When it comes to action in the market, money talks. That’s why the announcement from Tasmea (ASX:TEA) yesterday is notable.
The company is willing to spend at least $50 million to get further exposure to what it calls a ‘structurally’ growing sector: Australian energy.
Here’s the story. Tasmea is an engineering and maintenance services company. It’s using acquisitions to grow as a firm, and already has 27 separate businesses.
Now it’s going to add another one. Tasmea announced yesterday that it’s acquiring a business called JPS Group.
JPS works within the Australian and global liquefied natural gas (LNG) sector, plus the Australian domestic gas market and broader infrastructure space.
Tasmea says that JPS has a tier one client base, unique product offering, and high recurring revenue.
You can look at the gas basins just across Australia in the image below. There is certainly plenty for JPS and Tasmea to work with:
We can see this acquisition in another strategic light too. It’s a play on the artificial intelligence (AI) theme.
All around the world, everyone knows one thing: data centres are hungry for energy.
The team at Tasmea knows this. It was only last month that Tasmea announced another acquisition. That was $254 million to acquire a company called Maxim Group, an electrical contractor that specialises in wiring and cabling.
The Australian Financial Review quoted Tasmea CEO Stephen Young as saying, “There’s no hotter market in Australia than data centres.”
Maxim already has a $1.3 billion pipeline of work over the next seven years, according to the newspaper.
Presumably the board at Tasmea is thinking one thing: capture as much of the AI spending as they can.
Fund manager Emanuel Datt made the following comment in a recent post on Livewire:
“The AI-driven data centre buildout is one of the most discussed investment themes on the ASX right now. The companies attracting the most attention, the data centre owners and REITs, are not necessarily where margin concentrates. The more compelling case sits one level down: the contractors, electrical specialists, and equipment distributors who service the build.”
All true. He might have added the resources behind this capital intensive surge too.
Two come to mind easily. One is the demand for gas. The Australian Energy Market Operator (AEMO) is already worried there won’t be enough when it released its longer term forecasts recently. It needs to replace the ageing role of coal in the mix.
The AEMO is not the only one worried. The Japanese industry is highly concerned around the Australian federal government’s plan to reserve gas for domestic use.
Oil prices might be coming down now, but the damage to Qatar’s LNG infrastructure during the war is likely to leave the global LNG price higher than expectations at the start of the year.
The second major theme is lithium. There’s no doubt that batteries are booming in Australia and solar is projected to make up the largest share of power generation in the future.
It’s a global theme and one that shows no sign of stopping. What the world needs is more lithium mines to build out the storage infrastructure.
One company working on that problem is Solis Minerals (ASX:SLM).
Solis is currently drilling in Brazil after raising $6 million in capital in May, with support of major shareholder PLS Group (ASX:PLS).
The drilling news flow is set to come out over the remainder of the year. That could set the stage for a multiyear project development in a significant global mining jurisdiction.
Write to Callum Newman at Mining.com.au
Images: Tasmea & Australian Financial Review
