PETALING JAYA: Among the oil and gas service providers, Yinson Holdings Bhd is seen to be ahead of its peers on the energy transition path.
Its latest collaboration with Chile-based renewable energy (RE) developer Verano Capital Holdings SpA will speed up this journey, offering Yinson immediate access into Latin America’s RE space, with a strong development pipeline of 800 megawatt (MW) greenfield RE projects in hand.
Of this, 330MW is expected to be approved by the authorities within the next six to 12 months.
Yinson, a floating production storage and offloading (FPSO) leasing firm, and Verano aim to begin construction on the first 100MW within the next six months.
Maybank Investment Bank Research said crystallising these projects will help Yinson realise its 5 gigawatt (GW) RE capacity target by 2025, while meeting its 2030 carbon neutral agenda.
“Its energy transition agenda is gaining momentum, a positive, focused on the RE and e-mobility services space. Essentially, this will accelerate its carbon neutral agenda, which it targets to meet by 2030.
“Yinson has also set a net-zero carbon emission target by 2050, in line with the oil majors, ” said Maybank IB in a note to clients in which it maintains a “buy” on the stock with a RM6.65 target price.
According to AmInvestment Bank Research, based on the 123MW Granja solar power plant which began in March 2020 in Pozo Almonte, Chile, the project cost of US$110mil (RM458.09mil) or US$0.9mil (RM3.75mil) per MW is higher than the US$0.5mil (RM2.08mil) per MW for Yinson’s 190MW Nokh Solar Park in Rajasthan, India, which excludes land cost.
“However, as electricity prices in Chile are higher at US$0.15 (RM0.62) a kilowatt-hour or kWh versus India’s US$0.08 (RM0.33) a kWh, management is targeting for a project internal rate of return of 10% in this region, ” it added.
Together with high shipping costs currently, AmInvestment Bank estimates that the capital expenditure for solar capacity of 330MW could reach US$330mil (RM1.4bil) – 25% of Yinson’s market capitalisation.
“However, we highlight that the group could take up minority stakes while international banks could be prepared to fund over 90% of the renewable project costs, which may defray Yinson’s equity commitments.
“Based on an equity-to-debt ratio of 10:90, weighted average cost of capital of 5.5% and equity stake of 50%, we estimate that an additional 330MW solar capacity could raise Yinson’s sum-of-parts valuation by 4% or 28 sen, ” said the research firm.
Meanwhile, the group is awaiting the results for three bids submitted for the FPSO charters for Parque das Baleias (PDB) field in Brazil, Pecan in Ghana and Limbayong in Sabah.
Yinson expects an announcement by September-October this year for the PDB bid, with the group again emerging as the sole bidder from Petrobras’ re-tendering exercise.
Together with the RE prospects, the group expects to undertake a rights issue of up to RM1bil, 18% of the current market capitalisation, added AmInvestment Bank.