KNM Group - Secures financing for Peterborough’s WTE project

Author: kltrader   |   Publish date: Mon, 16 May 2016, 10:12 AM 

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From an aspiration into a reality

Securing £35m financing from Export-Import Bank of Malaysia (Exim Bank) for its Peterborough’s waste-to-energy (WTE) project is a key catalyst. We expect full financial closure of the remaining £65m soon. Total project cost is £140m, of which £40m is for land acquisition. Our BUY call and MYR0.80 TP, based on 0.4x EV/ backlog, exclude any contributions from RE projects.

Financial closure for WTE job; new orders from TR

KNM has secured overseas project financing (OPF) from Exim Bank of £35m (MYR204m). The OPF is to part finance the development and construction of Phase 1 of the 18MW WTE power plant worth £140m. The tenure for the financing is for a period of 11 years, to be guaranteed by KNM. Meanwhile, KNM has also secured MYR93m orders from Tecnicas Reunidas (TR) for the fabrication of high thickness vessels and high thickness columns, which will take about 16-18 months to complete.

En route to be a RE player

The Exim Bank financing addresses the long-standing concern over the viability of the project, of which KNM is an 80% shareholder. Part of the construction has already started. We understand that the Peterborough WTE project is expected to be completed within 30 months from now with a projected MYR10m net profit p.a. We also gather that there are already a few reliable takers for the energy. In the immediate term, its 72%-owned ethanol RE project (cassava-based feedstock) in Thailand will commence operations in 3Q16 and contribute positively to KNM (e. MYR15m net profit p.a.).

Earnings upside projected

Successful execution of these two projects will see KNM’s progressive transformation into a RE play, as it remodels its business, from a cyclical to a more secured, recurring based income model. Our model for now excludes earnings contributions from these RE operations.
Source: Maybank Research - 16 May 2016