Tuaspring acquisition a timely addition for YTL


Bright lights: YTL Power has confirmed it completed the acquisition of the 396MW Tuaspring combined-cycle gas turbine power plant in Singapore. — Getty Images

PETALING JAYA: The acquisition of the Tuaspring power station by YTL Power International Bhd has expanded its Singapore generation capacity by 16.5%. The additional capacity, according to MIDF Research, comes at a good time with outlook on the Singapore power sector improving.

“Multi-utilities division earnings (of the group) are gaining strong traction from higher electricity prices in Singapore, and the Tuaspring addition could further underpin this trend,” it said in a report.

Last week, YTL Power said it completed the acquisition of the 396 megawatt (MW) Tuaspring combined-cycle gas turbine (CCGT) power plant in Singapore.

One positive surprise said MIDF Research was the final purchase price of S$270mil (RM864mil) cash, which was about 19% lower than the original purchase consideration of S$331.5mil (RM1.06bil). Other terms of the acquisition remained the same.

It noted that this was a relatively attractive entry as the lower purchase consideration brought down the acquisition cost to an estimated enterprise value of RM2.2mil/MW from RM2.7mil/MW before.

“This is considerably attractive compared to the estimated replacement cost of RM3mil-4mil/MW for a typical CCGT plant, in our opinion. Tuaspring is a newer generation CCGT plant in Singapore, commissioned in 2016.

The addition of Tuaspring is estimated to expand YTL Power’s Singapore generation capacity by 16.5% to approximately 2.8 gigawatts – giving it an estimated 22% share.” According to MIDF Research in the Singapore electricity market outlook issued in November 2021, the Energy Market Authority (EMA) projects annual system demand and peak demand to grow at a compound annual growth rate of 2.8%-3.2% over the 2022-2032 period.

It said the tighter demand-supply conditions were driving up wholesale rates, which was up 281% year-on-year (y-o-y) in the first four months of 2022.

“YTL Power’s multi-utilities division earnings have reflected the improvements with profit before tax rising by 103% y-o-y in the latest third quarter of FY22 results.

“This is after eight consecutive months of losses seen in FY19-FY20 as a result of industry overcapacity in the past,” it added.

The research firm re-affirms its “buy” call on the stock with the target price unchanged at 92 sen.

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