This article first appeared in The Edge Financial Daily, on February 5, 2016.

KUALA LUMPUR: Mega First Corp Bhd is expecting its mid-term prospects to turn out “very well”, in conjunction with the completion of the group's US$500 million (RM2.07 billion) Don Sahong 260MW hydropower plant in Laos, according to executive chairman Goh Nan Kioh.

“We will try to do our best in the short term. But in the medium term, it will [turn out to] be very well,” he told reporters after the group's extraordinary general meeting (EGM) yesterday.

The Don Sahong project, in which Mega First has an 80% stake, is a 25-year concession that Goh expects to begin operating by end 2019.

In an interview with The Edge weekly last month, Mega First said the project would generate about 90% yield, or about 2,000GW hours per year. The concession has a tariff rate of 6.15 sen per kWh, which generates around RM120 million in annual revenue for the group.

At the EGM earlier, Mega First's shareholders have voted in favour of a proposed three-for-five rights issue to raise up to RM250 million, from which RM150 million is expected to be used for the hydropower project. The exercise also includes the issuance of two free warrants for every five rights shares subscribed.

Mega First had previously indicated its intention to raise another US$150 million to finance the project, but Goh said yesterday there was no immediate need to do so, and that further financing method would be finalised at a later stage.

Goh also reiterated that the project would be a key earnings growth driver for the group in the medium term, and expects to complete the project at a cost lower than US$500 million.

Work on the plant, located at one of the channels in the 10km-wide Mekong River, is already underway, led by China’s Sinohydro Corp Ltd, which was appointed by Mega First as the engineering, procurement, construction, and commissioning (EPCC) contractor for US$320 million.

Besides Laos, Mega First is also involved in power generation in Zhejiang, China, which produces steam for industrial consumption. Its power generation business constituted 74.14% of the group's total revenue in its nine months ended Sept 30, 2015 (9MFY15).

For 9MFY15, Mega First's net profit was RM62.8 million, up 12.9% from RM55.63 million a year ago, although revenue fell 16.15% to RM429.49 million from RM512.19 million in 9MFY14. The earnings improvement was due to foreign exchange (forex) gains from its renminbi fixed deposits and translation of the results of its China operations.

While Goh expects Mega First's revenue growth to remain flat in FY16, he believes its bottom line will continue to grow. “Power tariff has dropped because of lower commodity prices, so it will affect our revenue. But the margin is still there, due to forex,” he said.

The favourable forex rates have also given the group an advantage in the export of its quicklime products.

“Quicklime is good business as the price is stable. We are also expanding our production. We can produce about 360,000 tonnes annually now. In 2016, we hope to reach about 400,000 tonnes, and we aim to have half a million by 2017,” he said.

Quicklime has wide usage, ranging from industrial and construction to water treatment. The business constituted 15.94% of Mega First's total revenue for 9MFY15.