Raubex targets the renewable energy space

JSE-listed construction group Raubex is aiming to play a leading role in the renewable energy space by capitalising on its well-established relationships with renowned independent power producers (IPPs).

Raubex CEO Rudolf Fourie said on Monday the group’s infrastructure division is well positioned to take advantage of the government’s drive to increase power generation capacity and is “in the running for a substantial portion” of the work in the renewable energy IPP Bid Window 5.

“It’s obviously subject to financial close so once we achieve financial close we will bring the market up to date on how much,” he said.

The government has announced the preferred bidders on 25 projects in IPP Bid Window 5, with 12 onshore wind and 13 solar photovoltaic (PV) projects selected, totalling 2 600 megawatts (MW) of power, and commercial close estimated to be in February 2022.

Fourie declined to comment on how many projects Raubex is in a partnership in this round of bids, stressing that “this is price-sensitive information because we have not achieved financial close”.

“It’s quite a number of projects so it is price-sensitive. As we previously announced, in the IPP risk-mitigation round, there are two big projects which we should get,” he said.

Fourie said commercial close of the risk-mitigation round was delayed due to various legal actions and meant Raubex’s infrastructure division only got one solar contract and the potential solar work the group foresees will only happen in the next financial year.

“But we are excited and see ourselves playing a substantial role in renewable energy,” he said.

Fourie added that the government has announced that IPP Bid Window 6 is scheduled to open to the market at the end of January 2022 and is anticipated to also comprise 1 600MW of onshore wind and 1 000MW of solar PV.

He said the early announcement of this round will hopefully ensure continuity in the renewable energy market.

“We are quite a big player in this market but the problem at the moment is it was ‘stop-start, stop-start’. For example, this year we had quite big holding costs on our renewable energy capacity.

“Hopefully, if all this happens, we should see continuity of at least three to four years in this space, which will obviously benefit us,” he said.

Analyst’s view

Rowan Goeller, an analyst at Chronux Research, said the announcement from COP26 United Nations Climate Change Conference currently under way in Scotland about the cash that developed nations have provided to Eskom makes renewable energy “very interesting”.

This is a reference to the announcement at COP26 that South Africa would receive more than R130 billion from wealthier nations to help end the country’s reliance on coal.

Read: SA secures R131bn commitment to transition to low carbon economy

Listen to Ryk van Niekerk’s interview with Eskom CEO André de Ruyter as aired on RSG Geldsake (or read the English transcript here): 

Goeller believes this will allow an acceleration of investment in renewable energy through the Renewable Independent Power Producer Programme (REIPPP) and probably also unlock private spending because a fair amount of the money pledged at COP26 will probably go into the growth of transmission lines as this is currently a bit of a bottleneck.

“Raubex is very well positioned to be the contractor on a lot of these renewable energy projects and that probably gives them further growth on top of an order book that is looking good from a traditional Sanral [South African National Roads Agency] roads projects point of view,” said Goeller.

“The short term emergency procurement is an area where Raubex has put in a lot of proposals to do the balance of plant type of work and that should come through quite nicely in their 2023 financial year, effectively the next calendar year.”

Partnership prospects

Fourie said Raubex is also exploring opportunities to participate in a number of public private partnerships (PPPs) on a selective basis and is establishing partnerships with mining resource owners to secure opportunities to participate in materials handling contracts in the mining space.

He said Raubex had acquired minority stakes in Bauba Resources Ltd (23.08%), Arcadia Minerals Ltd (27.73%) and Vanadium Resources Ltd (9.56%) and will continue to explore bolt-on acquisitions.

He said Raubex is investing between R50 million and R100 million per opportunity and all these stakes will give the group first right of refusal for the material handling at these mines.

“This is quite a different strategy and we believe that in this way we will create work for 10 to 15 years in these mines for our own companies,” he said.

Infrastructure activity

Fourie said the government has brought out several PPP projects, which Raubex is busy pricing and are quite big projects, as well as student accommodation and affordable housing developments, which could grow the infrastructure division over the medium term.

“There are a number of projects on the table but they are very expensive and time consuming to pursue so we are not going to chase and bid on all of them. We are going to select a couple which complement our core business and then focus on them,” he said.

Interim results

Fourie’s comments coincided with Raubex reporting a 1 907.9% increase in operating profit to R435.2 million in the six months to end-August this year from R21.7 million in the corresponding Covid-19 lockdown-impacted lockdown period in 2020.

Revenue increased by 52% to R5.99 billion from R3.94 billion.

Headline earnings per share increased by 615% to 137 cents from the 26.6 cents loss in the prior period.

An interim dividend of 47 cents per share was declared.

Order book

Fourie said the order book increased 41.1% to R16.55 billion from R11.74 billion in the prior corresponding period and was maintained compared to its record R17.1 billion order book at the commencement of the reporting period.

Read: Raubex grows order book to record R17.1bn

He said the group’s Sanral order book is currently at R6.7 billion compared to three years ago when it was down at only R200 million and once again accounts for 40% of Raubex’s order book.

Fourie said the group has an order book pipeline for at least four years for the first time in its history.

“This order book can only improve going forward because there are a number of projects where we are waiting for awards, so the order book is quite encouraging,” he said.

Fourie indicated there are about “six tenders north of R1 billion which we are in the running for” but stressed that it could not bring these to book until the awards are made.

Goeller said Raubex achieved a good performance, adding that the group now comprises a number of different companies whereas “the old Raubex” was a roads company.

Shares in Raubex rose 1.13% on Monday to close at R35.80.