TA Research said Ranhill’s leading role as an independent power producer (IPP) in the power deficient state puts the group in a favourable position to lead the planned project development.
PETALING JAYA: Ranhill Utilities Bhd
is a frontrunner to bid for a new 100MW gas fired power plant in Kimanis, Sabah as the state seeks to assume more control of its energy infrastructure.
TA Research said Ranhill’s leading role as an independent power producer (IPP) in the power deficient state puts the group in a favourable position to lead the planned project development.
It added the proposed power plant project and the Sabah east-west grid transmission upgrade are stated under the 12th Malaysia Plan to dispatch 400MW of electricity supply from the state’s west coast to the power deficient east coast.
This new project is expected to achieve its first commercial operation date (COD) in April 2024 and final COD by January 2025.
“We believe Ranhill’s established track record in Sabah will boost its chances of securing this project. Ranhill is the largest IPP in Sabah, with a 40% market share based on installed capacity,” TA Research said in a report.Ranhill owns two gas fired power plants at the Kota Kinabalu Industrial Park with a capacity of 190MW each and backed with 21-year power purchase agreements (PPA) with Sabah Electricity Sdn Bhd (SESB).
SESB is 82.75% owned by Tenaga Nasional Bhd and the rest by the Sabah state government. TA Research noted that the state government is set to table a bill at the State Legislative Assembly in April 2023 that would pave the way for the formation of the Sabah Energy Commission, which would give the Sabah state government total control in managing its energy resources, especially electricity. The state government will reacquire SESB.
“If Ranhill is successful in its bid to secure the 100MW plant, this would result in a net present value accretion of 15 sen per share to Ranhill’s target price (TP),” TA Research noted.The price assumption was underpinned by 21-year PPA, which expires in December 2045, a two-year construction period, Ranhill owning a 100% stake and capital expenditure of RM261mil,.
This is also backed by first COD in June 2024 and final COD in January 2025, 80:20 debt: equity financing, capacity rate financial of 38.5 sen/kwH, gas cost of RM10 per mmbtu, a10-year loan tenure as well as project internal rate of return of about 7%.
Nevertheless, TA Research has raised its TP on Ranhill to 55 sen a share from 45 sen previously after narrowing its valuation discount due to the more stable political environment post-GE15 and maintained its “buy” recommendation on the stock.
