• Malakoff Corporation’s 65%-owned subsidiaries have been selected as two of the successful bidders in a competitive feed-in tariff e-bidding small hydro tender exercise.

• The shareholder of the remaining 35% stake in Malakoff’s subsidiaries is Touch Meccanica Sdn Bhd.

• Malakoff’s winning bid for the two hydro power plants was a basic tariff of RM0.29/kWh. The basic tariffs of the other winners range from RM0.23/kWh to RM0.2599/kWh but their power plants are smaller (from 3MW to 27.3MW).

• Malakoff’s subsidiaries will enter into a renewable energy power purchase agreement with Tenaga Nasional for a period of 21 years.

• The installed power capacity of Malakoff’s two hydro plants is 55MW in total upon completion. The two hydro power plants will be located in Pahang.

• This is positive as it would help Malakoff build up its experience and track record in the renewable energy space.

• However, we do not expect earnings contribution from the two hydro power plants to be significant as their installed power capacity is small at 55MW in total.

• In comparison, Malakoff’s total effective power generation capacity in Malaysia is about 5,910MW. Including overseas associates, Malakoff’s total effective power generation capacity is 6,498MW.

• Incidentally, the winners of the LSS3 tender have been announced. There are five winners. They are (1) ib vogt Gmbh and Coara Solar Sdn Bhd, (2) Cypark Resources and Impian Bumiria Sdn Bhd, (3) JKH Renewables and Solarpack Asia Sdn bhd, (4) ENGIE Energie Services SA and TTL Energy Sdn Bhd and (5) Konsortium Beseri Jaya Sdn Bhdand Hanhwa Energy Corporation Singapore.

• In September 2019, the Energy, Technology, Science, Climate Change and Environment Minister said that the lowest bid for the LSS3 (large scale solar) tender was 17.77 sen/kWh compared with the reference rate of 32.4 sen/kWh.

• We maintain Buy on Malakoff with a fair value of RM1.00/share.

Source: AmInvest Research - 24 Dec 2019