Mudajaya tipped to be prime beneficiary from RM11bil power plant job

Business Times

3^rd March 2014

Mudajaya tipped to be prime beneficiary from RM11bil power plant job

by Angie Ng

Mudajaya’s independent power plant in Chhattisgarh, India.

PETALING JAYA: Mudajaya Group Bhd, which has carved a niche for itself as builder of power plants in the country, is touted to be the prime beneficiary from the award of the 2,000 MW power plant contract to the joint venture of 1Malaysia Development Bhd-Mitsui Co Ltd.

According to industry officials, when the joint venture was preparing its technical and financial proposal for the tender, much of the input came from Mudajaya which had undertaken the civil works for most of the power plants in the country.

“Mudajaya is the civil contractor for the two ongoing coal-fired power plant projects. It was the company that the 1MDB-Mitsui joint venture were working with,” said an industry official.

Mudajaya officials were tight-lipped when asked about the prospects of the group benefiting from the power plant job, which is estimated to be around RM11bil.

Mudajaya chief operating officer James Wong, however, said that they were looking forward to being involved in the civil work construction job for the much-touted 2,000 MW coal-fired power plant project.

Last Friday the 1MDB-Mitsui consortium was awarded the power plant to be built in Jimah, Negri Sembilan. The plant is to be commissioned in stages with the first unit coming on stream by Oct 1, 2018 and the second on April 1, 2019.

Currently, Mudajaya is involved in two coal-fired power plant projects.

The company is the main civil works contractor for Janamanjung power plant in Perak and the EPC contractor together with Alstom and Eversendai Corp Bhd for the Tanjung Bin power plant project.

Both the projects are coal-fired with a capacity of 1,000 MW and extension to the existing power plant.

Wong of Mudajaya said that the company was banking on its track record of being involved in the engineering and construction of many power plants in the country to win the job for the 2,000 MW plant.

As of December 2013, Mudajaya has an order book of RM1.2bil and has tendered for jobs worth RM8bil. Its construction projects currently include the civil works for one of the MRT packages and Tune Hotel at KLIA2.

Wong said Mudajaya was also bidding for some of the new highway projects in the country. The highway projects coming up are the Kinrara Damansara Expressway, West Coast Expressway, Damansara-Shah Alam Highway/Duta–Ulu Klang Expressway and highway jobs in Johor.

Mudajaya’s dampener in recent years is its exposure to a 1,440 MW coal-fired power plant in Chhattisgarh, India where the weakening rupee has had an adverse impact on its investments. 

Mudajaya is the EPC contractor for the power plant, which is expected to see the first phase being commissioned in the next few months.

Wong conceded that although the weakening Indian rupee has had an effect on earnings, this had been compensated by the rising tariff for electricity in India.

Moreover, he said that as revenue and bank borrowings tied to the power plant was in rupee, it acted as a natural hedge for the company’s exposure to the power plant.

“The power plant would be a source of recurring income source for the company in the future,” he added.

Wong said India’s electricity tariff was expected to increase due to the rising demand for power in that country.

He added that RKM Powergen Private Ltd, the vehicle which owns the power plant, has sealed power purchase agreements with two parties – Chhattisgarh State Electricity Board and Power Trading Corp.

Mudajaya’s effective interest in RKM Powergen, the vehicle undertaking the RM5bil power plant, is a 26% stake. The power plant comprises four units of 360 MW each.

Wong said the first unit would be commissioned by the third quarter of this year, and the other three units to be commissioned in stages soon after.

In October 2013, RKM Powergen signed a coal supply agreement with South Eastern Coalfields Ltd for all the coal requirement of the power plant.

“All the major procurement has been completed and the facility is progressing towards final installation and commissioning in stages,” Wong added.

The power plant is expected to make profit contribution to Mudajaya to the tune of some RM70mil per year upon the full commissioning of the power plant.

“Having a presence in India is an advantage for us as we are in a good position to bid for other power plant projects there, when the opportunities arise,” he said.

Towards this end, Mudajaya has been invited to participate in a mega power plant that is 4,000 MW. However, its participation was pending the availability of more details and subject to the risk, Wong said.

He pointed out that India’s power sector offered immense growth opportunities as the country had installed power generation capacity far below the requirement needs of its growing population.

The company is also looking forward to participating in renewable energy sector, both in Malaysia and the Asean region.

On Mudajaya’s venture into the renewable energy sector in the Philippines, Wong said the project was progressing with the first phase (10MW) of the 50MW wind farm project in Cebu island expected to be commissioned by the end of this year.

Wong said the Philippines power sector was open to all players on a level playing field and it would be a lucrative market for the company to build a stronger presence there.