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Introducing Jaks Resources Vietnam Thermal Power Plant

JAKS RESOURCES(Jaks)在2011年争取的越南海阳燃煤电厂项目在经过了6年的风雨终于开工建设了。由于项目总投资达18.685亿美元,JAKS无法找到任何银行资助该项目,所以电厂的建设推迟了好几次,期间更换了2个中国伙伴。直到于2015年7月Jaks与中国电力工程顾问集团有限公司(CPECC)达至协议。Jaks让出项目控制权从以往60:40改为30:70的股权合资开发此工程。CPECC负责融资及全部工程建设。CPECC在进行发电和输变电厂的工程非常有经验。参与了约90%的中国煤电工程。共完成了49,000兆瓦燃煤厂工程。

为确保整个项目能够圆满完成,CPECC承担全部责任完成电厂建设,包括如需要额外的资本。 JAKS在建设期间将获得项目的4.5455亿美元工程。而此工程也将由CPECC承包。实质上,JAKS肯定会在施工期间赚取大约4亿令吉。此利润将流回合资公司充当JAKS的股权资金。换句话说,JAKS只需要拨出2亿令吉来拥有电厂30%的股份。完成发电厂项目后,JAKS在3年内有权向CPECC以成本购买另外10%而拥有合资公司的40%股权。

CEO洪南坡在2011年下了一个胆大包天的赌注,在世界面对金融风暴时刻,啃下一个陌生领域而且需要庞大资金的巨大BOT模式燃煤电厂工程。当时越南高速经济成长造成严重电力短缺,以至越南政府颁发了多个发电厂工程。因为资金需求庞大,大型的燃煤电厂工程都以BOT模式颁发了给外资企业。当时便有3个类似燃煤电厂供外企竞标。Mong Duong燃煤电厂是颁发给美国的AES Corporation (51%), Posco Energy (30%) and China Investment Corporation (19%), 越南永新燃煤电厂一期BOT项目是由中国南方电网有限责任公司(55%)、中国电力国际有限公司(40%)和越南煤炭集团电力有限公司(5%)共同投资。而越南海阳燃煤电厂项目则颁给Jaks。CEO洪南坡被访问时表示去越南本意是寻找内行的水务工程,可机缘巧合发现越南严重缺电,所以竞标陌生的燃煤电厂工程。

可看到得标者个个都是几百亿市值,财力雄厚,经验丰富的跨国集团。何以势单力薄的Jaks也会得标 ?也许当时正处金融风暴而且项目多,竞标者少。

Jaks於2011年动工清理场地后便处于静态,前后换了2 个中国伙伴都因为无法得到任何银行资助而无法动工。2014年5月中越南海纠纷引发了一场“反华暴动”,中国冻结了对许多越南工程。Jaks已耗资2亿令吉。眼看将要泡汤。曾一度与TENAGA商讨合作,后来中国越南领袖互相拜访重新友好。中国大减钢铁产能而冻结燃煤产量导致煤电厂工程喊停。此举导致煤电公司出走寻找机会。又逢中国发起的一带一路计划给合格的项目得以融资。同时,越南政府也修改了政策以便项目的条例符合中资银行的严格融资条件。机缘巧合,天时地利,海阳燃煤电厂项目办妥了。

按照购电协议,电力售价将随原料价格波动。意味着业务盈利贡献获得保证。Jaks管理层曾透露内部回酬IRR介于12%,PAYBACK PERIOD为8至9年。如果发电理想,可获1.5亿美元的常年收入。Jaks 40% 股 权 可 得 2.58亿令吉,相等于每股盈利 RM0.53。

燃煤电厂于2016年3月28日动土。机组建设工期为42+6,2016年10月1日开始计时,按照里程碑计划2020年2月28日#1机组完成临时移交,2#机组顺延6个月。工程正如火如荼的进行中。至今,估计已完成50%。

Jaks越南海阳燃煤电厂项目有何风险 ?

