THE BUZZ
Tenaga (TNB) yesterday announced that its subsidiary, TNB Repair and Maintenance SB (REMACO), together with its joint venture partner Kharafi National of Kuwait had been issued a letter of award by Kuwait’s Central Tender Committee for the operation and maintenance of the Shuaiba North co-generation plant in Kuwait.
OUR TAKE
More details on the agreement. According to TNB’s official Bursa release, the tenure of the contract is for seven years and valued at approximately RM958m. The co-generation plant, owned by Kuwait’s Ministry of Electricity and Water, is located within the Shuaiba Industrial Authority Area some 40km away from Kuwait city. Commissioned in 2010, the plant currently has an installed energy capacity of 780MW as well as the ability to produce 45m gallons of distilled water per day.
Tenaga (TNB) yesterday announced that its subsidiary, TNB Repair and Maintenance SB (REMACO), together with its joint venture partner Kharafi National of Kuwait had been issued a letter of award by Kuwait’s Central Tender Committee for the operation and maintenance of the Shuaiba North co-generation plant in Kuwait.
OUR TAKE
More details on the agreement. According to TNB’s official Bursa release, the tenure of the contract is for seven years and valued at approximately RM958m. The co-generation plant, owned by Kuwait’s Ministry of Electricity and Water, is located within the Shuaiba Industrial Authority Area some 40km away from Kuwait city. Commissioned in 2010, the plant currently has an installed energy capacity of 780MW as well as the ability to produce 45m gallons of distilled water per day.
Within expectations. We deem the announcement within our expectations as TNB’s management had previously made known its intention to grow the group’s non-regulated income stream from RM2.3bn in FY12 to the in-house target of RM5bn by 2015. One of the growth drivers would be its repair and maintenance business, which contributed RM543m to the group’s consolidated topline in FY12. While TNB’s effective stake in the JV as well as the potential contribution to its earnings over the next seven years remains unknown for now, we believe management would likely share more details on this venture in its upcoming 1QFY13 results briefing scheduled on 23 Jan.
REMACO to expand further. With this award in the bag, we expect TNB REMACO’s management to work proactively towards finalizing some of its other outstanding partnership agreements. These include potential co-operation and partnerships with the Defense Housing Authority in Pakistan, Sawary Energy in Saudi Arabia, Mashor Group in Brunei, Crescent Power and Wijaya Karya in Indonesia, as well as Dyna Synegy in Myanmar. Some of the operations and maintenance projects that TNB is looking at include a 2x750MW plant in Dairut, Egypt as well as a 2x600MW plant in Duyen Hai, Vietnam. While the contribution to earnings from TNB’s core operations in Malaysia is unlikely to be significant in the near term, we foresee further opportunities to be explored within this segment as the group capitalizes on its expertise and its over 30 years of experience in power plant repair and maintenance.
Prai remains on track. On a side note, TNB in a separate Bursa release announced that it has awarded the engineering, procurement, and construction contract for its 1,071MW Prai power plant to Samsung Engineering. Meanwhile, it has also entered into a 20-year operation and maintenance agreement with Siemens AG for the same plant. This comes three months after the group was first awarded the power plant by the Energy Commission in mid-Oct 2012 and we are optimistic that progress seems to remain largely on track for full completion by end-2015.
BUY. All in, we maintain our BUY call on TNB with our FV unchanged at RM8.90, based on 15x FY13 PE. We see positives in its ambitions to grow its non-regulated income stream in the long run. At the same time, we are glad to know that its proposed Prai power plant remains on schedule. As for its upcoming 1QFY13 results release, we believe the numbers are likely to be within our expectations or could potentially spring positive surprises amidst the continued weakness in coal prices.
BUY. All in, we maintain our BUY call on TNB with our FV unchanged at RM8.90, based on 15x FY13 PE. We see positives in its ambitions to grow its non-regulated income stream in the long run. At the same time, we are glad to know that its proposed Prai power plant remains on schedule. As for its upcoming 1QFY13 results release, we believe the numbers are likely to be within our expectations or could potentially spring positive surprises amidst the continued weakness in coal prices.
Source: OSK
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