KUALA LUMPUR: Printing ink maker Toyo Ink Group Bhd is seeking shareholders’ approval to hire a consultant that would cost the company US$35 million (RM132.7 million) for its power plant project. The amount is much larger than its market capitalisation of RM79.7 million.
The consultancy services agreement (CSA) to be signed with Phu My Vinh Consulting Investment and Trading Service Co Ltd (PMV) is pertaining to two 1,000mw coal-fired thermal power plants costing RM13.2 billion in the Song Hau Power Complex, Vietnam.
In a filing with Bursa Malaysia yesterday, Toyo Ink (valuation: 1.4; fundamental: 0.4) said shareholders’ approval would be sought before the formalisation of the arrangement with Vietnam-based PMV.
Furthermore, the consultancy fee does not include associated taxes, such as value-added tax, and is equivalent to 1% of the total development cost of the project, which is estimated to be RM13.2 million.
The fee is proposed to be funded through a combination of equity and debt financing instruments to be arranged for the project, as well as internally generated funds of the group.
Toyo Ink’s balance sheet as at March 31 showed that the company’s cash balance was at RM3.2 million, while it had borrowings of RM28.62 million, of which RM18.5 million was short-term liabilities.
“The board is of the view that the services are critical in assisting and facilitating Toyo Ink in the negotiation process, and the finalisation and eventual execution of the build, operate and transfer (BOT) contract, power purchase agreement (PPA) and land lease agreement (LLA) between us and the relevant authorities there,” it said.
PMV is tasked with advising the group on research, and to support the negotiation on the BOT contract, PPA and LLA of the power plant with the relevant authorities in Vietnam.
The arrangement with PMV is further to its consulting contract, for which the former provides services related to research, survey and document preparation for the policy of additional operation planning and management area, as well as the resettlement area for the power plants.
It added that the CSA proposal is not expected to have any material effect on the consolidated earnings and earnings per share (EPS) of Toyo Ink for financial year 2016.
“However, the board believes that barring any unforeseen circumstances, the power plant, upon implementation, is expected to contribute positively to the earnings and EPS of the group in future,” it said.
This article first appeared in The Edge Financial Daily, on July 10, 2015.