KUALA LUMPUR (Oct 30): Gamuda Bhd will establish a joint venture (JV) company to develop a 187.5 MW hydroelectric power plant in Tenom, Sabah through a private finance initiative with the total project cost estimated to be around RM4 billion, including interest during construction.

According to Gamuda, the project will be delivered via the JV company’s wholly-owned unit Upper Padas Power Sdn Bhd (project developer), and is estimated to have a construction period of five years and an initial operating period of 40 years.

As part of the proposed JV, a power purchase agreement (PPA) is to be finalised and entered into between the project developer and the offtaker Sabah Electricity Sdn Bhd.

In its announcement with Bursa Malaysia, Gamuda said it has signed an agreement to form a JV company namely UPP Holdings Sdn Bhd. The group will hold a 45% stake in the JV company, while Sabah Energy Corp Sdn Bhd (SEC) and Kerjaya Kagum Hitech JV Sdn Bhd (KKHJV) will own the remaining 40% and 15% respectively. The current paid-up capital of the JV company is RM1 with 1 ordinary share issued.

“It is the intention of the JV partners to fund the proposed JV via a combination of internally-generated funds and borrowings with minimum debt to equity ratio of 80:20,” said Gamuda. As at end-July 2023, Gamuda had RM6.92 billion in total borrowings.

On the rationale of the proposed JV, Gamuda said the project is in line with the group’s long-term environmental, social and governance (ESG) strategy and commitment.

“Sabah currently only has less than 12% reserve margin of electricity supply and coupled with increasing demand by the industrial sector for green energy, there is a need to further increase electricity generation to ensure a stable base load. As published in the Sabah Energy Roadmap and Master Plan 2040, the state currently has a dependable capacity for electricity of approximately 1,180 MW as of 2021.

This project, upon completion, will provide additional generation capacity of 187.5MW for Sabah, delivering up to 1,052GWh of clean energy per annum,” said Gamuda, adding that the project is expected to contribute positively to the group upon commencement of construction for the next 45 years.

Barring unforeseen circumstances, the project is expected to start construction in 2024 with commercial operation to start in 2029.

Shares of Gamuda closed down four sen or 0.87% at RM4.58, giving it a market capitalisation of RM12.35 billion.