OM Sarawak awards RM115mil contract to Pestech (5219)

KUCHING: OM Materials (Sarawak) Sdn Bhd (OM Sarawak) has awarded a US$36.1mil (RM115mil) contract to Pestech Sdn Bhd.
The
job involves engineering, procurement and construction of a 275kV power
substation for OM Materials’ ferro alloy smelting project in Samalaju
Industrial Park, Bintulu.
Pestech is a wholly-owned subsidiary of Pestech International Bhd (PIB). The substation is expected to be completed in September next year.
OM Sarawak, an 80:20 joint venture between OM Holdings Ltd (OMH) and Cahya Mata Sarawak Bhd (CMSB), has revised upwards the smelting project’s capital expenditure (capex) to US$592mil (RM1.89bil) from US$502mil (RM1.6bil).
The earlier estimated cost was based on a definitive feasibility study.
OMH
said in a statement a key component of the escalated capex was
additional costs associated with the design, installation and
commissioning of the power substation as a result of more requirements
related to power factor specifications by the grid system operator.
It
said higher equipment specifications, additional transformers and
automation systems were needed to improve the stability and efficiency
of the power transmission network.
OM Sarawak has signed a power purchase agreement with Sarawak Energy Bhd for the supply of 500MW to the smelting plant.
The
agreement, according to OMH, was structured on a take-or-pay basis for
an initial term of 20 years, with a fixed tariff that was both
competitive by international standards and subjected only to adjustment
for inflation at an agreed rate.
In its update on the Samalaju
smelting project to the Australian Stock Exchange on Wednesday, OMH
said higher-than-anticipated raw materials prices, labour costs,
installation and logistics costs associated with the civil and
structural engineering of the plant and equipment were the other
contributing factors to the increased capex.
“The project’s finance information memorandum has been completed and dispatched to interested prospective lenders,” it added.
OMH
said a consortium of international and regional banks, including major
Malaysian banks, were expected to finance 70% of the project’s total
development cost. It expects the finance facility documents to be
signed by September.
The remaining 30% project cost would come from equity funding – US$147mil from OMH and US$37mil from CMSB.
While
CMSB had advised OM Sarawak that its full equity funding requirement
was in place, OMH said apart from A$56mil it had recently raised, the
company was currently assessing several alternatives to secure the
balance of its required equity contribution.
The A$56mil was raised from a series of equity placements and issuance of convertible notes with Boustead Singapore Ltd, Japan’s Hanwa Co Ltd and several institutional investors.
OMH
said about 85% of the project’s earthworks had been completed and the
site was expected to be ready for plant construction by September.
“The
majority of the civil and structural drawings of the plant have been
completed, with the mechanical and electrical drawings expected to be
completed in the third quarter,” it added.
Construction of the
plant on 202ha is expected to take 30 months, with first production
under Phase I to commence in the first quarter of 2014.
OMH said
Phase I would involve ferrosilicon production to take advantage of
favourable market fundamentals, off-take commitments, higher margins
and ability to expedite project cashflows.
OM Sarawak has
recently signed binding off-take term sheets of its products with JFE
Shoji and Hanwa. JFE is Japan’s second-largest steel company.
Phase
II is expected to be commissioned in the first quarter of 2015 to
produce silicon manganese and high carbon ferromanganese. The smelter’s
full commercial operation is scheduled by mid-2015.