POWER (NEUTRAL) - Shortlisted Prai Power Candidates

POWER (NEUTRAL)

Shortlisted Prai Power Candidates

• Malaysia EC (Energy Comission) had shortlisted 9 candidates for the 1,000-1,400MW Prai Combined Cycle Gas Power Plant.
• The final decision on the winner is likely to be announced by Oct-Nov 2012 with final approval from the government.
• Separately, first generation IPPs are also welcomed to submit bids to extend their PPAs for another 10 years, which will be subjected to some conditions including reducing capacity payments for 4 years from now until end of the existing PPAs.
• Prai PPA is likely to be priced with IRRs of 7-8%, which is substantially lower than first generation PPAs of more than 15%.
• Tenaga will benefit from the tendering out of new PPAs, ensuring competitive PPA rates (lower than the existing first generation PPAs).
• YTL Power have to compete with other contenders which include international utility players (i.e. Mitsubishi, Mitsui, etc), lowering its existing ROEs.
• Maintain BUY on YTL Power with TP of RM2.23 and HOLD on Tenaga with TP of RM6.54.

Source: HLIB Research 19 March 2012