KUALA LUMPUR (Dec 11): Jentayu Sustainables Bhd has clarified that the funds that it is planning to raise from its latest private placement to be spent on pre-development expenses for the 170MW hydro project Oriole is part of "tried and tested industry norms" that are benchmarked against similar hydropower plant developments in Sabah.

Last Friday, the group announced the placement to raise between RM46.22 million and RM62.9 million, from which it plans to use RM26 million to part finance its pre-development spending for Oriole, a project involving the development of two hydropower plants in Sabah — along Sungai Maligan and Hulu Sungai Padas — that is estimated to cost RM2.77 billion to develop. It had just raised RM11.1 million back in July for similar pre-development spending.

In a statement, Jentayu said Oriole is now in the fourth of its six-phase development, which involves negotiating and finalising the power purchase agreement (PPA) for the project and securing financing for its full construction.

The first three phases include consultation with the federal and Sabah state governments, securing land and water use rights, building the necessary infrastructure to access the sites, as well as conducting necessary surveying, feasibility and verification studies. Jentayu spent RM73.67 million in completing these three phases. The fifth and sixth phases are the construction and commissioning of the plant.

Jentayu said "similar funds were spent at a similar development phase" of TH1 and TH2 — the Telekosang Hydro 1 and Telekosang Hydro 2 hydropower plants in Tenom that it is in the midst of acquiring, along with a 5.99MW solar power plant in Kedah, from the private vehicle of Jentayu’s major shareholders, Datin Nurhaida Abu Sahid and Datuk Beroz Nikmal Mirdin. Beroz is also Jentayu's executive chairman.

The asset injection by the major shareholders would be made via a cash and share deal, which the group announced back in 2021.

The group also said that Oriole has already been included as a confirmed project in the Sabah Energy Roadmap and Masterplan 2040 released on Sept 19, 2023.

Its clarification came after The Edge Malaysia, in its latest publication, raised questions about the sums it has spent and plans to spend further on Oriole's pre-development stage, as the weekly noted that the project has yet to secure approval from the Sabah government or the Energy Commission, or entered into any PPA with Sabah Electricity Sdn Bhd.

In a related bourse filing, Jentayu said it has received a letter of intent from the federal government in October 2022 that allows the company to continue with the project, with a targeted operational date of 2027.

“The group had submitted Project Oriole’s detailed feasibility study and financial model to the Energy Commission [EC], which provided detailed clarifications on the technical and commercial aspects of Project Oriole. The group has also received a draft PPA template from the EC to further the discussion into the key terms of PPA.

“Given the confidential nature of ongoing discussions, the group can only make the necessary disclosures upon achieving desired milestones with the concurrence of the EC. Furthermore, given the upcoming transition of regulatory powers from the EC to Energy Commission of Sabah [ECOS] beginning January 2024, the group may be required to finalise such discussions with ECOS.

“In order to meet the deadline set by the The Planning and Implementation of Electricity Supply and Tariff Committee [JPPPET], the PPA should be executed no later than middle of 2024,” it added.

It is noted that the federal and Sabah governments have reached an agreement for Putrajaya to hand over regulatory power of the Malaysian Bornean region’s electricity supply sector to Sabah from Jan 3, 2024, as part of the strengthening of the Malaysia Agreement 1963.

Additionally, as part of the development process and to achieve finality on the PPA, the group had launched an open tender to select an engineering, procurement, construction and commissioning (EPCC) contractor for Project Oriole in May 2023, it said.

Shares of Jentayu settled up three sen or 2.5% at RM1.23, giving the group a market capitalisation of RM516.87 million.

Read also:
Jentayu sees Telekosang Hydro 2 feed-in-tariff in one month, to rope in partner for 170MW Project Oriole
Jentayu plans another placement to raise up to RM63 mil
Morgan Stanley joins list of Jentayu’s substantial shareholders, exits Trive Property