• Malakoff Corporation announced that it has entered into a 21-year PPA (power purchase agreement) with Tenaga Nasional for a proposed 2.4MW biogas power plant in Kota Tinggi, Johor.

• We are neutral on this development as the earnings contribution from a 2.4MW biogas power plant is not expected to be significant.

• The size of the biogas power plant is small at 2.4MW only. In comparison, Malakoff has an effective generating power capacity of 7,036MW in Malaysia and overseas.

• We do not know the feed-in tariff for the biogas power plant in Kota Tinggi, Johor.

• However for solar power plants in Malaysia, the levelised tariff is expected to be below 38 sen/KWh in the current round of bidding.

• The bidding for the third round of large-scale solar power plants in Malaysia is expected to close in August 2019.

• The winners are envisaged to be announced by year-end. The largest capacity that a bidder can bid for is 100MW.

• We believe that Malakoff and Tenaga would participate in the bidding processfor large-scale power plants. The internal rate of return for a solar power plant is anticipated to be in the low double-digit percentage.

• We maintain a HOLD on Malakoff with a fair value of RM0.90/share.

Source: AmInvest Research - 6 May 2019