越南海阳2X600MW燃煤电厂,是中国能建所属中国电力工程顾问集团有限公司(简称“中电工程”)与马来西亚JAKS以70:30投资股比合作开发和建设的越南BOT项目。该项目是“一带一路”沿线的重点项目,总投资约18.685亿美元,是目前中国企业在越南单笔投资额最大的项目。在此探讨海外BOT项目投融资所涉及的主要风险及防范措施。

越南海阳BOT电厂项目位于河内以东100公里,建设两台600MW燃煤机组,采用四炉两机配置,计划为海阳省及河内输送电力,是越南政府吸引外资开发电力建设的重点项目。马来西亚的Jaks公司在2008年获得该项目的开发经营权。随后Jaks与越南工贸部经过近三年的谈判,于2011年6月签署了25年特许经营期的BOT合同,同时签署的有关协议还包括与越南煤炭公司的购煤协议(25年);与越南电力公司的购电协议(25年);与海阳省人民委员会的土地租赁协议;政府担保与承诺协议。根据购电协议,海阳电厂所发全部电量由越南电力公司收购;煤价与电价联动,即煤价上升,电价也随之上涨,投资方的收益始终保持在一个稳定范围内。根据政府担保协议,越南政府对越南煤炭公司和越南电力公司的付款违约提供政府担保,项目收益可以100%转换为美元转入到投资方的国外账户。项目建设期54个月,2020年终必须完工。项目收益享有优惠税务,施工材料与设备进口税收全免。25年特许经营期满后移交越南政府。

中电工程与Jaks经过一年多的谈判,于2015年7月签署了合作投资协议,中电工程为项目70%股东,Jaks为30%股东,由中电工程负责项目的银行融资并承担EPC工程建设。

中国工商银行,中国建设银行股份有限公司,与中国进出口银行三家银行集团为此项目提供了75%的融资。

国家政治风险

越南近年来与中国因南海主权问题曾发生多次摩擦,在该国开展投资项目有一定的国家风险和政治风险。但中、越两国地缘相邻,经济上互补性很强,越南经济对中国的依赖更大,从长远发展角度看表现出积极主动的合作态势。

战争、征收、汇兑和罚没属于政府违约范畴,可能造成企业无法继续正常生产以及项目收益无法兑换成美元汇出。虽然越南政府为海阳项目提供了项目收益100%转换成美元的保证,但在25年运营过程中仍然存在因故无法兑现该保证的可能性。

海阳项目的投资上,中电工程分别就股权和债权投保了中信保海外投资险,其中债权险是银行融资的要求,股权险是出于企业自身在越南进行投资的资本金安全考虑。通过投保海外投资险,发生上述风险时,先由中信保赔偿企业相应的损失,中信保再代表中国政府向越南政府索要保险赔款,企业面对的风险实际上转成由中信保承担。

投资收益风险

投资收益风险,主要考虑项目投资回报率及除政治风险以外的与项目建设、运行有关的主要风险是否得到有效分配和规避。通过购煤协议,电厂特许经营期25年内需要的原料通过25年期购煤协议得到基本保证。协议还规定,如出现越南煤炭公司因故不能提供燃煤,需由BOT公司自行购煤的情况,煤价的超出部分由越南煤炭公司负责补偿。

购电协议中电价由容量电价、电量电价及补充电价三部分组成。根据购电协议,电厂建成即使不发电,越南电力公司也要支付容量电价。电厂所发电量将全部由越南电力公司承购,即电量消纳有保障。补充电价主要包括实际土地赔偿费用。

通过土地租赁协议,项目建设所需土地得到有效保证。

通过政府担保协议,越南政府对越南煤炭公司及越南电力公司的付款违约提供政府担保,即如发生上述两家公司付款违约行为,其付款责任由越南政府承担。同时,越南政府保证投资方卖电获得的当地货币收益100%可以转换为美元汇出越南境外,有效规避了当地币发生大幅度贬值的风险。

针对项目投资回报率,中电工程聘请了国际著名财务事务所担任投资顾问,建立项目财务模型,在反复落实模型主要输入条件后,得到了比较理想的项目收益率。该收益率是基于长期的购煤、购电协议前提条件下获得的,因此较可靠。

海阳项目的投资收益风险通过上述各项协议得到了有效化解和分摊,并且项目投资收益率较为理想,该项目的投资收益风险可控制。

法律及不可抗力风险

根据购电合同PPA条款,因法律的变化对项目投资方带来不利影响的风险由越南工贸部负责承担,越南政府提供担保。合同也保障该项目不被不可抗力(天灾人祸)突发事件所影响。

