PAcific Energy was mentioned in Criterion in The Australian...

PAcific Energy was mentioned in Criterion in The Australian today with BUY call.

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Pacific Energy (PEA) 43c

AS about one-third of the cost of running a goldmine is for energy, here's an alternative exposure.

Pacific Energy provides and maintains portable generators for 17 mines in WA, with 70 per cent of revenue from goldminers. "We happen to be skewed to gold, which isn't such a bad thing," chief executive Adam Boyd says.

From current combined output of 175MW, management has targeted 250MW by the end of next year. Boyd says the contracts are typically structured over three to 15 years, on a take-or-pay basis.

Clients include Regis Resources, Alacer Gold, Saracen, Newmont, Xstrata, Iluka and OM Holdings. In its biggest win to date, Pacific is building a 20MW station for Sandfire Resources' Degrussa copper-gold project.

"The real mitigating factor is that with 17 contracts, no one failure would be particularly material," Boyd says.

Pacific Energy generated EBITDA of $9.8 million in the June half, up 10 per cent, on revenue of $13.3m. One reason for the fat margin is that there's only a handful of providers, the biggest being Queensland's Energy Developments, which last month bought Wesfarmers' remote power generation business (275MW capacity) for $100m.

Pacific Energy operates two small hydro projects for Victorian water authorities and is tinkering with waste heat energy enhancements to cut 7 per cent from a typical client's energy bill. Buy.