26 April 2012

No issue of potential coal shortage or squeezed margins, says Mudajaya Managing Director- Anto Joseph

(MUDAJYA opening stock price today (26.4.2012) was RM 2.54)

MUDAJAYA Group Bhd is positive on securing adequate coal supply from Coal India Ltd (CIL) to fuel up its power plants in Chhattisgarh.

"There's no issue of potential coal shortage or squeezed margins," said Mudajaya managing director, Anto Joseph.

Speaking to reporters here yesterday, he said, "The coal linkage with CIL has a guaranteed rate of return because it is structured in such a way that the offtake includes a pass-through cost."

A pass-through cost is charged to the energy supplier, which is then "passed through" directly to the consumer.

"In addition to the coal linkage with CIL, we also have a coal concession 80km away from the power plants with estimated deposit of 100 million tonnes. This is enough to fuel up all four 360-megawatt power plants in the next 15 years," he added.

It was reported that CIL wants to lower the penalty clause in the event of a shortfall in coal supply. The initial promise with new independent power producers (IPPs) was if it failed to supply 80 per cent of contracted volume of coal to power stations, it would have to pay a 10 per cent penalty on the coal cost.

However lately, CIL is pushing the penalty rate to only 0.01 per cent of the coal cost.

Anto acknowledged that Mudajaya's 26 per cent subsidiary, RKM Powergen Pte Ltd, which is the concessionaire of the eventual four power plants, has yet to finalise the fuel supply agreement with CIL.

He said following Indian President Manmohan Singh's issuance of presidential decree to ensure adequate coal supply to the power sector, CIL had agreed to sign fuel supply agreements with IPPs.

"Our subsidiary RKM Powergen is part of the 18-strong IPP lobby group there. The grouping stands by the argument that CIL cannot change the penalty clause unilaterally," Anto said.

"As we negotiate, we'll lobby for the penalty clause to revert to 10 per cent of the coal cost, the quantum that was initially offered to us," he added.

The first of RKM Powergen power plants in Chhattisgarh is scheduled to start operations by the end of this year. The remaining three will go onstream in staggered phases.

On the homefront, Mudajaya is busy executing a RM720 million design and civil works contract for Tenaga Nasional Bhd's new coal-fired plant in Manjung, Perak.

Early this year, Malakoff Corp Bhd awarded Mudajaya a RM1 billion job to carry our civil works on the expansion of the Tanjung Bin power plant in Johor.

Anto said these jobs bumped up Mudajaya's orderbook to RM4 billion.

"We're positive about our earnings outlook as we continue to put in bids for infrastructure works too," he said.

Source: www.btimes.com.my


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