另外,根据中电工程委托的法律事务所出具的律师工作备忘录内容,中电工程对本项目的投资不违反中国及越南两国法律规定,所规划的投资方案不存在法律障碍。法律事务所对境外投资架构的合法性、中电工程对BOT项目公司的控制权、跨境担保的合法性以及关于融资关闭逾期的法律后果出具了相关法律意见,均不存在法律障碍。

 
Understand the Key Contractual Obligations of the project award
 
Investment certificate
  • JHDP shall be entitled to 10% tax rate for the full term of the project.
  • JHDP shall be exempted from corporate income tax for 4 years and 5% tax rate for another 9 years from 1st year with taxable income or 4th year whichever is earlier.
BOT contract
  • 25 years from commercial operation date (COD).
  • The power plant shall be transferred to Vietnam Ministry of Industry and Trade (MOIT) at no charge after 25 years.
  • JHDP shall pay US$60,000 per day per unit for each day of delay after the deadline. The deadline for unit one shall be 48 months and 54 months for unit 2 after the construction start date. Subject to max of US$15m.
  • JHDP shall pay US$150 per KW shortfall below the contacted capacity which is 1112MW subject to max of US$8m.
  • JHDP company may terminate the BOT contract due to Vietnam side default or government events such as war, invasion, terrorist, revolution, strikes, none performance of GGU, change of laws.
  • In the event of non-government force majeure like earth quake, flood etc, either party can terminate the BOT contract and MOIT has to purchase the assets based on the terms set out in the BOT contract. However, MOIT has the option to continue to pay the capacity charges and JHDP has no right to terminate.
  • http://haiduongnews.com/economy/construction-progress-of-hai-duong-thermal-power-plant-too-slow-75824 - the MOIT on September 19, 2016 officially announced that the start date of the BOT contract was October 1, 2016.
Government guarantee (GGU)
  • The GGU provides Vietnam Government Guarantee on all payment obligations of MOIT under the BOT contract and the EVN under the PPA.
  • The guarantee on PPA is for 18 years from COD, and the full term of the BOT in the case of MOIT.
  • Guarantor shall also pay interest on any sums outstanding.
  • GGU also guarantee USD currency conversion and right to remit
  1. repayment of principal, interest, etc under financing document
  2. quarterly and annually profit distribution to JPP
  3. repayment of charter capital
  4. any expenses due to contracts goods imported
  5. any expenses due to foreign service contracts
  6. any payment that are due in foreign currency
Power purchase agreement (PPA)
  • EVN shall purchase dependable capacity and the net energy output from JHDP.
  • JHDP shall finance, design, build, operate and maintain the power plant.
  • PPA shall have a duration of 25 years from the COD.
  • No sales to third parties other than EVN.
  • Non-recourse obligation precludes EVN from further right or claim against or recourse to the investors other than the assets of the BOT company (Vinh PPA)
  • Liquidated damages payable by BOT company for outages beyond allowable limit at 105% of capacity payment (Vinh PPA)
  • Liquidated damages payable by BOT company for Output at delivery point either less than 97% or more than 103% of output required under dispatch instruction at 5% of capacity payment (Vinh PPA)
  • JAKS’ POWER PURCHASE AGREEMENT WITH VIETNAM ELECTRICITY (“EVN”) (“PPA”) - The PPA provides for EVN to purchase and the BOT Company to sell electricity generating capacity and electricity generated by the Facility for 25 years after the commercial operation date of the Facility unless extended or earlier terminated as stipulated under the PPA. The tariff charged by JAKS Hai Duong to EVN comprises the capacity charge, energy charge and supplemental charge. Fuel (coal and secondary fuel) and limestone costs will be passed-through costs under the PPA.
The Capacity Charge is a fixed payment that is paid each period for each kilowatt of available (not dispatched) capacity.  It includes fixed charges involved in the construction, operation, and maintenance of the power plant, including charges for: – Repayment of the principal and interest of the debt used to construct the facility – Return on equity capital invested – Fixed operation and maintenance (O&M) costs that are independent of the amount of energy generated (e.g., staffing costs, administrative expenses, operator fee, insurance premiums, etc.) – Possible fixed costs related to fuel supply and transportation, such as demand or through-put charges, or minimum take-or-pay obligations.
The Energy Charge is paid each period for each kilowatt hour of energy dispatched and delivered at the agreed delivery point during that period.  It includes variable costs involved in the generation of the energy delivered, including charges for: – Commodity charges for each unit of fuel used, including the cost of fuel and its transportation to the plant – Variable operation and maintenance costs (e.g., spare parts, lubricants, and other consumables) – A major maintenance sinking fund to cover the costs of required turbine maintenance based on usage.
