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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
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.
SUBANG JAYA, 2 December 2020 - JAKS Resources Berhad’s (“JAKS” or “the Group”) has received confirmation today that the Vietnam authority has officially acknowledged that the first unit of its Hai Duong build-operate-transfer (“BOT”) thermal power plant has commenced operation on 24 November 2020 following the completion of the construction of the said unit. The second unit is scheduled for completion in the second quarter of 2021.
After nearly 10 years of construction, Hai Duong BOT Thermal Power Plant in Quang Thanh commune, Kinh Mon town officially launched commercial power unit No. 1 at 0:00 on November 24, providing 600 MW of electricity per hour. for the national grid system. It is known that at 19:00 on November 23, Jaks Power Co., Ltd., the investor of the Hai Duong BOT Thermal Power Plant, completed all performance tests, running the initial capacity test. Machine number 1. With the efforts of Jaks Electricity Co., Ltd, Unit 1 has connected to the national power grid 1 week before the deadline of the BOT contract signed with the Ministry of Trade on November 31, 2020. According to The plan, unit 2 of Hai Duong BOT Thermal Power Plant will be commissioned in early December this year and will generate commercial electricity to join the national grid before the coming Lunar New Year.
