The somewhat quixotic suggestion that we might entrust the future of our power supply to Uncle Vladimir and his comrades at a cost far exceeding the number of digits available on your average calculator has dominated debate on the energy issue of late.
Coupled with the sharp exit of "Cryin’ Brian", it is not surprising that this largest of troughs has been emitting whiffs of corruption that would be familiar to long-suffering customers of Unhygienix, purveyor of piscatorial delights to a certain Gaulish village.
Given that we have ample supplies of wind all over our fair land — not just in the parliamentary precinct — coupled with unusual quantities of sunshine, the layman might be tempted to suggest that we are in a pretty solid position to give renewables a pop. This is something that Consolidated Infrastructure Group (CIG) has been doing with considerable success outside SA, while in the beloved country it, alongside others, has suffered the intense frustration of a malaise of contracts endlessly delayed.
CIG’s power division has an enviable reputation for completing projects on time and on budget, which has enabled it to grow and diversify. Its oil and gas services business is experiencing a slowdown due to the languishing oil price. But the recently acquired Conlog prepaid and smart electronic metering business is performing ahead of budget, as the prepaid model offers obvious benefits to utilities providers that don’t want to spend time chasing down minor debts.
CIG appears to be a well-managed operation that is building a considerable footprint.
A long road to recovery
Buildmax is an opencast mining contractor, and if we were to return to the Gaulish village we would find a prototype of this business model in the well-padded form of Obelix himself.
Fortunately for Obelix, his was a simpler age and he was not subject to the vicissitudes of the commodity cycle. He could merely carve a menhir or two, carry them around for no obvious economic or cultural end, then scarf down some wild boars before heading off to punch a Roman.
This, particularly the punching of Romans, would probably seem quite appealing to the management of Buildmax, which finds itself squeezed by an altogether more complex set of circumstances. As a contract miner, it is important to have contracts to mine, but with gloom and despondency sitting heavily on the sector these are hard to find.
As demand drops off, the supply chain rapidly finds itself overstocked, and any contracts that are floating around are fought over until the margins are so thin as to be negligible.
Management has reacted to the depressed circumstances by right-sizing the business to reduce the fixed-cost base, ditching loss-making contracts, restructuring its financing and attempting to make the business model more flexible.
This has greatly stemmed the bleeding on the income statement. But prices remain low, sentiment is distinctly bearish, and the company is concerned about the impact of a liquidity crunch. It is still hopeful that there will always be a demand for quality operators, but real recovery seems distant.
Fortunately for Obelix, his was a simpler age and he was not subject to the vicissitudes of the commodity cycle