• Gamuda has proposed to acquire a 30% stake in ERS Energy for RM200mil, equivalent to 4.3mil new ordinary shares. ERS Energy is one of the largest solar engineering, procurement, construction, and commissioning players in the region with a total project experience of close to 700MW completed largescale solar projects.

• The subscription price for the new shares of RM200mil, which values ERS Energy at a pre-money equity value of RM467mil will be funded by cash funded via internal generated funds and borrowings.

• Payment of the first tranche of subscription shares amounting to RM80mil shall occur within 14 business days when all conditions precedents are obtained/fulfilled, targeted to be within 3 months from 7 Dec 2022. The remaining balance of RM120mil shall be settled based on ERS Energy’s funding requirement.

• ERS Energy is currently a JV partner of Gamuda in Neda Pekan to develop a 39MV (29.99MWac) solar power plant under the New Enhanced Dispatch Arrangement (Neda) framework. The framework allows power producers to supply energy to single buyer, Tenaga Nasional (TNB) without entering into a power purchase agreement.

• Including Gamuda’s existing 49% stake and after the completion of 30% acquisition in ERS, Gamuda’s effective stake in Neda Pekan will be increased to 64.3%.

• Assuming a tariff of 18sen/kWh, we expect the power plant to generate revenue of RM10.4mil and PBT of RM2.6mil. Based on a 64% effective stake, the contribution of earnings to Gamuda will amount to RM1.7mil.

• This investment will help Gamuda reach its target of a renewable energy asset portfolio of 800MW in the next few years. This venture will replace the recurring income stream from its expressways that were sold to Amanah Lebuhraya Rakyat in Oct 2022.

Source: AmInvest Research - 8 Dec 2022