KUALA LUMPUR: Jentayu Sustainables Bhd can meet 16.3 per cent of Sabah's total electricity requirements from the development of two run-of-river hydro power plant projects, according to KAF Equities Sdn Bhd.
The two projects, collectively known as Project Oriole, will be developed at Sungai Maligan and Sungai Padas with a capacity of up to 31MW and 129MW respectively.
KAF said Project Oriole could also plug some of the demand gap caused by the delay of the commencement of previously planned projects such as the Upper Padas hydroelectric project (180MW), which had yet to be built.
Its analyst Nabil Zainoodin said Project Oriole was dubbed as the largest run-of-river hydropower plant project in Malaysia as it redefinec the limits of small hydropower plant in the country.
"With a total installed capacity of up to 160MW and assuming a load factor of 67 per cent, the plants are expected to have an annual generation capacity of around 920GWh, more than five times the total energy generated by all run-of-river hydropower plants in Malaysia," Nabil said in a report recently.
KAF said there was a requirement for an additional 392MW in Sabah by 2027, adding that the consistent energy dispatch from hydropower plants would provide voltage stability to the grid, consequently improving electricity supply services in the state.
"Sabah has the highest power disruption in the country. The estimated system average interruption disruption index (Saidi) for Sabah in 2021 is of 321.3 minutes/year/customer compared to 45.2 minutes/year/customer in Peninsular Malaysia, and 96.5 minutes/year/customer in Sarawak (based on the latest available data from Sarawak Energy)," Nabil said.
The proposed tariff is expected at 29 sen per kiloWatt hour (kWh) and the current Sabah Electricity Sdn Bhd's average generation cost of about 42sen/kWh as of 2020, which is much higher than the electricity tariff rate paid by consumers.
"Project Oriole will help to reduce the average generation cost and provision of a tariff support subsidies by the federal government," Nabil said.
Jentayu recently received letter of approval from the Sabah state government to undertake the development of Project Oriole
The company is procuring all necessary approvals from the Energy and Natural Resources Ministry, the Energy Commission and other relevant state authorities to execute the power purchase agreement (PPA), which is targeted on August 30 this year.
Jentayu's transformation strategy is expected to begin with a series of proposed corporate exercises including special cash dividends of 30 sen per share totaling RM30 million, bonus issue of 101 million new shares with 152 million free bonus warrants and rights issue of 101 million at an issue price of 30sen per rights share to raise RM30 million.
"Excluding bonus warrants, these exercises will triple Jentayu's share base to 304 million. The bonus warrants may be exercisable within 10 years and will be immediately detached from the bonus shares upon issuance and traded separately on March 3, 2022," Nabil said.
KAF said value accretive acquisition would likely drive Jentayu turnaround plan as the company was also expected to complete the acquisition of Ohana Specialist Hospital in the first quarter of 2022 and subsequently the acquisitions of Telekosang Hydropower Plant and solar farm in the second quarter.
The firm maintained a "Buy" call on Jentayu with adjusted target price of RM1.36 from RM4.08, post-corporate exercise.