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Northpower wins WA contract, eyes further Australian business

Published on April 22^nd 2010, 2:00pm

Northpower regional contracting general manager Fraser Jonker says that as Australian lines companies make further investments in infrastructure renewals and upgrades, there are real opportunities for the trust-owned company to expand its Australian operations.

The contract with Western Power includes a two-year deal with two consecutive renewal options for the provision of distribution construction, maintenance, and management services. The first projects under the agreement are expected to be issued this month.

Jonker says the contract is potentially worth AUD $208 million, and the increase in earnings will be used to reduce Northpower’s investment capital and finance further growth. The contract will see WCE grow from the current 135 employees to 250 over the next 12 to 15 months.

Whangarei-based Northpower entered the Australian market in 2007, targeting business created by Western Power’s planned multi-year investment programme worth up to AUD $6 billion.

Northpower’s entry into WA was made more difficult as it coincided with the global economic downturn and a period of slow growth in the Australian market.

“The forecasted growth for the 2009 to 2010 period has been significantly scaled down due to budget constraints from customers,” Jonker says.

Last year WCE posted a loss of around AUD $3 million, but Northpower expects a turnaround for 2010/2011 with earnings before interest and tax forecast at AUD $1.8 million.

Jonker says that the local market is still ‘very tight’, but Northpower is working on growth plans in Australia.

He says the point of difference between Australia and New Zealand is that Australian distributors have delayed their infrastructure renewal spends and are now playing catch-up, replacing and upgrading poles, cross-arms, and transformers.

Northpower’s acquisition of the New Zealand arm of Queensland-headquartered Energex in September last year has opened up relationships across the Tasman, which the company is trying to build on.

The company has also set up operations in Victoria and has several short-term contracts which expire in June this year, but Jonker says that the company aims to solidify its position beyond those contracts.

It is understood that further announcements on growth opportunities for Northpower both in New Zealand and in Australia are to be released within the next month.

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