Forgive me. Why do we always assume FCFE = 12% of U$1.87b instead of the 12% of U$468m (i.e. 25% of 1.87b)? Take note that this is FCFE, not FCF. ========

It is not whether it is based on 1.87b or 468m, it is the free cash flow derived by PBB to be RM327m to Jaks. You need to ask PBB how it derived its FCF.

------------------------- Investee Forgive me. Why do we always assume FCFE = 12% of U$1.87b instead of the 12% of U$468m (i.e. 25% of 1.87b)? Take note that this is FCFE, not FCF.

Hey DK66, u have my respect. This is just for argument sake. Ignore me if this is too noob question.

Actually it is whether 1.87b or 468m. JAKS' equity contribution is 25% x 1.87b x 30% stake = 140m. PB ascribing 82m (RM329/4) is weird but maybe not so big difference as presented here.

The logic is Vietnam will give fixed capacity charge to cover fixed principal repayment and interest expense. The leftover for equity holder (EBITDA - principal repayment - interest) is really 12% Return on Invest Equity. That's why we need to compare Invested Equity to leftover for equity holder.

"The Capacity Charge is a fixed payment that is paid each period for each kilowatt of available (not dispatched) capacity. It includes fixed charges involved in the construction, operation, and maintenance of the power plant, including charges for: – Repayment of the principal and interest of the debt used to construct the facility – Return on equity capital invested..... bla bla bla~"

Therefore, capacity charge is for return invested equity after netting of mainly principal repayment and interest.

don't be silly.........where did PBB says free cash flow to Jaks is $ 327 pa ?

some thing that can give $ 300 million pa will be worth much more.

want to forecast contributions from the plant?

then as a short cut, just compute a planned return of 10 -12% pa on equity participation of $ 600 million.........( 30% X 25% X 2 billion )....my answer about $ 60 - $ 70 million per annum.........and 100% of the plant about $ 200 to $ 240 million pa.

Investee, I m sorry. I don't quite understand the below

Actually it is whether 1.87b or 468m. JAKS' equity contribution is 25% x 1.87b x 30% stake = 140m. PB ascribing 82m (RM329/4) is weird but maybe not so big difference as presented here.

------------------ Investee Hey DK66, u have my respect. This is just for argument sake. Ignore me if this is too noob question.

Actually it is whether 1.87b or 468m. JAKS' equity contribution is 25% x 1.87b x 30% stake = 140m. PB ascribing 82m (RM329/4) is weird but maybe not so big difference as presented here.

The logic is Vietnam will give fixed capacity charge to cover fixed principal repayment and interest expense. The leftover for equity holder (EBITDA - principal repayment - interest) is really 12% Return on Invest Equity. That's why we need to compare Invested Equity to leftover for equity holder.

"The Capacity Charge is a fixed payment that is paid each period for each kilowatt of available (not dispatched) capacity. It includes fixed charges involved in the construction, operation, and maintenance of the power plant, including charges for: – Repayment of the principal and interest of the debt used to construct the facility – Return on equity capital invested..... bla bla bla~"

Therefore, capacity charge is for return invested equity after netting of mainly principal repayment and interest. 14/05/2020 3:51 PM

If you invest 1.87b equity, I will pay u 12% on 1.87b. If you invest 468m equity, I will ensure fixed capacity charge = principal repayment + interest + 12% on 468m.

This way, you will have IRR 12% on equity and payback period of 8 years to recover 468m invested equity.

You cannot use 12% on 1.87b and assume that's the FCF because capacity charge already take care of your principal repayment and interest. Capacity charge - principal repayment - interest will give you 12% IRR on equity.

Aside to PBB report, the 82m is a NPV, i.e. PV of future FCF (however derived by PBB) minus invested equity capital. It's not how much it's worth, i.e. PV of future FCF. Can understand ah?

_____________________________________________________________ DK66 Investee, I m sorry. I don't quite understand the below

Actually it is whether 1.87b or 468m. JAKS' equity contribution is 25% x 1.87b x 30% stake = 140m. PB ascribing 82m (RM329/4) is weird but maybe not so big difference as presented here.

The crux of the matter.......U think the PPA will give returns of 12% pa on the project cost of US$ 2 billion or 12% on capital brought in which 30% X 25% X US$ 2 billion. ( US$ 150 million )....

In the case of a risk free return of 12% is very good already when Vietnam guarantees both the costs and the revenue.....

still want super profits at 12% X 4 because of the gearing?

This is not Mahathir/ YTL in 1990.........This is Vietnam........U think they are cronies meh? Vietnam want to war with China if they think they can win.

there are many reasons why......it can be timing, changed circumstances, can be gearing, can be political, negotiating powers........they wanted some American investments?

but its reasonable to assume returns of 12% on funds invested is reasonable....and returns of 4 X 12 % is super profits and exceptional...........

qqq333, I am from engineering field, do not have accounting background, yet I still tried hard to learn about financial jargon and produced an elementary article in an aim to find the fair valuation for JHDP.

