ERM POWER SHARES TOPPLE AFTER EARNINGS FORECAST

Written on the 20 June 2016

ERM POWER SHARES TOPPLE AFTER EARNINGS FORECAST

ERM Power (ASX:EPW) has affirmed its full-year earnings guidance of between $81 and $85 million, despite Oakey Power Station causing a drain on performance.

Challenging market conditions have impacted the merchant plant in the Darling Downs, which was originally forecast to achieve $16 million EBITDA in FY16.

The underperformance will be offset by the Brisbane-based company's retail businesses in Australia and the US, with forecast sales load of up to 21.5TWh on track.

ERM Power's share price tumbled 24 per cent following the announcement, down from its closing price of $1.46 last Friday to $1.10.

The company acquired Source Power & Gas in the US last year, as part of its strategy to diversify into energy management, data analytics and lighting.

ERM Power CEO Jon Stretch (pictured) says as the company has explored offshore acquisitions as the energy retail industry consolidates in Australia.

"The US business is increasingly encouraging in terms of growth, margin and operating expenditure," Stretch says.

"Our Energy Solutions business deepens relationships with customers and creates value through revenue, retention and growing total customer margin in the burgeoning energy efficiency space.

"The integration of our two recent acquisitions, Lumaled and Greensense, is well progressed. They form an important part of our diversified energy solutions capability."

The company's US retail division is expected to double in sales volume in FY17, while the Australian business anticipates margin pressure due to significant competition in the market.

Oakey Power Station EBITDA is forecast to be in the range of $14 and $16 million in FY17, accounting for a scheduled maintenance outage next year.

The final dividend is expected to remain at current levels of 6 cents a share.

 


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