KUALA LUMPUR (March 13): The Negri Sembilan royal family has made a surprise move to join major power generators to make pre-qualification submissions for a 2GW greenfield coal power plant project possibly costing RM12-14 billion, according to CIMB.
“A bid by Automan Energy, supported by the Negri Sembilan royal family, was a surprise as news reports once hinted of an exit by the Negri Sembilan royal family,” said CIMB analyst Yeoh Yung Juen in his flash note this morning.But Yeoh opined 1Malaysia Development Bhd (1MDB) and Tenaga Nasional Bhd, which are state-controlled, might outbid other players that include Malakoff Bhd and YTL Power International Bhd and Automan.
The Energy Commission called for Requests For Qualification (RFQ) on Dec 18, 2012, and it received seven submissions for Project-3B on Mar 11, 2013.
According to the CIMB report, the government’s Project-3B is a 2x1000MW greenfield coal-fired power plant project that will be commissioned in stages from Oct 2018 to Apr 2019.
Shortlisted bidders will be announced in April 2013 and invited to join in the tender process.
“If we use the Prai gas-fired power-plant tender results as a guide, we believe 1MDB and Tenaga will submit the most competitive bids. Both are backed by sovereign capital and may have lower hurdle rates to meet,” said Yeoh.
“As Tenaga monopolises transmission in Malaysia, we believe its bid would be aggressive, based on its industry expertise and knowledge,” he added.
On the cost of the project, the CIMB analyst said going by the Janamanjung and Tanjung Bin extension awards in 2010, the total cost for Project-3B may be within RM12 billion to RM14 billion.
Yeoh maintains his “overweight” call on the power sector as he sees catalysts coming from ETP-backed electricity demand and power-plant tenders.
He said his top pick is Gas Malaysia Bhd, with target price of RM3.07, for its defensive earnings, debt-free balance sheet and strong cash flows.
He recommends investors to accumulate Tenaga now (Trading Buy, TP at RM8.55) as future tender awards would catalyse its stock. But he added Tenaga “is not an outperform due to election risks”.