Firm plans cost-saving measures to compensate loss from revised PPA

KUALA LUMPUR: Malakoff Corp Bhd is eyeing more projects to broaden its earnings base and planning to embark on cost-saving measures in its bid to compensate the loss from the revised Segari Energy Ventures Sdn Bhd power purchase agreement (PPA).

According to chief executive officer Datuk Ahmad Fuaad Kenali, the group’s loss from the Segari Energy PPA revision was reflected in its financial results for the third quarter of financial year 2017 (Q3’17) and will affect the company’s full-year results.

He added that Malakoff’s dividend distribution would depend on the group’s full-year financial performance last year, although the payout ratio of 70% of net income is likely to be maintained.

“Fortunately, our Tanjung Bin plant has been slightly compensating the loss we saw through the new Segari Energy PPA. However, moving forward, the group’s plan to intensify the number of new projects and introduce effective cost management will support us well.

Positive results: Ahmad Fuaad says financial results for Malakoff projected to remain positive for financial year ended Dec 31, 2017.

“With our strategic initiatives in place, we project our financial results to remain positive for the financial year ended Dec 31, 2017,” he said.

Ahmad Fuaad was speaking to reporters after the signing ceremony of a memorandum of understanding (MoU) between Malakoff and Touch Meccanica Sdn Bhd.

Beginning from July 1, 2017, Segari Energy has been receiving a lower capacity payment following the new 10-year PPA extension.

This resulted in a 50% to 70% step-down on levelised tariffs, bringing down the plant’s Q3’17 capacity payment by 82% quarter-on-quarter to RM34mil.

However, Malakoff recorded a stronger bottom line in Q3’17, mainly due to compensation received from the settlement of a dispute between its 90%-owned subsidiary Tanjung Bin Power Sdn Bhd and IHI Corp Japan.

Tanjung Bin sought damages for breach of duty of care, which led to at least 22 different boiler tube failure incidents at the plant operated by Tanjung Bin, and the inability of the plant to meet certain required output conditions.

The total claimed amount was estimated at RM785mil as at November 2016.

Yesterday, Malakoff signed an MoU with Touch Meccanica to jointly-develop renewable energy (RE) projects in Pahang, as the former aims to expand its footprint in the RE segment.

The collaboration involves the development of a 100 megawatt (MW) mini-hydro power plant and a 50MW integrated solar farm. The total development cost is estimated at RM1.3bil.

“This MoU will serve as a platform to exchange knowledge and expertise that will be of invaluable benefit to both companies. It also shows Malakoff’s commitment to expand RE in the generation portfolio.

“Currently, Malakoff owns a 50% stake in MacArthur Wind Farm in Victoria, Australia, with an effective generation capacity of 210MW,” Ahmad Fuaad said.

Following the MoU, Malakoff will conduct a feasibility study to ascertain the technical and commercial viability of both projects.

Ahmad Fuaad added that the development cost is likely to be financed via a combination of borrowings (70%-80%) and internally-generated funds (20%-30%).

Malakoff is Malaysia’s largest independent power producer, with a net generating capacity of 6,346MW from its seven power plants.

Its shares closed seven sen or 7.94% up to RM1.02 at the end of trade.