Mudajaya to earn up to RM80m a year from India

Mudajaya to earn up to RM80m a year from India

Author: Tan KW   |   Publish date: Mon, 23 Jun 16:56

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KUALA LUMPUR: Mudajaya Group Bhd is expecting its investment in the 1,440mw power plant in Chhattisgarh, India to contribute somewhere between RM60 million and RM80 million a year to its bottom line from 2015/16.

“We expect contributions from our associate to commence this year although it may not be significant. We will see the [bigger] impact in the second half of 2015 as all four units start contributing to the group,” group managing director and chief executive Anto Joseph told The Edge Financial Daily last week.

Contributions from the coal-fired power plant will trickle in via Mudajaya’s 26% stake in RKM Powergen Pte Ltd, which is the independent power producer for the Chhattisgarh plant in Chhattisgarh. The plant has four units generating 360mw each.

The Indian power venture will add significantly to Mudajaya’s income, where net profit stood at RM151.18 million for the financial year ended Dec 31, 2013 (FY13), down from RM237.1 million the year before. This was on the back of RM1.54 billion in revenue versus FY12’s RM1.66 million.

Mudajaya is on a plan to diversify its earnings away from pure construction, where it has built a name with ongoing civil works relating to the Janamanjung and Tanjung Bin power plants as well as the Klang Valley Mass Rapid Transit System. Anto said this is because construction margins are conventionally thin, at some 3% to 5%.

“Going forward what we are looking at is to generate our own work,” said Anto. This means that while Mudajaya will remain in its existing businesses of power, energy and property construction, it will also invest and develop in these three sectors.

This, added to its new renewable energy (RE) initiatives, will bring overall group margins to a high teens figure, Anto said.

In late May, Mudajaya completed and commissioned a 10mw solar energy power farm in Gebeng, Pahang, via its 60%-owned Special Universal Sdn Bhd. It has an RE power purchase agreement from Tenaga Nasional Bhd for a concession period of 21 years and expects to earn RM12 million a year from the project.

“The guideline from our investment committee is to match or exceed an internal rate of return (IRR) of 10% to 12%,” Anto said, adding that the estimated IRR on the present solar farm is in the mid  to high teens.

Mudajaya is concurrently working on a wind energy project in Cebu, the Philippines where is has a mandate for 62mw via its 40%-owned Amihan Energy Corp. It is also studying the feasibility of setting up a solar farm on the same plot of land.

The two projects in Cebu will be carried out in phases, but Anto hopes to complete both within 12 to 18 months.

According to Anto, the solar farms alone could add a few hundred million ringgit to the group’s order book which stood at some RM1 billion as at March 2014. Its tender book is valued at RM5 billion. As Mudajaya moves to diversify the group and grow its margins, its earnings profile is set to change, Anto said.

Some 90% of earnings now come from conventional construction work. This includes contributions from the construction of the Indian power plant.

“In future, our recurring income stream will not fall strictly under construction, but we will become more asset-based. Optimally, 60% of income will be recurring income while conventional construction [within its three core sectors] will fall to 40%,” said Anto, citing example of its Indian power venture.

He said Mudajaya is looking at regional mergers and acquisitions to move further downstream, but will not move out of its core businesses in construction.


This article first appeared in The Edge Financial Daily, on June 23, 2014.