GenusPlus Expands Nationally, Tapping into Australia’s Renewable Energy Transition

About GenusPlus Group Limited

GenusPlus Group Limited (Genus, the Group, ASX: GNP) is a specialist power and communications infrastructure and services provider operating across Australia. The Group designs, builds, and maintains electrical transmission and distribution networks, substations and battery systems. Applying the Group’s expertise in power networks, it also specialises in delivering integrated efficient and scalable communication networks including fixed and wireless infrastructure. GenusPlus listed on the ASX on 14 December 2020 at an issue price of 96 cents per share.

Growth pipeline for the East Coast energy transmission network is substantial

Construction of connections to the expanding energy transmission network from new energy power sources is set to provide Genus with sustainable earnings growth over the next two decades.

Electrical network infrastructure spending by public and private utility companies throughout Australia is being led by the Australian Energy Market Operator’s Integrated System Plan. This Plan requires 5,000 kilometres of new transmission lines to be built over the coming decade and 10,000 kilometres of new transmission lines by 2050. The capital investment required to deliver the 10,000 kilometres of transmission lines and upgrades to existing networks is estimated at $16 billion.

This government-mandated construction activity is an irreversible step-change for Australia’s energy system.  This explains the Group’s strategic geographic positioning to the heavily populated and much larger East Coast energy market where Genus is building a commanding strategic presence.

The Group’s explicitly stated business strategy is to replicate its successful West Australian-based, resources-centric business model by growing its strategic acquisitions in Victoria, Tasmania, NSW and Queensland. The Group’s West Australian presence is centred around providing energy solutions to the resources sector under the respected and well-established GenusPlus brand. The Group is now selectively pursuing energy transmission, and substation and battery energy system projects nationally.

Genus’s Joint Venture partnership with Acciona to deliver the HumeLink East transmission project in Southern NSW is a prime example of the Group’s role in the Energy Market’s renewables transition program. This is a new 500kV transmission line to connect Snowy Hydro’s 2.0 expansion to the network as part of a $10 billion energy transmission upgrade.

Other examples include the $50 million, 275kV Solar Farm substation Aldoga design and construction works in Queensland. This project and others like it will contribute significantly to the Queensland Government’s target of achieving 50 percent renewable energy by 2030.

Genus is also well positioned to deliver utility-scale battery opportunities across the nation, after having completed Stage 1 of the Kwinana Battery Energy Storage System last year.

A net cash position of $77 million and recurring revenue of $251 million per annum plus a $519 million forward order book complemented by a $2 billion tender pipeline points to a strong growth platform for GenusPlus.

Renewable energy transition is mandatorily legislated

Fundamental to the investor appeal of GenusPlus Group is the recurring nature of revenue generated from long-term, contracted work awarded by Government utilities in response to a structural change in the economy, as the world transitions to renewable energy sources. Revenue growth under these circumstances is not subject to cyclical disturbance and so is quantifiable, dependable and predictable.

The other key point for investors is that Genus is rapidly establishing itself as the contractor of choice in the domestic energy transmission sector. This is because it has invested in highly specialised plant and equipment essential for efficient and reliable operations in the energy transmission industry. Accordingly, the Group does not have to compete for work solely based on cost but on the superior customer value created through reliable, enhanced service levels and innovative solutions. This improves revenue quality and delivers higher operating margins that ultimately boost returns on shareholder equity in the long run. Higher quality revenue justifies sustainable earnings per share multiple premium, which is key to ongoing shareholder value accretion.

These favourable long-term structural economic and earnings tailwinds should continue to support the Group’s earnings growth profile in the decade ahead.