Investment delays dog Hai Duong power project
Investment delays dog Hai Duong power project
Nearly two years after Malaysia’s Jaks Resources Berhad gained an investment certificate for its $2.25 billion coal-fired power plant in northern Hai Duong province, the project has remained standstill due to the investor’s inability to find potential partners.
Jaks Resources Berhad (JRB) has announced that Sanjung Merpati Sdn Bhd, which last December entered subscription agreements with JRB’s subsidiary Jaks Power Holding Limited (JPH) to invest in the 1,200 megawatt Hai Duong power plant in Vietnam, decided to terminate the agreement.
This means China-based Wuhan Kaidi Electric Power Engineering Company, which also entered subscription agreements with JPH to invest in the project last December, is now the solitary company willing to invest in the Hai Duong project.
“Kaidi will be the engineering, procurement and construction (EPC) contractor as well as an investor with 40 per cent equity stake in the project. Such investment by Kaidi alongside JPH creates a strong alignment of interest between the sponsor and the EPC contractor,” JRB said in an announcement.
“Through the proposed joint venture, JRB would also be able to leverage on Kaidi’s experience and track record in securing financing for the project,” it added.
JRB obtained an investment certificate to build the power plant in Vietnam in August 2011 under the build-operate-transfer contract with the Vietnamese Ministry of Industry and Trade. The registered investment capital of the project is around $2.25 billion, currently planned to be financed 80 per cent by debts and 20 per cent by equity. As of March 31, 2013, JRB said it had invested approximately $31 million in the project.
According to the investor, the construction of the power plant, comprised of two 600 megawatt generating units, is scheduled to begin in the first quarter of 2014. The first and second generating units are scheduled to commence generation of power in the third quarter of 2017 and the first quarter of 2018 respectively.
But this is just a plan, the construction of this project now depends on the investment decision of Kaidi. Actually, the Kaidi subscription agreement shall be effective upon preceeding conditions being satisfied or fulfilled on or before June 30, 2013 with an extension of two months. These include the execution of the EPC contract, the approval of the board of directors and shareholders of JPH, and Kaidi obtaining relevant approvals for its investment in this project from the Chinese governmental authorities.
Early last year, JRB had also signed subscription agreements with two companies, Malaysian Island Circle Investment Holding Limited and Chinese Meiya Power Limited, to invest in the project. In the end, both terminated the partnership late last year.
If Kaidi fails to complete the Kaidi subscription agreement or breaches any of the terms of the agreement, JRB will have to continue its lonely search for other new interested partners.
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