September 21, 2011

Malakoff Wins New Power Concession

KUALA LUMPUR: Malakoff Corporation Berhad unit has won a bid to construct and operate a 1,000MW coal-fired power plant in a development which is seen as providing the utilities firm a boost for its prospective listing on Bursa Malaysia.

Malakoff’s parent, MMC Corporation Berhad, told Bursa Malaysia that the utility firm’s unit had accepted a conditional offer from the government via the Energy Commission to develop the power plant subject to several conditions.

The conditions include the finalisation of the project’s terms of agreements and approval of the environmental impact assessment from the Department of Environment Malaysia, MMC said.

Malakoff’s unit, Transpool Sdn Bhd, will build the coal-fired power plant adjoining the existing Tanjung Bin power plant in Johor, which is owned by Malakoff’s subsidiary, Tanjung Bin Power Sdn Bhd.

“The project involves the design, supply, construction, commissioning, operation and maintenance of a 1,000MW coal-fired power plant on a build, own and operate basis with an expected commercial operation date of March 1, 2016,” MMC said.

While not entirely unexpected, the power plant concession award will give a boost to earnings of Malakoff, which is said to be working on its listing exercise, and hence more attractive to investors.

MMC, a company controlled by tycoon Tan Sri Syed Mokhtar Albukhary, recently announced plans to spin off three units for listing. The three subsidiaries are Malakoff, Gas Malaysia Sdn Bhd and Johor Port Bhd.

In a note, OSK Research said, “Malakoff needs the 1000MW extension to allow it to grow its capacity beyond the level the company was at when it was privatised in 2007, thus paving the way for an eventual relisting by 2013”.

OSK Research also said the 1000MW power plant lifts its sum-of-parts value per MMC Corp share by 16 sen to RM3.58.

Malakoff’s new coal-fired power plant is expected to cost between RM4.5 billion and RM5 billion, similar to the RM4.5 billion price tag placed on Tenaga Nasional Bhd’s (TNB) expansion of its Janamanjung plant.

Last August, the Energy Commission (EC) awarded TNB the concession to develop a 1,000MW coal-fired power plant, which will be part of its expanded Janamanjung coal-fired plant in Perak.

To cope with the rising demand for electricity in Peninsular Malaysia, EC chairman Tan Sri Ahmad Tajuddin Mohd Ali revealed that the commission had sought proposals from two power plant operators to construct a second 1,000MW coal-fired power plant.

The two independent power producers (IPPs) approached were Tanjung Bin Power and Jimah Power in Negri Sembilan, which is owned by Jimah Energy Ventures Sdn Bhd.

TNB is expected to push for competitive power purchase rates from Malakoff’s 1,000MW coal-fired plant, given that the latter will be held up against the power generation costs incurred by TNB in its own 1,000MW plant.

Nevertheless, the award of the concession to build a new 1,000 MW coal-fired plant is expected to boost Malakoff and MMC’s earnings potential.

MMC’s turnover and earnings are driven by its core energy and utilities segment, which accounted for almost 85% of its revenue in its 1QFY11 ended March 31.

In 1QFY11, MMC’s energy and utilities segment saw revenue growing about 7% year-on-year to RM1.89 billion while earnings before interest, tax, depreciation and amortisation (Ebitda) also grew at nearly 7% to RM788 million.

MMC said increased profit from its energy and utilities division was driven by higher volume of gas sold, improved performance by associates, lower operating expenses and lower finance cost following repayment of a loan during the period.

As a whole, MMC’s profit for its 1Q grew 42% to RM179.59 million from RM126.47 million a year ago. Revenue rose to RM2.23 billion from RM2.07 billion a year ago.

Additionally, the award of the coal-fired power plant to Malakoff’s unit is seen as yet another win for Syed Mokhtar in recent months.

In April, Padiberas Nasional Bhd (Bernas), a company indirectly controlled by Syed Mokhtar, announced that the government had extended its mandate to manage the nation’s rice supplies for another ten years until Jan 10, 2021.

Another of Syed Mokhtar’s companies, DRB-Hicom Bhd, had also won a bid to acquire a 32.21% strategic stake in Pos Malaysia Bhd from Khazanah Nasional Bhd for RM622.8 million.

Source :

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