The Supplemental Charge covers other costs not included in either the Capacity or Energy Charges, including:
– The costs of start-ups beyond an agreed number each year reflecting the cost of fuel per start-up and likely a contribution to the major maintenance sinking fund
– The costs of ancillary services provided if such services are included in the scope of the PPA
– Any supplemental charges for repairing damage to the facility as a result of a Force Majeure event if such repair is the responsibility of buyer.
Coal supply agreement (CSA)
  • Vinacomin shall supply anthracite coal for the full term of the BOT contract.
  • Failure of supply gives JHDP the right to source for alternative coal from domestic or foreign sources and seek compensation from Vinacomin for additional costs.
  • JAKS’ COAL SUPPLY AGREEMENT WITH VIETNAM NATIONAL COAL-MINERAL INDUSTRIES GROUP (“VINACOMIN”) (“CSA”) - The CSA provides for the delivery by Vinacomin and purchase by JAKS Hai Duong of coal for use in the Project from testing and commissioning until the termination of the BOT Contract or other circumstances as stipulated under the CSA. The quantities of coal to be supplied by Vinacomin will be determined, among other things, by the actual plant load factor and operating performance of the Facility and the quality and other characteristics of the coal used at the Facility. JAKS Hai Duong will have the right to buy from other coal sources in the event Vinacomin is unable to meet its obligations under the CSA and provided that the coal price from the other source have been agreed by both parties and approved by MOIT. There is no take or pay obligation (minimum order obligation) in the CSA.
Shareholders agreement (SHA)
  • Shareholders agreement dated 6 July 2015 entered between JPH, CPECC and JPP to regulate their proposed relationship as shareholders of JPP as well as certain matters relating to the management of JPP and also to govern their relationship in respect of matters related to JHDP.
  • The EPC cost for the project shall not be more than US$1.515b excluding working capital.
  • The total shareholder funding shall not be more than US$467.125m
  • Project financing based on debt to equity of 75:25
  •  In the event additional shareholder’ funding required other than due to project cost exceeding US$1.8685b, CPECC shall provide additional funding in the form of (i) additional RCPS which will reduce JPH effective economic interest and/or (ii) interest bearing shareholder loan at bank interest, at the option of CPECC.
  • JHDP Board of directors, 3 from JPH and 2 from CPECC. However, 3 years after COD, 2 from JPH and 3 from CPECC.
  • JPP Board of directors, 2 from JPH and 3 from CPECC.
  • In the event of deadlock, buyout of opponent procedures will be initiated.
  • CPECC irrevocably grants to JPH non-transferable rights (option) to increase its effective economic interest in JPP to 40% at such price based on cost of investment plus holding cost. The option is exercisable by JPH up to expiry of 3rd year after the COD.
JV agreement (JV)
  • The JV agreement provided that Jaks resources (JRB) shall execute subcontract agreement with CEEC in relation to its scope of work under the EPC Contract 2.
  • For EPC1 contract, CPECC contractors shall achieve the completion of the performance tests and satisfaction of the conditions for 1st generation unit by 42 months from agreed construction start date, or pay US$280,000 per day of delay. However, Jaks shall procure its subcontractor to pay the delay damages of US$120,000 of its EPC2 contract.
  • Under contracts EPC1 and EPC2, if the minimum output without fuel oil support exceed the guaranteed minimum output level, contractors shall be liable for damages of US$2,800 per KW.
  • Under contracts EPC1 and EPC2, damages of US$5,000 per KW is payable by the contractors if net output of electricity is less than the guaranteed net output by less than 3%. If more than 3%, the amount payable is US$13,500 per KW.
  • Under contracts EPC1 and EPC2, If the net heat rate of each unit is greater than the guaranteed net heat rate by 2.5% or below, damages of US$400,000 per kcal/KwH is payable. If more than 2.5%, Damages shall be US$800,000 per Kcal/KwH.
  • Under contracts EPC1 and EPC2, if limestone consumption rate is higher than guaranteed rate by 5% or below, contractors shall be liable for damages of US$465,000 per ton/h. if more than 5%, damages shall be US$930,000 per ton/h
 
