KUALA LUMPUR: Malakoff Corp Bhd plans to bid for a mine-mouth power plant in Indonesia and possibly build another coal-fired power plant in Tanjung Bin, Johor, to export electricity to Singapore.
The expansion of its electricity generation business in the region is part of the plan by Malaysia’s largest independent power producer (IPP) to increase its generation capacity to 10,000mw by 2020 from 5,500mw currently.
In a draft exposure prospectus issued last Friday, Malakoff revealed its plan to expand its capacity in Malaysia to 7,000mw by 2020 from the current 5,020mw.
It is already adding another 1,000mw to the existing 2,100mw coal-fired power plant in Tanjung Bin. The project is slated for commercial operation in March 2016.
To reach its 7,000mw target, Malakoff plans to participate in the Energy Commission’s proposed competitive bidding for the construction of another 3,000mw of coal-fired power plants in the peninsula.
“We believe that we have a competitive advantage, as we are one of the few IPPs in Malaysia with a proven track record and experience in the development and operation of a coal-fired power plant. In addition, we can leverage on ready access to requisite land and existing coal handling infrastructure at our existing Tanjung Bin site for the new coal-fired power plant,” the company said.
On its plans to export power to Singapore, Malakoff is studying the feasibility of a new coal-fired power plant at the existing Tanjung Bin site that will target the export market of Singapore.
“We intend to develop our capabilities to become a merchant power operator in selected foreign markets,” it said.
Unlike Malaysia, in Singapore, power supply is through a bidding process where the cheapest power plant gains the most.
On its plans in Indonesia, Malakoff said it intends to participate in the upcoming bidding exercise that is expected to be issued by Perusahaan Listrik Negara, the Indonesian national electricity company, in the first half of 2013 for the construction and operation of an up to 1,800mw mine-mouth power plant in south Sumatra, Indonesia.
Malakoff also plans to expand its water production business by almost doubling its effective water production capacity from approximately 358,550 cu m of water per day to approximately 530,000 cu m of water per day and diversify its asset portfolio by building a renewable power generation portfolio of 300MW both domestically and internationally.
According to the prospectus, Malakoff’s IPO involves the sale of 760.87 million shares, accounting for 30.4% of the company’s expanded share base of 2.5 billion units post listing. This comprises a public issue of 500 million new shares and an offer for sale of 260.87 million shares by existing shareholders of the company.
Malakoff did not specify the issue price for its IPO, hence, the amount to be raised from the exercise was not stated.
The company, however, said it is setting aside 90% of its IPO proceeds to redeem its debt instruments while 5% and 2.5% will be earmarked for business expansion and working capital respectively.
Malakoff plans to pay out between 50% and 75% of its net profit as dividends after its relisting.
The prospectus indicates that Malakoff, a 51% owned subsidiary of MMC Corp Bhd, intends to pay the dividends from the cash generated from Malakoff’s operations after allocating adequate funds for capital expenditure and working capital needs.
“As part of this policy, our company targets a dividend payout ratio of 50% to 75% of our consolidated profit attributable to equity holders under the MFRS (Malaysian Financial Reporting Standards), beginning Jan 1, 2013,” Malakoff said.
The company, which did not indicate its listing date on Bursa Malaysia’s Main Market, said its shareholder rewards will depend on factors including the firm’s financial performance, cash and debt levels apart from its capital requirements.
Based on the draft prospectus, Malakoff’s net debt is RM10.7 billion as at end September 2012, and this figure is expected to come down by about 20% with the proceeds from the listing.
Its earnings before interest, income tax, depreciation and amortisation (Ebitda) for the nine months as at Sept 30, 2012 was RM1.6 billion. For the full year ended 2012, it was RM2.3 billion.
The move will see MMC reducing its interest in Malakoff to associate level under its plan to relist the unit.
Post listing, MMC, which now holds a 51% stake in Malakoff, will see its interest diluted to 37.8% due to the issue of new shares and sale of existing shares.
On the sale of existing shares amounting to 260.87 million shares, the biggest seller is the Employees Provident Fund (EPF) that is divesting 113.9 million shares followed by MMC Corp which is disposing of 74.8 million shares.
Malakoff was initially set up in October 1975 as a plantation company and was listed on the then Kuala Lumpur Stock Exchange in 1976. Thegroup revised its corporate direction which led to the sale of its plantation business, hence , making way for its venture into electricity-generation operations in 1993.
Malakoff was delisted from the exchange in May 2006 and became a private entity where MMC owns a controlling 51% stake in the subsidiary. The EPF owns 30% while Kumpulan Wang Amanah Pencen holds 10%. The remaining 9% is held by private equity funds.
This article first appeared in The Edge Financial Daily, on Jan 8, 2013.