KUALA LUMPUR (Feb 1): Reservoir Link Energy Bhd’s unit has entered into a term sheet (TS) to acquire a 90% stake in Indonesia’s PT Eco Power Engineering (EPE) for US$3 million (RM12.81 million) in cash.

EPE was incorporated in Indonesia on Feb 20, 2013 as a limited liability company as a special purpose vehicle (SPV) to enter into a power purchase agreement (PPA) with PLN for a 9.6MW Mini Hydro Project at Sungai Lawe Mamas, Wilayah Sungai Alas-Singkil, Acheh, Indonesia, according to Reservoir Link's bourse filing Tuesday. PLN is an Indonesian state-owned company tasked with supplying the electricity needs of the Indonesian people.

Reservoir Link said the acquisition represents an immediate earnings accretion opportunity upon completion of the project.

"The proposed acquisition is envisaged to provide an opportunity to the company to build a 9.6MW mini hydro power plant in line with the company’s asset ownership business model for long-term dividend sustainability.

"The proposed acquisition will enable the company to expand its income streams and further strengthen its position in the sustainable energy and utilities sector," it said, adding the acquisition is expected to provide the company with a profitable recurring income stream that will improve the company’s profit and provide better earnings visibility over the long term.

Reservoir Link's wholly-owned Skyline Energy Sdn Bhd signed the term sheet with PT Sumpratama Juru Engineering, EPE's owner.

The purchase is expected to be funded by internal funds or bank borrowings subject to the execution of definitive agreements and is expected to be completed in 14 days after all conditions precedent have been fulfilled or waived.

The announcement came less than a week after Reservoir Link announced that it had secured a purchase order worth RM11.4 million for the supply of mounting structure for large-scale solar photovoltaic (LSSPV) plant development from Fabulous Sunview Sdn Bhd — a wholly-owned subsidiary of Sunview Group — through its 51%-owned subsidiary, Founder Energy SB.

The goods to be supplied, which include coated carbon steel and hot dipped galvanised carbon steel top structure, are expected to be sent to LSS photovoltaic plants at the project location between January and April, according to Reservoir Link.

Public Bank Investment Bank, in a research note on Jan 27, said the development is positive for the group as it deepens its foray into the renewable energy (RE) space. “However we lower our call to underperform (from neutral) as we see the current share price having run ahead of its fundamental valuations. Our sum-of-parts based TP is unchanged at RM0.31,” said the research outfit.

It also noted that while Reservoir Link is building on its momentum in securing new RE contracts, the research house remained cautious on the short-term earnings prospects for this segment amid inflationary pressures.

Shares of Reservoir closed on Tuesday 1.37% or half sen lower at 36 sen a share, giving the company a market value of RM103.15 million.