Other Concerns
 
Jaks' Equity Funding Secured 
Source of funding for JPH equity commitment of US$140.14m
  • Already invested US$51.15m
  • Proposes to fund US$30m via external borrowings
  • Balance US$58.99m from cash generated from local and overseas contracts including the Vietnam project contracts.
  • Balance Equity commitment of US$110m
  • Based on construction earnings history of Jaks from Vietnam of 25% margin. The US$454m EPC2 contract at 25% profit margin (US$113m) is sufficient for the US$110m equity commitment.
JV partner Competency
中电工程承担了中国全国电力市场分析、电能消纳、电源电网规划、西电东送、全国联网,电力产业结构优化升级等电力发展规划研究工作;完成了中国大量发电工程和输变电工程的勘察设计工作,承接了几十个国家的数百项电力工程。中电工程开创了“以设计为龙头的EPC 建设模式”,圆满完成了中国首台600MW 、1000MW机组电站等一批EPC 总承包工程。中电工程在中国电力勘察设计行业的科研、标准化工作中发挥着主导作用,承担了中国约90% 的电力勘察设计科研、标准化任务,承担着电力新技术研究和国外先进技术的引进、消化和创新等工作。近十余年来,中电工程凭借其良好的经营业绩和资产状况,连续进入美国工程新闻记录 (ENR) “全球150强设计公司”和“世界225 强设计公司”排名,2015年分别名列第42 位和96位;在“2015全球最大250家承包商”排名中,中电工程名列第124位;首次进入“2015全球最大250家国际承包商”,排名第234位;连续位居前列进入“中国承包商、工程设计企业双60 强”,荣膺2014年“中国工程设计企业60强”第2名;中电工程所属六大区电力设计院多年连续进入中国勘察设计综合实力百强。
中国电力工程顾问集团有限公司 China Power Engineering Consulting Group Co. Ltd (‘CPECC’) CPECC was registered as a company under the laws of People’s Republic of China on 12 August 2003 and is a wholly owned subsidiary of China Energy Engineering Group Co., Ltd. CPECC had its name changed from China Power Engineering Consulting Group Corporation to China Power Engineering Consulting Group Co., Ltd., on Dec. 5th, 2014. It has its office at 65 Ande Road, Xicheng District, Beijing, 100120, People’s Republic of China and Mr Wu Chunli is the sole Executive Director of CPECC. CPECC holds ten (10) wholly-owned subsidiaries, including six (6) regional (Northeast China, East China, Central Southern China, Northwest China, Southwest China, and North China) electric power design institutes, China Power Construction Engineering Consulting Corporation Ltd., China Power Engineering Consulting Group Investment Co., Ltd., China Power Engineering Consulting Group International Engineering Co., Ltd. and China Power Engineering Consulting Group New Energy Sources Co., Ltd. CPECC, together with its subsidiaries, are integrated power engineering service providers and are engaged in providing integrative solution services for power projects to clients from various sectors e.g. government sectors, financial institutions, investors, developers and other authorities in respect of power projects, in both domestic and foreign markets. CPECC, including its subsidiaries, are involved in electricity planning studies, consultation and evaluation, survey and design, project supervision, EPC projects, investment and operation for power projects, and development of proprietary technology products.
中国能源建设集团有限公司 China Energy Engineering Group Co., Ltd (‘CEEC’) Founded on September 29, 2011, China Energy Engineering Group Co., Ltd. is an ultra-large energy engineering group under the direct administration of the State-owned Assets Supervision and Administration Commission of the State Council. It was founded on the basis of China Gezhouba Group Corporation (CGGC), China Power Engineering Consulting Group Corporation (CPECC), and subsidiaries of the State Grid Corporation of China and China Southern Power Grid Co., Ltd. that are engaged in power engineering, construction, equipment manufacturing and distributed in 15 provinces, municipalities and autonomous regions. CEEC is an ultra-large backbone enterprise engaged in a complete business chain ranging from power planning & engineering consultation, engineering, project contracting, equipment manufacturing to investment and operation. With a registered capital of RMB26 billion, currently the company has total assets of RMB187.5 billion and more than 160,000 employees. In 2013, it registered RMB158 billion operating revenues and RMB4.2 billion profits. 6 It is an engineering group featuring the greatest comprehensive strength, largest scale and broadest market in the energy engineering field of China. Domestically, the company undertakes most of the fossil fuel power and grid projects engineering and takes up 2/3 of fossil fuel power construction market and 1/3 of hydropower construction market. It has undertaken the engineering work for more than 200 major projects in over 20 countries and regions, and contracted projects in over 80 countries and regions around the world. Energy China was ranked the 465th in the Fortune Global 500 in 2014, its subsidiary CGGC was ranked the 37th in the Top 250 Global Contractors, and another of its subsidiaries CPECC was ranked the 42nd in the Top 150 Global Design Firms, all of them forming a main force in the energy engineering field both at home and abroad.
