Malakoff listing likely to stay on track for Q2 2015, analyst

PETALING JAYA: MMC Corp Bhd may likely go ahead with its long awaited US$1 billion listing of its power unit, Malakoff Corporation Bhd, in the second quarter of 2015, AllianceDBS Research.
"The Malakoff listing is slated for Q2'15 and is unlikely to be delayed again because the company has RM1.8 billion Junior sukuk due September 2015, which if not repaid will see a sharp increase in interest rate from 6.3%," analyst Chong Tjen San said in his report yesterday.
Malakoff recently notified the Energy Commission (ST) that the second phase expansion of its 1,000MW coal-fired power plant in Tanjung Bin, Johor will be delayed by six to 12 months because piling for the plant's main turbine building had given way.The initial expected commercial operation date was March 2016.
The delay in the plant fueled talk of another delay in the listing date of Malakoff which has been postponed twice before.
Malakoff is also expected to be slapped with a maximum liquidated liquidated and ascertained damages (LAD) of RM110 million for the delay, as per its power purchase agreement.
To recap, Alstom and its consortium partners Mudajaya and Shin Eversendai are the parties involved in delivering the Tanjung Bin project.
Alstom will supply all key power generation equipment and will be in charge of the overall engineering, project management and commissioning. Mudajaya is the main civil contractor, while Shin Eversendai is in charge of mechanical equipment and structure erection.
"We are still seeking details on who will bear the cost of the delays and whether there was a change in design work. If there were design changes, Malakoff will likely be liable.
"In the worst case scenario where the maximum LAD of RM110m is imposed, this would shave 2 sen off our sum-of-parts value, taking into account MMC's 51% stake in Malakoff," said Chong.
"More importantly, we do not think this will derail the listing of Malakoff," he added.
MMC's share price has fallen 6% year-to-date compared to the Kuala Lumpur Composite Index's (KLCI) 2% gain due to disappointing earnings as a result of Tanjung Bin maintenance, delays in Malakoff listing, and the abortion of the P3 shipping alliance.
In 2013, MMC's overall profitability was dampened by poor results at Malakoff due to scheduled maintenance shutdowns at its boilers.
Malakoff's revenue fell 16% to RM4.7 billion in FY13, while earnings before interest, taxes, depreciation and amortization (ebitda) fell 21% to RM1.8 billion.
The maintenance work at Tanjung Bin had been completed in February-March this year and was reflected in MMC's Q2'14 results, which saw its Energy & Utilities earnings surging 45% to RM421 million.
"There will be further improvements in Q3'14 when it receives a full quarter of capacity payments.
"Tanjung Bin's availability factor has improved from 50% in Q1'14 to 70% in 1H14, and is 80% currently. In the medium to longer term, earnings will also be anchored by the completion of the new 1,000 MW plant at Tanjung Bin and its 50% stake in Macarthur Wind Farm," Chong said.
MMC, controlled by reclusive Malaysian tycoon Syed Mokhtar Al-Bukhary, took Malakoff private in a 2006 deal, which valued the company at about US$2.6 billion.