Vietnam power plant will drive Jaks profit growth

Vietnam power plant will drive Jaks profit growth

Jaks Resources plans to take a step back from the property segment to focus more on infrastructure and power generation projects, including the one being developed in Vietnam, as well as searching for other opportunities in the renewable energy sector.

“In the next two years, Jaks Resources sees the $1.87 billion, 1,200-megawatt coal-fired thermal power plant in the northern province of Hai Duong driving the company’s profit growth,” the company stated in its latest report recently released.

According to another Jaks Resources report on its property development and investment division, the company recorded a pre-tax loss of RM14.8 million ($3.64 million) in the first quarter of this year, lower than a pre-tax loss of RM10 million ($2.46 million) in the same period last year.

Jaks Resources’ chief financial officer Steven Ang Si Eeng said that profits generated from the Vietnam-based engineering, procurement, and construction (EPC) contract would be more than enough to cover the losses incurred from the Evolve Concept Mall, which recorded high operating expenses, large depreciation charges, and vast financing expenses in the financial year ending on December 31, 2018.

The Hai Duong build-operate-transfer (BOT) power plant, licensed in 2011, is the Malaysian company’s first foray into Vietnam’s power generation secctor. It started construction in March 2016 through a joint-venture between Jaks Resources and China Power Engineering Consulting Group. Golden Keen Holdings, a wholly owned subsidiary of Jaks Resources also secured a $454.5 million EPC contract for Hai Duong BOT power plant. Future earnings look promising as the company has a 25-year power purchase agreement (PPA) for the power plant. The project is expected to come online in 2020, and it is expected to enjoy recurring concession-type earnings with state-run Electricity of Vietnam from the generation and sale of power under the signed PPA.

Affin Hwang Investment Bank Bhd pointed out that the Vietnam EPC and commissioning contracts will remain the main earnings driver for Jaks Resources, as it contributes around 69 per cent year-on-year to the company’s profits.

“We believe that management will complete the project on time, as it will play a significant role in bolstering Jaks Resources’ chances of securing new power-related projects in Vietnam,” Hwang affirmed in a statement. “Hence, we believe the risk of delay is minimal, providing better forecasts and lower risk in the earnings delivery from the Vietnam EPC contract.”

Jaks Resources is actively exploring several renewable energy projects in Vietnam, which will help to compensate for the shortfalls in its construction earnings until 2020.