Aggreko shares power to record high on Japan deal

Published on Monday 4 April 2011 15:24

AGGREKO surged to a record high on the stock market yesterday - adding more than £200 million to its market value - as it announced a deal to provide emergency power to Japan following the earthquake and tsunami.

The Tokyo Electric Power Company has signed a letter of intent to award the Glasgow-based group a contract to provide 200 megawatts of gas and diesel-fired generation for at least a year.

Aggreko said that, given the challenges facing Japan, it will start mobilisation of the equipment immediately.

Shares in the company soared by more than 7 per cent on the news to over 1,700p, but edged back to close up 84p at 1,678p. The company's market value of 4.6 billion has now increased by more than 350 per cent in the past two years and stands six times higher than five years ago.

Under the latest deal, the details of which are still to be finalised, power plants will be installed at sites in the Tokyo Bay area to supply electricity to residents and industrial users. The Aggreko equipment is expected to start delivering power to the grid in June.

Aggreko chief executive Rupert Soames said: "Within a few days of the disaster, Aggreko entered into discussions with Tokyo Electric Power (Tepco] to bring additional electricity to the grid. Tepco have moved extremely fast and with great professionalism to define an engineering solution which will bring additional generating capacity to Japan.

"Aggreko is pleased it is able to be of assistance to the country at this very difficult time."

Caroline de La Soujeole, an analyst with Seymour Pierce - which has a buy recommendation on the shares with a 1,775p target price - said the deal underlined her positive stance on the company. "Aggreko enjoys a market -leading position and has the global scale and flexibility to respond quickly to emergency needs," she said.

The expected contract came a fortnight after the company said it "stood ready" to help Japan with temporary power.

Aggreko's dramatic share price rise has delivered handsome returns for investors, which include the Salvesen family.

The temporary-power supplier was originally formed as a division of logistics Christian Salvesen before being spun-off in 1997. The family's stake of just under 11 million shares, held by Andrew Salvesen, is now worth 184m, more than ten times the original value.

Capital-based fund manager Baillie Gifford is also a significant investor with a stake of more than 4 per cent.

Soames, who has led the company for more than six years, owns 300,000 shares - which rose in value by 252,000 yesterday - as well as share options potentially worth several million pounds.The chief executive and his fellow directors also shared just under 2m in bonuses for the firm's performance last year when pre-tax profits jumped 24.6 per cent to 307.1m on the back of events, including football's World Cup in South Africa.

At the time of the results, the company also announced plans to return 150m to shareholders. It cautioned that instability in some countries made the task of predicting the outcome for the current year more difficult than normal.