Topglov earn 300 million and become KLCI blue chip and PE fetch 30. So I think Jaks can also become blue chip and worth around RM18 and become KLCI members. Have to look far far ...
Just want to repeat this. I think this is very very important, but I hardly to see others mention it — JRB doesn't need to pay taxes for first 4 years.
Posted by DK66 > Nov 13, 2019 11:41 PM
I apologize for wrong information given earlier.
Correct information should be : Vietnam BOT will be exempted from taxes for the first 4 years, 5% for the next 9 years and thereafter 10%.
For FCF: Net profit + depreciation - loan principal payment Coal cost should take care of 6% auxiliary consumption Should take out Maintenance cost since tariff should included maintenance payment.
You didn't say these when I included auxiliary consumption and maintenance in my previous article "Jaks Resources - Earning Forecast of Hai Duong Power Plant based on Government Data" - Why ?
Now you want me to exclude just because it will lower the impact ?
Your view is contradictory - now the 6% auxiliary consumption is taken care of by the coal cost and the tariff has included maintenance payment, but not in my previous article !
Anyway, there is no way to confirm that the coal cost has taken care of the auxiliary consumption and the tariff has included maintenance payment. As the government data were meant for local IPPs. I don't think the government would manage the costs of the IPPs.
As far as the interest cost is concerned, I have already explained I have used the long term average interest cost as it is deemed more appropriate for making long term investment decision.
Thank You.
------------------------------ Coal cost should take care of 6% auxiliary consumption Should take out Maintenance cost since tariff should included maintenance payment.
Dear DK66, What I mean is if Coal consumption is based on 0.474 kg per KwH generated:
Output based on 6500 hours = 1,200,000 x 6500 = 7,800,000,000 KwH Net output (6% auxiliary consumption as per Vinh Tan 1) = 7,800,000,000 KwH x 0.94 = 7,332,000,000 KwH Average prices for power generation effective February 2019 = US$0.075 per KwH Average Cost of Imported Coal in 2019 = VND1.74m / 23,350 = US$74.5 per tone Revenue = 7,332,000,000 KwH x 0.075 = US$ 550m Cost of Coal Based on 0.474 kg per KwH consumption rate = 7,332,000,000 KwH x 0.474 x US74.5 / 1000 = US$ 259m
Then coal cost should be = 7,800,000,000 KwH x 0.474 x US74.5 / 1000 = US$ 275.44m
sslee, DK66 was only demonstrating the impact of change in annual utilization hours on earnings. Its for comparison , not for absolute profit derivation.
That is for the local IPP not for foreign BOT.
If you really want to know the money they make now, you should see the below chart:
Posted by DK66 > Dec 9, 2019 7:08 PM | Report Abuse
Nagachan, Thanks for sharing your knowledge. May I ask how do you know the IRR for Jaks is around 15%? Is your project also in Vietnam ? ------------------------ nagachan I am involved in a similar power project of the same size like Jaks (also under construction now). Basically all PPAs in Vietnam have to have the following to be bankable. BOT contract, fuel cost (coal price) passed thru. No IPPs will take fuel risk even in Malaysia. USD fluctuations not a concern as the tariff is index to USD even though is paid in Dong. The last thing is Dong convertibility which is guaranteed by MOF of Vietnam. In essence Jaks is a profitable IPP with project IRR around 15%. The only thing to worry like in any other business is Management credibility.
Posted by nagachan > Dec 9, 2019 8:47 PM | Report Abuse
I apologize that I have misunderstood you. You have always tried to lower my figures.
I have chosen to use the net output for both 6500 and 7238 hours for simplicity. Anyway, the net impact is only about US$1m. It won't affect my conclusion.
Nevertheless, I will amend my article for more "correct" presentation
but I still do not understand your point on "Should take out Maintenance cost since tariff should included maintenance payment."
Dear DK66, Normally a new plant would have very low maintenance for first few years hence only a provision is provided (I thought previously I read somewhere from your article that this maintenance provision is provided for in the agreed power purchased agreement). Only after the recommended hours of operation then only have scheduled MTA to replaced those wear and tear parts.
To appreciate JAKS, one need to do the following basic homework: .............................................................
1) Understand what an IRR of say 10% means for 25 years with capital invested at 30 - 40% stakes of the equity ownership of the 1200 MW Power plant valued at US 1.87 Billion. Alternatively the meaning of a payback period of 8 years considering the depreciation of the plant over 25 years.
