KUALA LUMPUR: JAKS Resources Bhd expects to see a better financial performance for the year ending Dec 31, 2022 (FY2022), amid consistent and recurring contributions from its power-energy division and as the company becomes more active in the energy space.
The group, which is also actively involved in construction, expects the profit from its 30 per cent stake in a coal-fired thermal power plant in Vietnam to cushion the current soft construction outlook and COVID-19 pandemic, said its chief financial officer Lim Tiong Jin.
The 1,200-megawatt (MW) plant is operated through a 30:70 joint venture with China Power Engineering Consulting Group Co Ltd (CPECC), an integrated power engineering service provider in China.
The coal-power generation plant is JAKS' first foray into the power generation and other large-scale infrastructure projects as an independent power producer under a power purchase agreement with Vietnam Electricity, the largest power company in the country.
The plant achieved the commercial operation for its first 600MW unit in November 2020, while the commercial operation for the second unit was achieved in January 2021.
Lim said the share of profit from the group's 30 per cent stake in the power plant was the largest contributor to the group’s earnings at present.
The group expects the power plant to generate a fixed future payment stream over the 25-year concession period, which began from the fourth quarter of 2020.
“For construction, we now have about RM240 million in orderbook mainly for six local projects,” he told Bernama during a media visit to the power plant in Vietnam recently.
For the financial year ended Dec 31, 2021, its total share of profit from the 30 per cent stake in the Hai Duong power plant was RM140.7 million. It led to the company’s turnaround to a profit before tax of RM30.3 million from a loss of RM110.2 million in the previous financial year.
Meanwhile, the group has an option to increase its stake in the power plant to 40 per cent from the current 30 per cent.
“We are working to exercise that 10 per cent. Hopefully if everything goes well, it will be this year,“ said Lim.
In addition, the group is actively exploring to invest and expand operations in overseas markets, particularly Vietnam.
Lim said it is looking for opportunities to acquire existing power plants, solar plants, water infrastructure projects and sewerage treatment plants in Vietnam that can provide immediate earnings contribution to JAKS.
“We have a lot of interesting projects in the pipeline. If we can conclude that, it would be good. There are also a lot of parties coming to us for possible collaborations,“ he added.
JAKS maintains a healthy financial position with a low gearing of less than 1.0. The low gearing provides the group with the flexibility to increase its debts to fund any future accretive acquisitions.
Renewable energy opportunities in Vietnam
The coal-fired thermal power plant bodes well for JAKS to venture into other energy offerings such as liquefied natural gas (LNG) as Vietnam is looking to wean off its dependency on carbon-intensive coal in line with growing regional trends that could possibly intensify competition for the fuel.
Energy demand in Vietnam is expected to increase to 572–632 terrawatt-hours (TWh) in 2030 from 265–278 TWh in 2020 in line with growing industrialisation and economic modernisation.
To meet the growing demand, the country needs 60,000MW of electricity by 2020, 96,500MW by 2025, and 129,500MW by 2030; and to do so, the country needs to increase its installed capacity by 6,000MW–7,000MW annually and spend close to US$148 billion by 2030.
Lim said this represents a lot of opportunity for JAKS to venture into other renewable energy projects especially in Vietnam.
Currently, the group is exploring potential acquisitions of renewable energy projects, including solar farms, hydroelectric dams and LNG facilities, in both Malaysia and Vietnam.
In 2021, JAKS entered into two separate memoranda of understanding with the Sabah government’s investment arm Qhazanah Sabah Sdn Bhd and Vietnam-based T&T Group Joint Stock Company to explore collaboration possibilities in renewable energy.
Concurrently, the group is also looking to replenish its local construction orderbook, involving water infrastructure, roads and highways.
“Of course, we would want to grow this segment (power-energy division), and we are now going more into renewable energy.
“In Malaysia, we are involved in the fourth cycle of the large-scale solar (LSS4) programme, and the construction has started at end-March,“ he said.
JAKS is among the 10 companies that were selected for the LSS4 projects last year, which analysts predict will deliver a mid- to high-single-digit internal rate of return for the award winners.
The group targets to achieve commercial operation by the first quarter of 2023, which will provide JAKS with an additional stream of stable recurring income with a 21-year concession period, Lim said.
- Bernama
