TNB confirms Chugoku’s emergence as shareholder in RM11.7bil Jimah plant

A view of Tenaga Nasional Berhad headquarters in Kuala Lumpur, Malaysia, October 13, 2015. Malaysian utility heavyweight Tenaga is inching towards a multi-billion dollar purchase of energy assets from 1MDB after a rival bidder dropped out, a deal that would bring welcome financial relief to the scandal-hit state fund. Hong Kong-listed CGN Meiya Power Holidings Co, the only firm beyond Tenaga to have openly expressed an interest for some 1MDB assets, said in regulatory filings on Friday it was no longer considering the transaction. REUTERS/Olivia Harris

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) has confirmed that Japanese utility company Chugoku Electric Power Co Inc has taken up a 15% stake in Jimah East Power Sdn Bhd (JEP), the special-purpose vehicle (SPV) to develop the RM11.7bil, 2,000MW coal-fired plant in Port Dickson codenamed Project 3B.

The 15% stake was transferred from Japanese conglomerate Mitsui & Co Ltd’s share in JEP, which had been 30% prior to the transfer, to Chugoku’s special-purpose vehicle (SPV) Chugoku Electric Power International Netherlands BV.

On Thursday, TNB, which has a 70% stake in Project 3B, entered into a deed of adherence with Mitsui, 3B Power Sdn Bhd, JEP, Chugoku and Chugoku’s SPV.

By virtue of the deed, Chugoku and Chugoku’s SPV will comply with the terms as provided in the shareholders’ agreement dated July 9, 2015 entered between TNB, Mitsui, Mitsui’s unit 3B Power (through which Mitsui holds its stake in JEP) and JEP.

Last month the Nikkei reported that Chugoku would buy a 15% stake in JEP for 10 billion yen (RM349.87mil) from Mitsui.

Mitsui had prior commercial arrangement with Chugoku Electric Power Co, whereby Chugoku may take up 50% equity in 3B Power, through which Mitsui owned its 30% stake in JEP. The JEP management has set a condition that Chukogu’s participation is solely subjected to TNB and Energy Commission’s written approval. 

Chugoku, TNB noted, has vast experience in ultra-supercritical boiler. The Jimah plant uses ultra-supercritical technology, which means it requires less coal per megawatt-hour than a conventional coal-fired plant and therefore boasts lower emissions, higher efficiency and lower fuel costs per megawatt.

TNB’s statement to Bursa Malaysia on Thursday did not mention how much Chugoku paid for the stake.

It was reported that Chugoku’s operations outside Japan had largely been limited to consulting previously.

To recap, TNB signed an agreement to acquire 1Malaysia Development Bhd’s (1MDB) 70% stake in JEP for RM46.98mil in July last year. As of April 17, 2015, 1MDB had incurred project development cost of about RM83.68mil.

According to TNB in an announcement to Bursa Malaysia on June 29 last year, Project 3B is scheduled to start commercial operation of the first 1,000MW unit by June 15, 2019 and of the second 1,000MW unit by Dec 15, 2019. The levelised tariff would be fixed at 26.67sen/kWh as proposed jointly by TNB and Mitsui, which was higher than the 25.33 sen.kWh that the Government initially approved when the project was awarded to 1MDB-Mitsui.

Giving the rationale for the 70% stake acquisition, TNB said the project would boost its generation market share from the current 53.3% to 57.7% by year 2020.

The project costs are estimated at RM11.7bil, which will be financed through a combination of project finance and equity.

The Energy Commission selected 1MDB and its consortium partner Mitsui to undertake Project 3B in early 2014. The power plant was then expected to be commissioned in stages beginning Oct 1, 2018.

TNB shares gained 4 sen to close at RM13.16 on Thursday, with 12.386 million shares being traded.