ERM Power - Offering solutions to corporate energy challenges

ERM Power is a leading electricity supplier and trader operating in Australia and the US. In addition to supply and gas-fired power generation in Australia, the company is focusing on two new sources of growth: US supply and energy solutions. These new areas of focus are the key drivers of our forecast 12% EBITDA CAGR in FY17-23. Energy solutions aims to reduce customers’ costs and carbon footprint and improve their energy efficiency. We believe ERM Power’s current share price implies not only zero value for the US and energy solutions but a significant decline in supply and generation margins. In our view the strong balance sheet leaves room for acquisitions and/or additional share buybacks beyond the one announced for FY18.