You have been talking a lot to undermine the potential valuation of JHDP. I believe you have sound financial background and you should utilise your strength to come out a convincing article to refute DK66 & mine and many other sifus' earning projections. Do not give vague arguments or beat around the bush statements to justify your claims. Be professional, thank you.

Think of it this way, when you invest USD1.87b on a project, whether you use borrowing or not your total risk is USD1.87b. If you can't complete the power plant, you lost USD1.87b, not 468m.

In the 25 years of operation. Your capacity payment is only guaranteed if you make the capacity available. If for any reason your power plant does operate because of your fault (not Vietnam EVN's fault), there is no capacity payment, and your total loss will be the whole sum not just the equity portion. Therefore, you think you will base your projection on 468m and not 1.87b ?

In any case, Vinh Tan 1 would not have achieved its results had its IRR is equity based.

---------------- Investee If you invest 1.87b equity, I will pay u 12% on 1.87b. If you invest 468m equity, I will ensure fixed capacity charge = principal repayment + interest + 12% on 468m.

This way, you will have IRR 12% on equity and payback period of 8 years to recover 468m invested equity.

You cannot use 12% on 1.87b and assume that's the FCF because capacity charge already take care of your principal repayment and interest. Capacity charge - principal repayment - interest will give you 12% IRR on equity.

Aside to PBB report, the 82m is a NPV, i.e. PV of future FCF (however derived by PBB) minus invested equity capital. It's not how much it's worth, i.e. PV of future FCF. Can understand ah?

Posted by Ehome009 > May 14, 2020 7:14 PM | Report Abuse

qqq333, I am from engineering field, do not have accounting background, yet I still tried hard to learn about financial jargon and produced an elementary article in an aim to find the fair valuation for JHDP.

You have been talking a lot to undermine the potential valuation of JHDP. I believe you have sound financial background and you should utilise your strength to come out a convincing article to refute DK66 & mine and many other sifus' earning projections. Do not give vague arguments or beat around the bush statements to justify your claims. Be professional, thank you. =

I believe u...........now your turn to believe me and don't pretend.

DK66 / Ehome009 bros...just ask that HE/SHE WHO JUST ABOUT KNOWS ALL...i think!!!...to prepare n lay out his/her worksheet to convince n make you guys to BELIEVE HIM?HER ....i suppose that is d least he can do after so many days of ...SO MANY TALK !!!

ehome...........the only time I have seen 12% returns on gross assets for IPPs are those Jho Low transactions..........I scratch your back, u scratch mine.......

From now on, I will keep posting this remark to remind you that you may seek my comment if you wish to clarify what you read in this forum no matter how stupid they are. I will not be responding to comments here unless requested by sincere readers.

I trust most readers here are able to differentiate for themselves comments that are reliable from those that are ridiculous. If you are not sure, ask.

Thank you.

P/S Aseng may help to post this remark frequently. TQ 14/05/2020 8:28 PM

DK66 bro...when u got a ...CHING NGOW KIM... residenting here day in day out ...u dont need to go anywhere else lo...hahaha ...joking eh..ok...tough luck bro

if u are not pretending, u will at least acknowledge that at least PBB is conceptually correct based on information supplied by Jaks management to PBB.

Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero.

Internal rate of return is used to evaluate the attractiveness of a project or investment. If the IRR of a new project exceeds a company’s required rate of return, that project is desirable. If IRR falls below the required rate of return, the project should be rejected.

Not so agree because Vietnam Government is a financing guarantor.

If you think it's 12% on $1.87b, that means debt structure is irrelevant and EVN doesn't care how the project is financed, right? In this case, it contradicts with Appendix 2 of Circular No. 56/2014 which includes principal repayment under cash outflow. In other words, the fixed capacity charge includes a portion for debt repayment and hence debt structure is relevant in EVN's 12% computation. Does this make sense?

This is also the reason why EVN cap equity at 20%-30% of project cost in the circular. Too high equity % will be too costly for EVN. EVN needs to give 20-30% to incentivise foreigners to build and transfer knowledge. EVN will make sure capacity charge is enough to service debt repayments and add on 12% return on invested equity.

The issue with Vinh Tan 1 is that we have no detailed financial breakdown to analyse. Any one-off income will throw that out of whack. Mong Duong 2 has detailed financials disclosed up to Q1'19, just not in its IR section. Haha, need to search harder. ______________________________________________________ DK66 Investee, You have to take risk into account.

Think of it this way, when you invest USD1.87b on a project, whether you use borrowing or not your total risk is USD1.87b. If you can't complete the power plant, you lost USD1.87b, not 468m.

In the 25 years of operation. Your capacity payment is only guaranteed if you make the capacity available. If for any reason your power plant does operate because of your fault (not Vietnam EVN's fault), there is no capacity payment, and your total loss will be the whole sum not just the equity portion. Therefore, you think you will base your projection on 468m and not 1.87b ?

In any case, Vinh Tan 1 would not have achieved its results had its IRR is equity based.

This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....

Investee444 posts

Posted by Investee > 2020-05-14 15:01 | Report Abuse

Forgive me. Why do we always assume FCFE = 12% of U$1.87b instead of the 12% of U$468m (i.e. 25% of 1.87b)? Take note that this is FCFE, not FCF.