Strong Electricity demand
Mong Duong 2 thermal power plant, strive to produce over 8.1 billion kWh in 2016. According to information from the Mong Duong 2 Thermal Power Plant, since its inception, from April 2015 to December 2015, the plant has contributed over 5.3 billion kWh of electricity to the national power grid.
This shows that Mong Duong 2 power plant was immediately operating in full capacity upon operation in April 2015.
  • Vietnam to face power shortage by 2030
Viet Nam will likely face a power shortage in the period 2020-30 if electricity generation is not increased and there is not enough fuel (coal and gas) for generation.
The warning was made at the Viet Nam Energy Forum held by the Ministry of Industry and Trade (MoIT) in Hanoi on Thursday. Aug 9 2018
According to Viet Nam Electricity (EVN), to meet electricity demand for socio-economic development up to this year, EVN has completed 40 power plants with total capacity of 20,586MW.
By the end of 2018, total installed capacity of the sector is expected to reach 47,768MW (5.41 times higher than in 2003), ranking second in ASEAN (after Indonesia) and 25th in the world.
It is forecast that up to 2030, demand for electricity will continue to grow at a high level. The electricity sector will need to ensure 265-278 billion kWh by 2020 and around 572-632 billion kWh by 2030.
Thus, the growth rate in the period 2016-20 is 10.3-11.3 per cent per year and the period 2021-30 about 8-8.5 per cent.
Ngo Son Hai, Deputy General Director of EVN, said that the electricity supply in the years 2019-20 could be ensured. However, oil-fired thermal power plants would have to generate approximately 4.4 billion kWh by 2019 and 5.2 billion kWh by 2020.
“During the years 2021-30, the electricity system may not meet demand and power shortages could occur in the south,” said Hai.
Hai said power shortages may increase up to 2025 under scenarios including high load or the volume of water in reservoirs being lower than previous years. Furthermore, the gas projects of Bloc B and Ca Voi Xanh (Blue whale) and several others are being conducted slowly compared with the plan.
"Each of the 1,200MW coal-fired power plants in the south facing slow progress will worsen the shortage by 7.2-7.5 billion kWh per year," said Hai.
Strong Earnings Potential estimates derived from various sources
  • From News Media
  • The Star 7 July 2015
KUALA LUMPUR: “We expect our operating cash flow to be healthy over the next few years. During the project’s execution, JAKS will be able to also recognise an additional revenue from its participation in the engineering, procurement and construction contracts (EPCC) from the JV co,” JAKS chairman Tan Sri Hussin Ismail said.
“If we can achieve better-than-expected returns, we could see more than US$150mil (RM571.15mil) in annual recurring revenues, while recognising a bottom line performance from this venture,” Goh said.
Based on management estimate of US$150m, 40% share at USD/MYR of 4.15, works out to be EPS of RM0.45.
  • The Star  29 March 2016
HANOI, Vietnam: JAKS Resources Bhd is eyeing an internal rate of return of 12% for its Vietnam US$1.87bil (RM7.52bil) coal-fired thermal power plant project independent power plant (IPP) project. The company’s chief executive officer Andy Ang said after a ground breaking ceremony of the IPP here on Sunday that he was happy with the returns of the effort that had been put in over the years to bring this project to fruition. “The break-even should be slightly longer than 8 years. Bear in mind the concession period is 25 years,” he told reporters here in the outskirts of Hanoi at Hai Duong Province where the plant will be located. He also said that the project which will be led by the China Power Engineering Consulting Group Co Ltd (CPECC) may be complete earlier than scheduled in 2020. The company will enjoy recurring income from this IPP for 25 years from the date the plant commences commercial operation in 2020.
Simple calculation;      US$1.8656b / 8 years = US$233m
Operating income less depreciation = US$233 – 75m = US$158m
Jaks 40% share at USD/MYR of 4.15 =  RM262m = EPS of RM0.48
  • Peer Comparison 
  • Mong Duong 2 Power Plant in Vietnam (2x600MW)
Information sourced from AES corporation which owns 51% of Mong Duong 2.
AES-VCM Mong Duong Power Company, a joint venture between AES Corporation (51%), Posco Energy (30%) and China Investment Corporation (19%), developed the 1,240MW Mong Duong-2 (MD2) coal-fired thermal power plant in the Quang Ninh Province of Vietnam. 

