Kenanga Research said the project is expected to contribute approximately RM16mil annually at full operational capacity.
PETALING JAYA: Kenanga Research is positive on Yinson Holdings Bhd
’s latest acquisition of a solar power plant in Peru, which is the group’s first operating project in South America.
The research house said the project is expected to contribute approximately RM16mil annually at full operational capacity, yielding an internal rate of return (IRR) of 8%.
It is noteworthy that Yinson Renewables concluded the acquisition of the Matarani Solar project in Peru, with a capacity of 97 megawatt, from Grenergy Renewables for US$90mil.
The cost included acquisition of stake and further earnouts payable to Grenergy.
The majority of the project’s energy is under a 15-year power purchase agreement with an undisclosed off-taker, set to commence in the third quarter of 2024.
Grenergy will handle the engineering, procurement, construction and commissioning works, and provide operation and maintenance services for the initial two years upon full commencement.
“Despite the commencement of the Matarani Solar project in the third quarter of financial year 2025, we expect contributions from the project to be largely offset by startup costs,” stated Kenanga Research.
Following the acquisition, Kenanga Research raised its target price for Yinson by 1% to RM3.47 per share.
“Note that our target price reflects a 5% premium accorded by a four-star environment, social and governance rating as appraised by us,” it said in a note.
Kenanga Research has also reiterated its “outperform” call on Yinson.
“We continue to favour Yinson due to its strong floating production, storage and offloading (FPSO) order book pipeline with multiple major FPSO jobs under the conversion stage which provides significant earnings growth in coming years.
“It also has a strong project execution track record which positions the company to benefit from strong structural demand for FPSO contractors anticipated in the coming years.
“We also like it because it is one of the first local oil and gas companies to invest in green technology companies (solar, e-mobility and others) which in our view would help with the company’s long-term energy transition agenda,” Kenanga Research said.
Commenting on the potential risks to its call on Yinson, it said one of the risks was crude oil prices falling below US$70 per barrel, raising required IRR for new floating production projects.
Regulatory risks and uncertain returns for renewable energy investments that are mainly focused on emerging markets as well as project execution risks such as cost overrun and delays were the other risks.
