To recap, the power plant comprises of two 600 MW coal-fire thermal units with a project cost of US$1.87 billion. JAKS initially obtained the concession and subsequently formed a joint venture (“JV”) with China Power Engineering Consulting Group Co Ltd (“CPECC”) to build and operate the power plant. JAKS holds a 30% equity interest in this JV with CPECC holding the balance. It is being built under a BOT structure with a 25-year power purchase agreement (“PPA”) with state-owned utility, Vietnam Electricity Corporation (EVN) and a 25-year coal supply agreement with Vietnam National Coal and Mineral Industries Group, commonly known as Vinacomin. Under the PPA, the JV company, namely JAKS Hai Duong Power Company Limited (“JAKS Hai Duong”) will be guaranteed with fixed capacity payments by the Government of Vietnam and will be backed by energy payment to cover variable costs, including fuel and variable operating costs, and therefore contributing to a sustainable income contribution during the 25 years tenure.
The recurring income from JAKS Hai Duong, which is readily converted into US Dollar bodes well for JAKS as it helps to hedge its earnings against foreign currencies’ fluctuations when the Group widens its operational footprint in the Southeast Asia region, where potential income will be based on different currencies.
“We are extremely privileged and thankful to have a renowned JV partner to complete this prestigious project, which symbolises a great milestone for the Group. The completion of the (power) plant underlines the strong relationship and collaboration between JAKS, CPECC and the Vietnamese government,” said JAKS chief executive officer Andy Ang Lam Poah.