The power plant was constructed on a build-operate-transfer (BOT) basis and comprises two generating units of 620MW gross capacity each. 

Mong Duong-2 is Vietnam’s first and biggest coal-fired BOT project and is also the biggest private sector power project undertaken in the country. The $2.1bn project was developed with 100% foreign direct investment. Ownership will be transferred to the government of Vietnam after 25 years of operation. 

Mong Duong 2 is a very close model for the Jaks power plant as; 
1. Both in northern Vietnam 
2. Both about 1,200MW capacity 
3. Both using domestic anthracite coal 
4. Both under foreign BOT guaranteed by Vietnam Government 
5. Both projects cost around US$2b 
6. Both Power purchase agreements signed with EVN 
7. Both coal supply agreements signed with Vinacomin 
8. Both under max 18 years loan tenure allowed by Vietnam government 

Based on financing agreement of Mong Duong 2, the BOT company to maintain debt service coverage ratio (DSCR) of 1.4x – 1.5x 

http://www.academia.edu/26270684/Mong_Duong_Power_Project_the_Largest_... 

The ratio of (Operating income before interest and depreciation) / (Total loan principal and interest payments) must be above 1.5x otherwise the loan defaults. 

As the loan is non-recourse in nature and the collateral is a non-movable object with no market resale value, the Banks would require very high certainty in earnings. In this case the capacity payment alone in the PPA which guarantee fixed annual payment for the tenure of the project must at least meet the DSCR requirements. 

Based on Jaks' Vietnam IPP loan of US$1.402b, interest of 6% (Est), Loan tenure of 18 years 
Annual principal repayment = 1.402b / 18 = 77.8m 
1st year interest repayment = 1.402b x 6% = 84.1m 

Based on 1.5x DSCR, Minimum operating income EBITA = (77.8+84.1) x 1.5 = US$242.85m 

Annual depreciation = 1.8685b / 25 = 74.7m 

Hence, Net Operating income = US$242.85 – 75.7 – 74.7 = US$92.45m 

Jaks 40% = US$92.45 x 40% x 4.15(us/rm) = RM153m / 546m = RM0.28 EPS 

In practice, the earnings must be much higher to be of comfort to protect the company from loan default risk due to earning fluctuations. 
 
Strong Cash Flow 
Information sourced from AES corporation which owns 51% of Mong Duong 2. 

https://s2.q4cdn.com/825052743/files/doc_presentations/2016/AES-Q4-FY-... 

Page 52 Mong Duong distributed US$46m to AES in 2016 

https://s2.q4cdn.com/825052743/files/doc_financials/quarterly/2017/q4/... 

Page 46 Mong Duong distributed US$51m to AES in 2017 

Therefore, Mong Duong distributed US$90m in 2016 and US$100m in 2017 to its shareholders

Base on the same projection, Jaks 40% = US$100m x 40% x 4.15 = RM166m / 546m = RM0.30 cash flow per share.


The main and sole purpose of this article is to share information relating to Jaks vietnam power plant. I acknowledge that certain crucial information, especially those critical to earnings calculation, is still unknown. Readers are advised to exercise care when relying on the above information for decision making.

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