Tenaga Nasional : Proposal to take over operations at Bakun

January 22, 2009 at 7:26 am Leave a comment

· TNB to work with SEB
Tenaga Nasional Bhd (TNB) and Sarawak Energy Berhad (SEB) have obtained Government approval to take over the operations of Bakun Hydroelectric Project (BHEP) from Sarawak Hidro Sdn Bhd (SHSB).
· Project details
The project will see TNB and SEB taking over the operations of 8x300MW generating units at BHEP, which are currently nearing completion. The scheme will then export a large part of the power generated to Peninsular Malaysia via a high-voltage direct current (HVDC) transmission system and the remaining power to Sarawak.
· Details of the takeover
BHEP is currently owned and developed by SHSB, a fully-owned subsidiary of the Minister of Finance Inc (MOFI). Upon commissioning of the units, A Special Purpose Vehicle (SPV) will then be set up to take over the operation of BHEP from SHSB through a leasing agreement and other
related commercial agreements for the sale of electricity to Peninsular Malaysia and Sarawak.
· Maintain call and TP
It is unclear at this point the income it can derive from the project and also the cost of laying down the undersea cables. However, the impact of this project will only be seen on TNB’s books from 2012 onwards, when the cabling works start. For now we maintain our buy call on the stock and maintain our TP of RM6.75

Proposal to Take Over Operations of BHEP

TNB to work with SEB
Tenaga Nasional Bhd (TNB) and Sarawak Energy Berhad (SEB) have obtained Government approval in principle to take over the operation of Bakun Hydroelectric Project (BHEP) from Sarawak Hidro Sdn Bhd (SHSB).
The takeover of operations will involve a leasing agreement to develop the associated transmission system from Sarawak to Peninsular Malaysia. The Board of Directors of both companies have resolved to proceed with the Project and commence the negotiations with the relevant authorities.

Project details
The takeover will see TNB and SEB taking over the operations of 8x300MW generating units at BHEP, which are currently nearing completion. The scheme is expected to export about 1,600MW from BHP to Peninsular Malaysia via a HVDC transmission system and the remaining power will be channelled to Sarawak.

Details of the takeover
BHEP is currently owned and developed by SHSB, a fully-owned subsidiary of the Minister of Finance Inc (MOFI). SHSB will continue to undertake the development of BHEP until full commissioning of the units.
A Special Purpose Vehicle (SPV) will then be set up to take over the operation of BHEP from SHSB through a leasing agreement and other related commercial agreements for the sale of electricity to Peninsular Malaysia and Sarawak. The SPV will be owned by TNB, SEB and the Sarawak State with MOFI holding a golden share.
Apart from that, a joint venture company (JV) owned by TNB, SEB and MOFI will be set up to undertake the development of the undersea transmission facilities. The on-land transmission systems for Peninsular Malaysia and Sarawak will be developed by TNB and SEB respectively.

Maintain call and TP
There have been no concrete details released at this point in time. It is only known that TNB will takeover the operations of BHEP via an SPV, and that the group will be involved in the development of the undersea transmission facilities. We have been told that TNB will retender the laying of the undersea cables with the hopes of getting a better price this time around.
It is unclear at this point the income it can derive from the project and also the cost of laying down the undersea cables. However, the impact of this project will only be seen on TNB’s books from 2012 onwards, when the cabling works start.
For now we maintain our buy call on the stock and maintain our TP of RM6.75

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