Jaks Resources refutes Hai Duong power plant capital shortage claim

Haris F. Abdullah, chief representative of Jaks Hai Duong Power Company told VIR’s Linh Hanh that the presumption is incorrect and the project is on track.

Hai Duong’s  authorities have twice requested Jaks Resources to repay the $10 million in loans. This is a small sum when compared to a total investment of $2.25 billion. Why haven’t you repaid the loan? 

The agreement with Hai Duong Power Company was to repay the $10 million after financial closure (FC) was achieved. The FC committed to in the contract between us and Hai Duong’s authorities was set to end as of October 30, 2013. But the FC has not materialised  as our Chinese partner Wuhan  Kaidi  Electric  Power  Engineering  Company, who  is  responsible  for  arranging  the  financing,  is still in the process of getting Chinese government approval for their participation in this project.

The first time Hai Duong authorities sent the repayment request was before the FC date in early October. We did not respond because we based the repayment date on the contract.

We are now negotiating with Hai Duong People’s Committee to repay the advance latest by June 30, 2014. The presumption that the delay meant we do not have the financial capacity to repay the loan is incorrect.

How do you evaluate the prospects of Wuhan Kaidi getting the Chinese government’s approval, a condition for your project to receive loans from five Chinese banks?

We  believe  that  Wuhan  Kaidi  has  the necessary capabilities and qualities  to  strategically partner us on  this project  and we are  in close  communications  with  them. Wuhan  Kaidi is confident it will obtain the Chinese government’s stamp of approval. It’s just the matter of time. We hope Wuhan Kaidi will receive that approval in coming months.

Do you have an alternative source of funds if Wuhan Kaidi is not able to participate?

From an investment point of view, this project is attractive and there would not be any shortage of possible suitors should there be a need for a new strategic partner. However, we wish to emphasise again that, as of  today, we have full trust in Wuhan Kaidi  that  they will be able  to obtain  the necessary Chinese government approval.

Has Jaks Resources remained just as keen as when you first received the  investment certificate  two years ago? Is there any possibility Jaks would  seek to sell the entire project to another investor?

Our  interest  remains  and  there  are  no  plans  as  of  now  to  sell  the  entire project to any other investor.

How is the construction of the project going?

A lot of work has already started since the infrastructure ground breaking ceremony on September 9, 2011. In respect of the site preparation works conducted by the BOT  company, we have procured and paid for the backfilling which has almost been completed. Relocation of the high voltage transmission lines, the design and construction of the access roads and living quarters have all begun. 

In respect of the engineering, procurement and construction (EPC) works,  the basic design of  the plant  is now completed. The EPC has completed initial construction activities which included soil analysis, test piling, underground drainage system, boundary wall, project site office, water and electrical supplies and warehouse facilities, and has placed orders for the main equipment to be delivered to the site. Piling is targeted to begin before the end of 2013.

We have spent a significant amount of money on this project to date. At the moment, we will continue to use internal funds while awaiting financing. The EPC contractor has also agreed to help finance the construction works with its own funds initially until a financing agreement has been put in place. We remain committed to completing the project in 2017. This is our key objective now.