The USD amount of the cumulative recognised revenue of the EPC contract was USD410.60 millions. The EPC 2 contract amount is USD454.50 millions, leaving a balance of USD43.9 millions (RM180 million) to be billed vs RM81.7 million outstanding as provided by the management. It is clear that there is variation orders instead of pure forex differences.
The management clarify that the current private placement is primarily intended for the LSS4 and not meant for the 10% optional interest in JHDP.
The company has no plan to exercise the 10% option well before expiry. It seems that the company is planning to take up the 10% option using the dividend from JHDP. Hence, it is likely to take up the option only when it is due in 3 year from COD.
JHDP is likely to distribute dividend in mid 2022.
The company acknowledged that there were initial problems relating to power plant operation but were duly rectified by the contractors. The power plant was also shut down for maintenance works which was in accordance of the PPA and has not affected capacity payment.
Costs of solar panels have risen 4 times, this is a concern. However, Jaks has yet to lock in the price for the solar panels and the management believe the cost will normalise in Q3. IRR for LSS4 is in the mid to high single digit.
Gross electricity output of 1.1b Kwh and net output of 1.0b Kwh are definitely indication of operational problems because the anciliary electricity consumption is about 9% of gross output which is way higher than the rated 6.5% consumption. However, it is understandable as the power plant was operating at low utilisation rate, hence lower efficiency.
The rated optimal annual net output of a 1,200MW power plant is about 8b Kwh which is around 2b Kwh per quarter. JHDP’s 1.17b Kwh output (prorated to a full operating quarter) in Q1 is only about 58% of targeted level. It is difficult for a power plant to achieve optimal efficiency at such output level. As we are aware, energy profit is highly dependent on the
plant operating efficiency. Mong Duong II was having negative energy profit in few years of operation due to efficiency problems. Therefore, I m not surprised if energy profit is minimum, if not loss.
Assuming that capacity payment is 80% of total tariff payment and there was no energy profit in Q1 due to low efficiency, under normalised operation, profit sharing from JHDP would have been RM30m / 80% = RM37.5m. Hence, annual profit sharing projection will be RM37.5m/ 156 days x 365 days x 2 Units = RM175m.
Many were asking about project cost savings. Let me clarify. Project cost savings has no immediate and significant impact on the profit reporting by JHDP as it is not adopting the new accounting standard where cost savings will be taken upfront as a one time gain upon project completion. Any cost savings will be reflected through reduced future depreciation charges. This accounting treatment was confirmed by the vietnam auditor earlier.
Thank you
DK