- $10mn heat pump contract win
- Potential to manufacture TerraPower’s production pumps
Avingtrans (AVG: 378p), a maker of critical engineering components and services, has been awarded a major contract with TerraPower, a high-profile win in the nuclear industry. The nuclear segment accounts for 30 per cent of group revenue.
Co-founded by billionaire Bill Gates in 2008 to create a new cheaper, more efficient and safer type of nuclear power station, TerraPower’s Natrium Rector uses liquid sodium instead of water as a coolant. Its storage capacity enables the release of higher levels of electricity during high demand, too. The heat pump transport system is critical in the reactor, so it’s quite some accolade that Avingtrans’ wholly owned subsidiary, Vermont-based Hayward Tyler, has been awarded a multi-phase $10mn contract by TerraPower to design and develop the heat pumps that circulate the liquid sodium and transfer the coolant. Hayward Tyler has decades of experience in designing large vertical pumps for the existing US civil nuclear fleet, the largest in the world.
Upon completion of the three- to four-year initial phase, TerraPower has the option to have Hayward Tyler manufacture the production pumps for the demonstration project. The award of this contract presents a significant growth prospect within one of Hayward Tyler's core markets.
Orders de-risk earnings guidance
True, the flagship initial order from TerraPower doesn’t impact current year forecasts but it certainly adds to an order book that provides more than 90 per cent visibility for the 2023-24 financial year. The same is true of two national contracts Avingtrans secured last month that aim to make safe nuclear waste for long-term storage of the UK's legacy of nuclear assets. The £14.5mn contract value boosts the order book of Avingtrans’ Metalcraft subsidiary to £75mn over the next six years.
So, although the energy-focused operations are still projected to deliver operating profit of £12mn for the 2023-24 financial year, as a standalone entity the division is worth at least as much as Avingtrans market capitalisation of £124mn. That leaves shareholders with a free ride on the group's medical businesses (‘This energy play has a healthcare arm thrown in for free’, IC, 27 September 2023). Buy.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus P&P of £4.95, or £25 plus P&P of £5.75 for both books.
