Aggreko reveals net zero target as it signals tentative recovery

The Glasgow-based company is looking to reduce the amount of diesel used by its generators by at least 50 per cent by 2030 as one of several stepping stones on its net zero mission, stating that its energy transition plans will require capital investment of between £250 million and £350m per year.

The plans were revealed as Aggreko reported that underlying group revenue was down 14% in the nine months to September 30 versus the same period in 2019, driven by the “significant impact of the pandemic in the last two quarters, and the lower oil price”.

However, the company said it has seen “some recovery in most of our markets, with activity levels and equipment on hire continuing to increase through the third quarter”. It expects to produce profits at the upper end of its £80m to £100m guided range for the full year, having made a pre-tax profit of £199m in 2019.

Chief executive Chris Weston told The Herald that Aggreko has been working on net zero plans for the last three years, highlighting its acquisition in 2017 of the Berlin-based battery storage firm Younicos, and its investment in more energy efficient technology, smaller batteries and solar-powered solutions.

He said: “We have started to make good progress… but you will see more progress over the next 10 years.”

Aggreko recently commissioned a “solar hybrid” in Australia, called Granny Smith after a mine of the same name, which generates 7.7 megawatts of solar-generated power, 2MW of battery power, and 27MW of gas. Mr Weston said: “That reduced the cost of power for our customer, and reduced the environmental impact.”

Noting that Aggreko was “way ahead of our competitors” on net zero, he said: “I’m very pleased with the progress we have made and very excited about the commitments I have laid out this morning.” Asked to sum up the response the plans, Mr Weston said that staff have been “amazingly engaged and excited”.

He added: “It was good to see the share price go up [this morning] in a market that has gone slightly backwards. I have yet to speak to investors, but I have no doubt they will be interested and equally supportive.”

There has been much talk amid the pandemic that the drive towards net zero will be hastened by the crisis. Oil major BP has declared its ambition to be a net zero company by 2050 or sooner. Mr Weston expressed the view the pandemic will likely lead to a “more concerted push towards net zero”.

He said: “I think we will see governments take a much longer view, so out to 2050, and much more support for alternative fuels, particularly the likes of hydrogen, which there is a lot of talk about at the moment.

“It is an interesting pathway for us to get to net zero by 2050 but, in the meantime, we can do a lot around reducing diesel burn, introducing renewable technology and emissionised technology.”

Mr Weston was effusive about the company’s handling of the coronavirus crisis, declaring that Aggreko has a “very strong financial position [with] good cash flow and a strong balance sheet”. He said: “I am very pleased with how we are seeing the recovery. Underlying volumes… are pretty much back to where they were this time last year, which is encouraging.

“As I look forward, we are beginning to see recovery in some of the sectors, like events. Although that is still fairly muted at the moment, order activity is stronger. I expect to see much more activity in Q2 next year, given what we are seeing in the order book.”

Mr Weston has been encouraged by the confidence expressed by organisers of the Tokyo Olympic and Paralympic Games that the event will take place next summer, and “with crowds”, having been postponed this year. Aggreko has a $200m (£155m) deal to provide power to the Games, and at one stage had 200 to 300 staff deployed in the country making preparations.

On the recent breakthroughs in work to establish vaccines for coronavirus, he said the “biggest impact is the sense of optimism it brings to everyone”.

Shares close up 3.9 per cent, or 22p, at 590p.