Construction - Another five coal-fired plants to power SCORE OVERWEIGHT

- The Star reported that Sarawak Energy Bhd (SEB) plans to build another five coal-fired power plants with a combined generation capacity of 2,400MW under SCORE. They are: (i) Balingian II (300MW); (ii) Mukah West 1 (600MW); (iii) Merit Pila in Kalit Division (300MW); (iv) Mukah West II (600MW); and (v) Balingian I (2x300MW).

- Tenders for the Balingian I project had already been called earlier, for which we understand seven parties were pre-qualified.

- SEB highlighted during an international energy conference in Kuching yesterday that the total annual coal consumption of these power plants is estimated to be around 12.8mil tonnes.

- Interestingly, Sarawak has about 1.5bil tonnes of coal reserves. The measured reserves of 276mil tonnes are mostly located within the Mukah-Balingian area and Merit Pila in the central region.

- The Balingian plant itself would require an annual coal consumption of 3.2mil tonnes or some 80mil tonnes over its 25-year operating life.

- At the moment, gas constitutes approximately 50% of Sarawak’s energy mix – with hydro and coal contributing 35% and 15%, respectively.  The target is for coal to supply up to 20% of Sarawak’s future generation mix.

- While we had expected two new coal-fired plants to meet Sarawak’s long-term power generation target of 20,000MW, we are pleasantly surprised that that number has risen to five.

- This is in addition to two more hydro dams (Baram and Balleh) with a combined generation capacity of 2,500MW that are being lined up along with the development of another 1,000MW through several smaller dams.

- We foresee more urgency for SEB to prod the roll-out of its power programme, as the entire firm output of Bakum (1,771MW) and Murum (635MW) dams have already been taken up by pioneer investors operating at the Samalaju Industrial Park in Bintulu division.

- The rising prospects for infrastructure-related works to support these massive power projects would ultimately benefit local contractors with a strategic niche, notably Hock Seng Lee, KKB Engineering and Naim Holdings.  

- We also envisage Sarawak Cable as another key beneficiary of SEB’s rising capex cycle – where it is one of five parties that had originally been pre-qualified for the 500kV transmission line project linking Bintulu to Kuching (transmission portion: ~ RM1bil).

- Rounding up our top picks for leverage to SCORE are Bintulu Port Holdings and Press Metal.  

Source: AmeSecurities