Broker snap: Jefferies hails power contract at Aggreko

14th Mar 2013 10:47

Jefferies has maintained its 'buy' rating and 2,200p target price for temporary power and temperature control group Aggreko after the company announced a 'helpful contract win' in Southern Africa on Thursday.The company said that it has signed Tri-Party Power Purchase Agreements (TPPA) with Mozambican and Namibian utilities, Electricidade de Moçambique (EDM) and NamPower respectively, to provide them with 122 MW of power from its plant located in Gigawatt Park at Ressano Garcia, Mozambique."While a degree of contract wins are required to meet consensus numbers, meaning we do not anticipate changes here, this contract win is very helpful for sentiment and applies upside risk to FY14F consensus earnings," the broker said.Even though contract wins in 2012 were just in excess of 1,000 MW, Jefferies says these were heavily weighted in the first half with just 300 MW for the second half. The new contracts take 2013 wins to 262 MW, "not far off the 2H12 run rate we believe more analysts would have been expecting for 1H13", Jefferies said.Production for the new contracts is expected to start in the second quarter and will run for at least two years with a contract value of $200m of revenue (including fuel) which implies $100m per annum. The broker said that assuming this occurs at usual margins, the adjusted profit-before-tax contribution is £10m in 2013 and £19m in 2014."At the preliminary results, [Chief Executive Officer] Rupert Soames spoke of an increase in the tempo of the drum beat that runs through the business with inquiries and meetings rising. We believe this contract win is evidence of conversion of some of the opportunities that are in front of them."Shares were up 6.65% at 1,961.32p by 10:46.BC