Petrofac Shares Surged 64.9% on a $1.4Bn TenneT Project Award

The Petrofac Ltd (LON: PFC) share price surged a maximum of 64.9% as of 0917 GMT after announcing that it had won another contract in collaboration with Hitachi Energy. The new contract is the second one under the six-project multi-year agreement worth $14 billion between the companies and TenneT. 

TenneT is a Dutch-German transmission system operator that awarded the two firms the first contract in March 2023, followed by today’s second contract award. Petrofac is a prominent service provider in the global energy sector, while Hitachi Energy is a leader in technology dedicated to promoting a sustainable future. 

This latest initiative, valued at approximately US$1.4 billion for Petrofac, involves a separate contract to execute the project. The collaborative effort aims to develop Nederwiek 1, a Dutch transmission station. 

The Nederwiek 1 station is crucial to TenneT's ambitious 2 Gigawatt (2GW) Programme. This program includes multiple high-voltage direct current (HVDC) offshore grid connection systems, each with a capacity of 2 gigawatts. 

Previously, Petrofac and Hitachi Energy had disclosed their involvement in a six-project Framework Agreement. This significant deal mandates Petrofac to handle offshore platforms' engineering, procurement, construction, and installation (EPCI) and specific aspects of onshore converter stations.

Meanwhile, Hitachi Energy provides HVDC converter stations that facilitate the offshore conversion of AC to DC power and the onshore conversion from DC back to AC.

Since the initial disclosure, Petrofac and Hitachi Energy teams have engaged in intensive preparatory activities. This includes reserving production capacity for several platforms and HVDC technology and commencing the detailed design phase for the first platform, Ijmuiden Ver Alpha.

Following the Group's update on December 4, the latest announcement confirms Petrofac's acquisition of the necessary performance guarantee for the Ijmuiden Ver Alpha contract. Discussions are held with credit providers and clients to secure guarantees for other new contracts within Petrofac’s portfolio.

The TenneT 2GW Programme anticipates awarding additional projects at roughly six-month intervals. 

These projects include the grid connections at Geertruidenberg or Moerdijk (Nederwiek 3) and Eemshaven (Doordewind 1 and Doordewind 2), with the sixth project, the German connection LanWin5, planned near Rastede, Germany.

Petrofac share price. 

The Petrofac share price surged 64.93% to trade at 36.02p from Tuesday’s closing price of 21.84p.