KUALA LUMPUR: Jaks Resources Bhd believes that its joint-venture (JV) company in Vietnam can generate between RM2.4 billion and RM2.8 billion annual revenue, from the first quarter (Q1) of 2021.
The bullish forecast is due to Jaks Pacific Power Ltd's coal-fired power plant there.
Jaks Pacific, a 30:70 per cent JV between Jaks Resources and China Power Engineering Consulting Group Corporation, is the owner of Jaks Hai Duong power plant (Hai Duong) with 1,200 megawatts capacity.
The power plant has a 25-year concession with fixed capacity payments convertible to US dollars guaranteed by the Vietnamese government.
Jaks Resources chief executive officer Andy Ang Lam Poah said its investment in Jaks Pacific would generate a more sustainable and predictable income stream to balance off its cyclical construction business.
"Given the current scenario of the local construction industry and effects of Covid-19 pandemic on many businesses, we are considered lucky to have this power plant which will provide stable and recurring income stream for the next 25 years upon completion by the fourth quarter of this year," he told the New Straits Times recently.
Ang said the concession income from the power plant would be a cushion given the current state of the Malaysian construction industry and effects of Covid-19 on many businesses.
With the total cost of US$1.87 billion, construction of the power plant began in Q1 of 2016.
The project was funded by debt (75 per cent) and equity (25 per cent).
As at August this year, about 95.5 per cent of the overall construction work has been completed.
Ang said Jaks Resources had the option to subscribe for an additional 10 per cent stake in Jaks Pacific and was currently working on exercising the option.
Hai Duong consists of two units of power plant, each capable of delivering an output of 600MW. Both units are expected to be operational by next year.
"The first unit of 600MW is on track and within the contractual commercial operation date (COD) which is in November 2020. This unit is currently undergoing testing and commissioning phase.
"Similarly, the second unit is on track and within the contractual COD which is scheduled in May 2021," said Ang.
He said Jaks has outstanding order book of RM413.8 million, of which RM267.6 million is derived from local construction works and RM146.2 million engineering, procurement and construction (EPC) contracts in Vietnam.
"These order book will contribute positively to our second-half of 2020 results. These contracts will run up to 2022 which will provide earnings visibility for the next two years," he said.
Apart from the ongoing power project in Vietnam, Ang said the company was interested in water infrastructure projects.
It expects to expand through acquisitions of existing water infrastructure, sewerage treatment plants and other infrastructure-related projects.
"These projects can provide immediate and sustainable earnings to the group. Of course, the pricing and valuation must be right for us. We also have a good opportunity to expand into water supply and other infrastructure constructions in Vietnam due to our good relationships with the local government.
"Hence, it comes several benefits and advantages of securing future concessions or projects that may be awarded. However, timeframe wise, it is still too premature to say as most are in the tendering stages," he said.
Jaks Resources is on the lookout to acquire suitable existing power plants in Malaysia, particularly in renewable energy which can immediately contribute positively to the group.
"We will continue to focus on power and energy sector in Malaysia. We have recently submitted the open tender for Large Scale Solar 4," he said.
Meanwhile, he said Jaks Resources had planned to undertake a right issue to raise a minimum of RM200 million for funding requirement based on the current situation and future business plans.
"The proceeds will predominantly be utilised for the subscription of an additional 30 million Jaks Pacific's shares for US$30 million (RM128.4 million).
"This is to maintain the Hai Duong power plant project's intended capital structure of 75:25 debt-to-equity ratio," he added.
A total of RM31.58 million will be used for partial repayment of borrowings, RM20 million for future business projects and investments, another RM10 million for initial expenses arising from the new ventures in Vietnam, RM4.42 million for working capital requirements and RM5.6 million expenses for the proposed rights issue.