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Friday October 24, 2008

Cepatwawasan optimistic despite declining CPO prices

KUALA LUMPUR: Cepatwawasan Group Bhd, an oil palm company, expects its two bio-energy projects in Sabah to contribute RM20mil annually to group revenue by 2011.

The company also said it was “still confident that we are profitable” despite declining crude palm oil (CPO) prices.

“Total contribution from the sale of electricity and carbon credits is estimated to be RM20mil per annum to group revenue,” said executive chairman Datuk Mah King Thian after signing an agreement with Danishcompany Nordysk Elhandel A/S to set up the two bio-energy projectsin Sandakan, Sabah yesterday.

Mah said the projects, a 3-megawatt (MW) biogas plant and 10 MW biomass-fired plant, would be able to sell power toSabah Electricity Sdn Bhd (SESB)and generate carbon credits for sale, adding that the projects were expected to be registered for the clean development mechanism (CDM) scheme.

The CDM is a scheme under the Kyoto Protocol which helps developing countries achieve sustainable development through the sale of certified emission reduction, or carbon credits, to developed and industrialised countries.

Mah said the two projects would cost RM80mil, RM60mil for the biomass plant and RM20mil for the biogass plant. Construction of the plants is expected to commence by the middle of next year and will be completed and fully commisioned by 2010. Cepat Wawasan is expected to sign a renewable energy power purchase agreement with SESB early next year. SESB is a subsidiary of Tenaga Nasional Bhd. Meanwhile, Mah said he remained optimistic about the palm oil busines despite declining CPO prices.

“(While) we will be affected, in the first six months of this year, we have analysed our operating cost and it’s below RM1200 per tonne of oil, so even at the current low price, we are still confident that we are profitable,” he said, noting that Cepat Wawasan has a low gearing ratio of 0.1.

“The panic reaction (to declining CPO prices) does not tie in with global demand,” he added.

The benchmark January contract for CPO was traded at RM1,417 per tonne at press time.