JAKS eyes more power projects in Vietnam with RM7.02b plant

KUALA LUMPUR: Jaks Resources Bhd, which has inked agreements with China's China Power Engineering Consulting Group Co Ltd (CPECC) to jointly develop a US$1.87 billion (RM7.02 billion) power plant project in Vietnam, is interested to look into other power projects in Vietnam.
Jaks CEO Andy Ang Lam Poah said with the successful implementation of the power plant project, it will consider other projects there, but not property development at the moment.
Property development was the biggest profit contributor for the group last year.
"In Vietnam, the population is close to 100 million and currently there is a shortage of power supply. If there's opportunity, the first thing we will look into is power because we've developed our team there and it is easy for us to access the information. If the timing is right, why not explore again?" Ang told a press conference after the signing ceremony for the key agreements here yesterday.
Jaks and CPECC, via a 50:50 joint venture (JV) in Jaks Power Holding Limited, will fully own project company Jaks Hai Duong Power Co Limited (JHDP) that will spearhead a 25-year build-operate-transfer (BOT) project for a 1,200MW thermal power plant in Hai Duong province.
The project is Jak's maiden foray into power generation to generate stable and recurring concession-type earnings.
Jaks Power Sdn Bhd executive chairman Goh Theow Hiang said currently Jaks do not have any overseas contribution yet and thus will be able to recognise substantial bottomline from the project. The strategy to invest overseas is to provide a safeguard against any adverse effects of cyclical local business activities.
"We're one of the top three priority projects in Vietnam and will generate good returns, much more than BOT projects in Malaysia. Vietnam is an emerging market," Goh said.
The construction of the power plant, which comprises two 600MW generating units, is scheduled to begin in the first half of 2016 and commence commercial operations in 2020.
The project will be funded on an intended capital structure of 75% debt and 25% equity.
CPECC has completed over 300 overseas projects in over 60 countries. CPECC and its parent company China Energy Engineering Group Co Ltd shall provide corporate guarantees or other such security to secure the entire equity commitment and financing for the project.
Jaks' equity commitment of US$140.1 million would be met via a combination of internally-generated funds and bank borrowings.
Once this project gets underway, Jaks will be able to recognise additional revenue stream from its proposed participation in the engineering, procurement and construction contracts to be awarded by the JV company.
JHDP has also entered into a power purchase agreement with Vietnam Electricity for the generation and supply of electricity for 25 years, a coal supply agreement with Vietnam National Coal-Mineral Industries Group for the duration of the BOT period, and a lease agreement with the Hai Duong Peoples' Committee in respect of the leasing of land for the project.
Going forward, Goh said construction and property development will be equally important for the group.
"Construction recognition for this year will be good, compared with property development, which could experience a slowdown so its recognition may not be as good as last year," said Goh.
The group is pursuing a construction tenderbook of RM3.5 billion in various road, water and sewerage infrastructure projects. It is also planning to launch its mixed development project at USJ1, which can potentially generate an estimated gross development value of RM2 billion.
Trading of Jaks shares, which was suspended yesterday, will resume today.