Pacific managing director James Cullen said. “This provides us with stronger and longer earnings visibility,” he said. Contract Power founder Leon Hodges said that during the due diligence of the deal it became very clear that the two businesses were remarkably similar. “I am looking forward to continuing to drive the business with our team and the support of Pacific Energy’s resources … this is certainly a landmark transaction in our industry,” Mr Hodges said. Mr Cullen said that subject to the settlement of the transaction, the estimated EBITDA for Contract in FY19 would be in the range of between $14m and $16m, and likely increase to between $17m and $19m the following financial year. “In addition to a dependable and growing earnings profile, the transaction is also backed by strong underlying asset values, both installed on site and available to be installed in [the] future, and gives both companies access to an expanded asset base and therefore lower joint future capital expenditure and improved utilisation,” Mr Cullen said.
The acquisition will take Pacific Energy’s total provided capacity up to 245MW.