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 The purpose of this article is to provide timely analysis as new information is discovered.

Why Looking at  Vinh Tan 1 ?

Mong Duong II, Hai Duong , and Vinh Tan 1 are all foreign owned power plants in Vietnam operating under 25 years BOT contracts with capacity around 1,200 MW. All their power purchase agreements were signed around 2012.

Therefore, terms and conditions of these BOT contracts should exhibit extreme high similarity, if not identical.

Vinh Tan 1 Thermal Power Plant

Located in Vietnam's southern province of Binh Thuan.

The coal-fired power plant includes two 620-MW super-critical generating units owned by a consortium led by China Southern Power Grid, and constructed by CEEC. CEEC is a subsidiary of CPECC who is Jaks' partner in JHDP.

The plant, with a total investment of about US$1.76 billion, is the biggest project invested by Chinese companies in Vietnam, as well as the first BOT (Build-Operate-Transfer) investment made by China in the country. Both its design and construction adopt Chinese standards.

Vinh Tan achieved full commercial operation on 27th November 2018 (COD).

First contract year operation data of Vinh Tan 1

http://www.cnr.cn/gd/gdkx/20191206/t20191206_524886717.shtml

In the first contract year, the two units of the project continued to maintain safe, stable, and high-load operation. The unit load rate reached 95.80%, the cumulative power generation was 8.686 billion kWh, the cumulative power sales were 8.194 billion kWh, and the annual utilization hours were 7,238 hours. The available hours specified in the power purchase agreement were completed 17 days in advance.

Important assumption

I managed to obtain the 9 months abbreviated results of its holding company, China Southern Power Grid. I will be trying to "extract" the operating results of Vinh Tan 1 with one important assumption;

"The increase in profit attributable to non controlling interests (PATNCI) is solely pertaining to Vinh Tan 1"

Therefore, the validity of the calculation below relies heavily on the validity of the assumption above.

Is there any merit in the assumption ?

Vinh Tan 1 began operation on 27th November 2018. There is only 1 month of operation in 2018 compared to full 12 months of operation in 2019. Vinh Tan 1 is a signification subsidiary of China Southern Power Grid. Hence, I believe the sharp increase in PATNCI in 2019 is significantly a result of full operation of Vinh Tan 1.

Data

Vinh Tan 1 is 55% owned by China Southern Power Grid

The PATNCI of China Southern Power Grid for 9 months ended 30th Sept 2019 was RMB 1,127m ( 9 months 2018 : RMB754m)

The PATNCI of China Southern Power Grid for 2018 which is attributable to Vinh Tan 1 was RMB56m

Calculation

Increase = RMB 1,127m - RMB 754m =  RMB373m

Prorate to 12 Months = RMB373m/9 x 12 = RMB497m

Add 2018 PATNCI = RMB497m + RMB56m = RMB553m

100% Vinh Tan 1 PAT = RMB553 / 45% = RMB1,230m

At 7 USD/RMB Ex Rate = RMB1,230m / 7 = USD176m

At 4.2 USD/RM Ex Rate = USD176m x 4.2 = RM738m

Conclusion

Vinh Tan 1 has proven that power plants under BOT contracts in Vietnam are highly profitable.

For Jaks,

@30% sharing = RM221m = EPS RM 0.34

@40% sharing = RM295m = EPS RM 0.45

Hence, 10 times PE values Jaks between RM3.40 to RM4.50 and 15 times PE values Jaks between RM5.10 to RM6.75.



Thank you for reading. Happy Investing !



DK66

Caution: Please take note of the assumption

https://klse.i3investor.com/blogs/Jaks%20resources/2020-03-03-story-h1484685319-Jaks_Resources_A_Wild_Estimate_Based_on_Vinh_Tan_1_s_Abbreviated_Result.jsp
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