Highlight Mudajaya eyes mega power plants

by **Cals** Mon 21 Oct 2013, 09:49

Highlight Mudajaya eyes mega power plants

Business & Markets 2013

Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com

Monday, 21 October 2013 08:32

KUALA LUMPUR: Mudajaya Group Bhd has set its sights on building and operating two ultra mega power plant (UMPP) projects with a capacity of 4,000MW each in India.

The group is looking for a partner — either from Malaysia or India — to form a consortium with its current partner in India to bid for the projects.

Currently, Mudajaya is undertaking a 1,440MW coal-fired power plant through its 26% associate company, RKM Powergen Pvt Ltd (RKMP).

Mudajaya group managing director Anto Joseph said the group and its existing partner in India, RK Power Pvt Ltd, are looking for another party to form a consortium and apply for a request for qualification (RFQ) document for the UMPP.

“We are not sure if we are qualified at this moment and we have not applied for the RFQ yet. We may have to form a bigger consortium to possibly submit the RFQ by the end of this month,” said Anto.

The ministry of power of India has launched an initiative to develop three 4,000MW coal-fired UMPPs under a tariff-based competitive bidding process. The plants are to be located in Cheyyur, Odisha and Chhattisgarh to supply power to several states surrounding these areas.

According to the RFQ tender document issued by Power Finance Corp Ltd, a state-owned company, the Cheyyur UMPP is a coastal power project using imported coal based in a captive port in Panaiyur.

The power generated from the Cheyyur plant will benefit seven states, namely Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Kerala, Uttar Pradesh and Punjab.

The Odisha UMPP is a coal-fired, pit-head power project in which coal for the project will be sourced from coal blocks allocated by the ministry of coal.

The beneficiary states are Odisha, Punjab, Haryana, Madhya Pradesh, Rajasthan, Uttar Pradesh, Tamil Nadu, Uttarakhand and Chhattisgarh.

Both projects are on a design, build, finance, operate and transfer basis following the RFQ and a request for proposal (RFP) process.

Anto said these power projects cost US$4 billion (RM12.6 billion) to US$5 billion each and this will be the biggest power plant built and operated by the group.

“We have not conclusively decided on the UMPP projects as a proposal of this nature will involve a lot of costs,” he said.

However, Anto said in the implementation of the UMPPs, the government provides the land as well as coal, and contenders bidding will be based on who will provide the lowest tariff. He hopes by next year with the possible consortium being formed and with a healthy balance sheet, the group will be able to take on the project, should it be chosen.

CIMB Research said in a report that Mudajaya has an outstanding order book of RM1.8 billion backed by a RM5 billion tender book with a 15% to 20% success rate.

“Job wins are likely to make a comeback in the second half. A likely gap in profit recognition for new jobs should be filled by new independent power plant (IPP) associate profits from India,” said the research house.

Mudajaya has been in the Indian power industry since 2000. Recently, the group secured a long-term coal supply agreement for phases one and two of RKMP’s coal-fired thermal power plant in Chhattisgarh for 20 years.

Previously there were concerns over Mudajaya’s venture into India’s IPP sector due to the uncertainty over coal supply. The Indian government last year issued a directive to ensure an adequate supply of coal for the power sector via the signing of a fuel supply agreement.

According to the group, the Indian power sector has plenty of opportunities and it would like to further expand its foothold in the country. However, Anto said there are a lot of pitfalls.

“The challenge in India is overcoming problems and the learning curves but we have gone through that and it’s worth a lot, so why run away from India as many [other Malaysian companies] can’t get in. The intangible benefit for the company is high,” he said.

Mudajaya posted a 24% decline in net profit of RM46.14 million for its second quarter ended June 30 compared with RM60.4 million in the previous corresponding period. Revenue also fell to RM432.14 million from RM558.81 million.

In an announcement to Bursa Malaysia, the group said its construction revenue and profit declined mainly due to the tapering off in the delivery of its equipment components of the procurement contract for its power plant in Chhattisgarh.

Net profit for the first half of 2013 fell to RM88.25 million from RM134.64 million a year ago. Revenue was lower at RM809.99 million against RM999.3 million in 2012.

This article first appeared in The Edge Financial Daily, on October 21, 2013.