Tetra Tech Inc. (TTEK) will be aiding the government of Indonesiain attaining its energy security and greenhouse gas emissions (GHG) reduction targets through a $16.2 million contract received from the U.S. Agency for International Development (USAID).
The contract is a part of 3.5-year program in Indonesia to increase large-scale geothermal power development and other renewable energy initiatives. The Indonesian Ministry of Energy and Mineral Resources is focused on extending energy supply coverage to 90% of its population by 2025 by encouraging investment in renewable energy and through improvement of policy.
The government also targets to gain GHG emissions reduction target of 26% under business-as-usual and 41% through decline in GHG emissions in the energy and transportation sectors by 2020. Tetra Tech will aid the government of Indonesiain to achieve its goals.
Federal bodies like The United States Agency for International Development (USAID), the Army Corps of Engineers, and the Environmental Protection Agency (EPA) are receiving significant increases in funding even without taking stimulus spending into account. About 57.2% of total revenue in the first-quarter 2011 was derived by Tetra Tech from the federal government and state and local government.
However, demand for state and local government services is cyclical and vulnerable to economic downturns; if the economy weakens, the company’s revenues, profits and financial condition may deteriorate. The company derives majority of its revenue from government agencies, and any disruption in government funding or in its relationship with those agencies could adversely affect its business.
Tetra Tech Inc. is a leading provider of consulting, engineering, program management, construction and technical services focusing on resource management and infrastructure. It serves clients by providing cost-effective and innovative solutions to fundamental needs for water, environmental and alternative energy services. Major competitors of Tetra Tech are Arcadis NV, Shaw Group Inc. (SHAW) and URS Corporation (URS).
We continue to maintain a Neutral rating on Tetra Tech, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
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