This morning Ranhill made a long legally worded announcement about the Sabah State Government’s award of a contract to construct a 100 MW gas power plant to sell/supply electricity to Sabah Energy Corporation for 21 years. The price of electricity will be based on cost plus profit.

Currently Ranhill has a 380 MW gas power plant in operation and with this additional 100 MW, the company will have 480 MW gas power plant generating electricity to sell to the Sabah Energy Corporation.  

That simply means Ranhill has additional profit growth for 21 years. Among all the share section criteria such as NTA, cash flow, debt, health balance sheet, EPS etc the most powerful criterion to push up share price is profit growth prospect.

That is why Ranhill share price has been going up higher and higher recently, especially today.

You can read the actual announcement as below:  

INTRODUCTION

Ranhill Utilities Berhad is pleased to announce that its wholly-owned subsidiary, Ranhill Capital Sdn Bhd  (registration no. 201401034295 (1110393-P)) (“RCSB”) had on 31 March 2023 received a Letter of Notification from the Energy Commission  (“EC” or  “Suruhanjaya”) notifying that the unincorporated consortium comprising RCSB and Sabah Energy Corporation Sdn Bhd (registration no. 199601009602 (381950-H)) (“SEC”) (hereinafter referred to as “the Consortium Ranhill-SEC” or “the Consortium”) has been selected as the successful bidder under the Request for Proposal dated 28 February 2022 (“RfP”) : New Power Generation Capacity Required in Year 2024 for West Coast, Sabah (the “Project”).

2.0     DETAILS OF THE LETTER OF NOTIFICATION (“LON”)

The LON was issued to the Consortium Ranhill-SEC subject to few conditions, amongst others the following:

(a)     the nominal net capacity of the Power Plant being fixed at 100MW;

(b)     the final commercial operation date (“COD”) shall be no later than 1 March 2026;

(c)     the Project Company (as hereinafter defined) being incorporated and company registration and associated documents shall be submitted to Suruhanjaya within two (2) months from the date of the LON;

(d)     the Consortium shall maintain its effective shareholding in the Project Company for a period of ten (10) years from the date of the LON;

(e)     the Power Purchase Agreement and Gas Sales Agreement shall be executed no later than seven (7) days after Suruhanjaya's  approval of the final draft or  two (2) months from the date of the LON, whichever is later;

(f)      the Project Company achieving the Financial Closing Date no later than five (5) months from the date of the LON;

(g)     the original signed copies of the Successful Bidder's Declaration (“Declaration Form”) being executed and submitted to Suruhanjaya within seven (7) days from the date of the LON;

(h)     the Consortium shall submit the Substitute Bond (as hereinafter defined) to Suruhanjaya, within fourteen (14) days from the date of this letter and which shall be valid up from the date of this LON up to and until one (1) month after the Financial Closing Date; and

(i)      all technical and commercial aspects remain unchanged, save as otherwise collectively agreed in writing by the Sabah State Government, Suruhanjaya and Sabah Electricity Sdn Bhd.

3.0       DETAILS OF THE PROJECT

On 28 February 2022, the EC issued a RfP to RCSB and SEC, for the proposed development of the Project.  In response to the RfP, the Parties have entered into a memorandum of understanding (“MOU”) dated 28 April 2022 to form the Consortium Ranhill-SEC and submitted the bid on 29 April 2022.

The MOU provides, inter alia that upon successful award of the Project to the Consortium, a special purpose vehicle shall be established to undertake the Project (“Project Company”) and the Parties shall enter into shareholders’ agreement to regulate the relationship of the Parties in executing and implementing the Project.

The Project involves the design, construct, own, operate and maintain of a 100MW gas-fired Combined-Cycle Gas Turbine (“CCGT”) power plant on a build, own, operate and transfer basis (“BOOT”).  The expected COD of the combined cycle facility is by 1 March 2026 with a concession term of 21 years under the power purchase agreement to be executed with Sabah Electricity Sdn Bhd.

4.0       SOURCE OF FUNDS

Ranhill plans to finance its portion of its investment in the Consortium and the Project through internally generated funds and bank borrowings.

5.0       RISK FACTORS

Risk for the Project work includes typical risks associated with the development and operation of a CCGT power plant, which are in the normal course of Ranhill’s business, such risks will be adequately addressed and mitigated through our existing standard operating procedures and processes developed over these years.

Ranhill having been involved in the development and operation of two (2) 190MW CCGT power plants, under a Build-Operate-Own (“BOO”) and Build-Operate-Transfer (“BOT”), since 1998 and 2010 respectively, will utilise its capabilities and experience in ensuring that all risks will be properly identified, assessed, addressed and mitigated.

6.0     FINANCIAL EFFECTS

The Project is not expected to have any material impact to the share capital, consolidated earnings, net assets and substantial shareholders’ shareholding of Ranhill for the financial year ending 31 December 2023.  The Project is expected to contribute positively to the future revenue and earnings of Ranhill Group from the financial year ending 31 December 2026 onwards.