Australia | 11:30 AM
In everything from electrification to data centres and defence, listed engineering and maintenance contractors are gearing up for increasing demand.
- The future is bringing opportunity for engineers & contractors
- August results saw a modest de-rating
- Second half skews support full year earnings growth
- Plenty of Buy ratings from brokers
By Greg Peel
NorthStar Impact Fund was launched in 2017 with the intention to offer investors a fund that only invested in companies with solutions to manage social and environmental challenges.
Australia's energy transition has just entered a new phase but most investors haven’t worked that out yet, says NorthStar portfolio manager Claudia Kwan.
The latest statistics show that in 2023–24, electricity accounted for around 20% of Australia's final energy consumption. To reach the federal government’s 2035 emissions reduction target of -62% to -70% below 2005 levels, and its pathway to net zero by 2050, the country needs to electrify almost everything.
Deloitte estimates more than $420bn in additional investment will be required, on top of business-as-usual spending.
No prizes for guessing “data centres are emerging as one of the most important new sources of electricity demand, and the effect is likely to be considerably larger than their current contribution suggests,” Kwan says.
“In addition to the initial capex, they consume electricity almost continuously, have very high load factors and are increasingly power dense.”
The Australian Energy Market Operator forecasts data centre electricity consumption will rise from approximately 5TWh in 2025-26 to 34TWh in 2035-36, which is a sevenfold increase in ten years that takes data centres from about 3% to 13% of grid-supplied electricity.
Then there’s the weather. Kwan estimates approximately 3TWh of incremental annual electricity demand from the 2026-27 El Nino event alone, and she doesn’t expect the effect to be temporary.
NorthStar has positioned for the theme by deliberately avoiding the utilities and electricity generators at the centre of the build-out, instead buying into the contractors that connect everything in between.
To that end, NorthStar is invested in Southern Cross Electrical Engineering ((SXE)). Only one broker monitored daily by FNArena covers the stock. Bell Potter has a Buy rating.
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