2) What Earnings does the above translate to JAKS for 25 years.
3) If the earnings is too impressive, question the economics of Vietnam government to provide such an attractive offer for BOT contract? How is it economically viable and why they do so?
4) Finally, figure out how in the first place did JAKS managed to obtain such a fantastic lucrative deal?
once you obtain the above answers, you may slowly start to appreciate JAKS. Then you can start verifying with other similar BOT contract power plant performance and earnings.
almost all the answers are available on DK66 articles below:
Capacity charge includes payment for capacity and fixed maintenance as well as agreed capital returns.
Here we are talking about vietnam government tariff for local IPPs which should be sufficient to cover IPPs' expenses including maintenance costs.
However, the tariff or capacity charge paid by the government still need to minus the maintenance costs etc to get the net profit.
I agree that new plants have very low maintenance cost. However, my intention here is to show the impact of change in annual utilization hours on earnings on a long term basis, thus I have to consider the case under normal operating conditions.
----------------------------- Sslee Dear DK66, Normally a new plant would have very low maintenance for first few years hence only a provision is provided (I thought previously I read somewhere from your article that this maintenance provision is provided for in the agreed power purchased agreement). Only after the recommended hours of operation then only have scheduled MTA to replaced those wear and tear parts.
At 7238 annual utilization hours, Jaks' IRR is about 15.5% which matches information provided by Nagachan. From his statement below, I know Nagachan indeed has in-depth knowledge of BOT IPP in Vietnam. Very few will know that the tariff is actually calculated in USD but paid in Dong and eventually converted to USD again. I know this is true.
--------------------- nagachan I am involved in a similar power project of the same size like Jaks (also under construction now). Basically all PPAs in Vietnam have to have the following to be bankable. BOT contract, fuel cost (coal price) passed thru. No IPPs will take fuel risk even in Malaysia. USD fluctuations not a concern as the tariff is index to USD even though is paid in Dong. The last thing is Dong convertibility which is guaranteed by MOF of Vietnam. In essence Jaks is a profitable IPP with project IRR around 15%. The only thing to worry like in any other business is Management credibility.
Recalled YTL Power experience. Early bird enjoy all the fruit. JAKS may repeat and enjoy the fruit like YTL Power those days. Electricity demand by Vietnam now is like year 1993 in Malaysia, ie severe shortages.
Perhaps the growth investors in this forum would like to look at a takaful insurance co that is experiencing and inflection point and a structural shift in islamic insurance..
Takaful's net profit grew by CAGR 25% over the last 10 years from RM 38 mil (2009) to RM 380 mil (T4Q), increasing even through the global financial crisis and recession with a still low takaful penetration of 16% (overall insurance penetration rate of only 50% with takaful insurance growing much faster than conventional insurance)
Takaful is currently trading at a PE of only 12.7x (vs Lonpac PE 18) and a P/BV of only 3.6x (historical P/BV 6.x) with an industry-leading ROE 29.11% (Lonpac ROE 16.72%)
* Growing dividends and a record high 20c ex-date 18 Dec 2019 giving rise to DY of 3.4% *
(AlgoQuant) A Takaful Titan & Analysis of Listed Insurance Companies (TAKAFUL)
Takaful?? No, thanks. If it is not for the government, it would have closed shop. They use government to arm twist companies to subscribe takaful, kind of mandatory.
chapter 9 - Financial, Economic Analysis, and Prospect of Project Funding
will provide very good information on IRR sensitivity to utilization rate, selling price and fuel costs
Table 9-7: EIRR sensitivity analysis results by power selling price
Table 9-9: EIRR sensitivity analysis results by fuel price
Table 9-10: EIRR sensitivity analysis results by operation hours
......................
Fuel price dropped by just 10%, can increase the IRR from 10% to whopping 20%! Appears to me the current fuel price had actually dropped by 50% from their original estimate.
This article demonstrated that increase of 11.35% in annual utilization hour from 6500 to 7238 hours has significant impact on the investment returns of the power plant.
It shows that the relationship between utilization hour and earnings is not linear but exponential.
The logic behind this exponential relationship is to encourage the IPP operator to "work harder".
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Posted by DK66 > 2019-12-09 17:29 | Report Abuse
Ramada, thanks for your 1st "like"