I originally posted this in November 2021. I believe it is still relevant:
According to the 2020 Annual Report, Note 6(a), in relation to the Ladang Tanah Merah WTE plant, "During the financial year, the borrowing costs capitalised in the intangible asset amounted to RM23,522,000 (2019: RM28,422,000)"
According to the Independent Auditor's Report in the same Annual Report, the carrying value of the WTE intangible asset was RM871M.
When the WTE plant is brought on line, the intangible asset will have to be amortized instead of accumulated. Assuming this is done linearly over 19 years (the 19 years being a complete guess on my part), this will be an outflow of RM871/19 or RM45.8M per annum.
At the same time, the interest, which is presently being capitalised, will have to be expensed, which will be an additional expense of RM23.5M.
If you add the interest to the amortization, when the WTE plant is brought on line there will be additional expenses of RM69.3M.
star168 If like that, why still going to invest to operating. 10/11/2021 9:17 PM
MathMan It's actually slightly worse than that. Although the company was forecasting revenue from the WTE plant of RM100M in 2015, in it's Unaudited Interim Financial Report for the Third Quarter ended 31 July 2021, the company stated that "Once the plant is commissioned, the integrated WTE plant is expected to contribute up to RM80 million a year in revenue". So now we have RM80M less RM69.3M less operating costs. A positive effect on earnings is starting to look improbable. 11/11/2021 10:07 AM
And according to Energy Malaysia Volume 13, in 2017, the combined cost of electricity is 26.39 cen per kWh, which puts an annual value on say, 22.5MW of RM0.2639 * 22.5 * 1000 * 24 * 365 = RM52M. And that assumes the plant can produce 22.5MW 24x7, which seems a bit optimistic.
So unless Cypark has negotiated better tipping fees and wholesale energy prices (which it may have) my estimate of the revenue is not the RM80M suggested by the company, but RM63M.
Now the effect on earnings is going to be RM63M less RM69.3M less operating costs. Unless there's something seriously wrong with my reasoning, bringing the WTE plant on line is going to have a seriously negative effect on earnings.
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kenny rojer
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Posted by kenny rojer > 2023-01-27 11:44 | Report Abuse
tp 1.50