R18bn to Murray & Roberts, partner

JSE-listed engineering and construction group Murray & Roberts (M&R) has received a significant boost to its potential future earnings.

An equal joint venture between Clough, the Australian subsidiary of M&R, and global Spanish infrastructure and concessions group Elecnor has been selected as the contractor for an about Au$1.5 billion (R17.9 billion) contract for TransGrid’s Project EnergyConnect.

The award follows M&R reporting in June 2020 it has a significant, quality order book of R54.2 billion, which includes several multi-year contracts.

R40bn in ‘near orders’

In addition, M&R said then it has four near orders and “Category 1 opportunities” with a combined value of about R40 billion that it is negotiating on a sole-source basis.

M&R said on Monday that the TransGrid project is however not one of the three energy, resources & infrastructure platform projects and single mining platform projects mentioned in its annual results announcement.

M&R group investor and media executive Ed Jardim said on Monday these four projects are on different paths and timelines because they are all still in the commercial negotiations phase/reaching final investment decision.

“We hope to be in a position at the announcement of our half-year results in March 2021 to provide a report back on all these projects.

“If however we achieve a final investment decision on any of the projects before that timeline, we will announce them to the market as we did with TransGrid today [Monday],” he said.

M&R said ElectraNet and TransGrid are partnering to deliver an energy interconnector between the power grids of South Australia and New South Wales, with an added connection to Victoria.

It said the joint venture will deliver the engineering, procurement and construction of TransGrid’s portion of the project, which includes four substations and about 700km of 330kV transmission line.

“Elecnor has an enviable track record globally in delivering high voltage transmission projects such as this, and combined with Clough’s Australian project delivery expertise, they form a formidable joint venture.

“The project has been strongly supported by the New South Wales government, which has declared it Critical State Significant Infrastructure,” M&R said.

Perspective

Marc Ter Mors, global head of equity research at SBG Securities, said on Monday the way he looks at project announcements is that it’s obviously always positive to gain new contracts but it is important to remember that these contracts also need to replace existing revenues.

“It’s positive, but we don’t know what the margin is going to be and it replaces existing revenue from projects delivered,” he said.

Ter Mors added that since M&R has already said there will very likely be another R40 billion of additional contract wins in the short term that were not part of this Au$1.5 billion project, of which half or R9 billion will be Clough’s portion, “it’s very likely the order book is going to be at an all-time high at the next reporting period for the interim period to December 2020”.

This article first appeared on Moneyweb and was republished with permission.

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