Renewables will grow Consolidated

Consolidated Infrastructure Group says its newly established renewable energy division in South Africa,focusing on wind power, will be a major growth driver for the company.PHOTO SUPPLIED 1

Consolidated Infrastructure Group says its newly established renewable energy division in South Africa,focusing on wind power, will be a major growth driver for the company.PHOTO SUPPLIED 1

Published Oct 28, 2011

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Asha Speckman

CONSOLIDATED Infrastructure Group is actively seeking new funding to expand its renewable energy projects in South Africa, the rest of Africa and the Middle East.

Raoul Gamsu, the chief executive, said yesterday that renewable energy would become one of the major growth drivers for the JSE-listed group.

Consolidated Infrastructure Group derives most of its income from the manufacture of high-voltage electrical substations and the installation of high-voltage overhead cables across the continent through its Conco division. It dominates the turnkey provision of substations to municipalities and utilities, and claims an estimated 50 percent of the market.

Consolidated Infrastructure Group has established a renewable energy business in South Africa intending to design, develop and install electrical solutions and grid connections for the regional renewal energy industry.

The growth trajectory expected in Africa, and in the renewable energy projects in South Africa in coming years, would strain the group’s working capital, it said.

The company has agreed, in principle, to a R100 million revolving credit facility from the Industrial Development Corporation to alleviate constraints.

Gamsu said it was also investigating several medium-term funding alternatives and had not considered a rights issue to raise capital from shareholders, preferring a conservative approach.

“I’m nervous to raise capital and find that we need capital for only six months,” he said.

The Department of Energy has launched a R60 billion programme for the roll-out of 3 750 megawatts of renewable energy capacity over the next four years. The company has submitted 45 tenders for work.

“The rules in South Africa favour us because localisation is critical. We’re confident from a performance excellence point of view,” Gamsu said.

“I don’t think it will have a material impact in the year ahead, but it will have a significant impact on our order book over the 12 months.”

For the year to August, in financial results published yesterday, the group’s short-term order book grew by 11 percent to R1.45bn. Fifty percent of the order book comprises African-based projects and currently excludes potential projects from renewable energy.

Gamsu said the group’s building materials unit, which grew market share but only realised a slight increase in trading profits due to poor market conditions, was expected to be cash generative to support other growth in the group.

Its Conco business experienced a fruitful year and worked on 208 projects across 12 sub-Saharan countries. It also opened an office in Saudi Arabia to take advantage of the 8 percent annual estimated electricity capacity growth in that country.

Fully diluted headline earnings a share grew 13 percent to R1.0051.

The outlook for the construction and building materials segments was expected to remain murky for at least another 12 months.

Public sector infrastructure spend was constrained and construction in the residential market, which was a primary driver for building material sales, was low.

Alistair Lea, a portfolio manager at Coronation Fund Managers, said banks were reluctant to lend and consumers were under pressure. Many companies providing building materials had gone through a tough time during the past two years and many had focused on internal cost cutting, but also by now had several years to adjust to the low levels.

The area in which Consolidated Infrastructure Group’s Conco operated was buoyed by Eskom’s infrastructure spend.

The shares closed unchanged at R9.75 yesterday.

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