JAKS: Returning with a Vengeance

JAKS may see things getting better as potential projects  takes fruition. From just being a pipe manufacturer, supplier and minor contractor for waterworks,it went through a baptism of fire when it was sabotaged politically out of its agreement to supply pipes for the re-piping project in Selangor. The case is still dragging in its  fee in court. I think JAKS will win out this one. There is nothing to really lose.

However, the management is not sitting still. It continued its quest to get more projects into its book and now has two on-going projects in the country and two more moving towards contract  fruition in China and in Vietnam.

Let us look at the latest announcement to Bursa KL.This is with regard to its project in Vietnam on the construction of a coal-fired power plant.


The first one is the execution of Memorandum of Agreements in relation to Hai Doung 1200MW Thermal Power Project.
   
"Further to the Company’s announcement on 17 October 2008, where the Company received a letter from the Ministry of Industry and Trade of Vietnam (“MOIT”) to prepare an Investment Project Report for submission to the relevant authorities in Vietnam for the construction project of a 2 X 600 megawatt coal-fired power plant at Phuc Thanh Commune, Kinh Mon District in Hai Duong Province, Vietnam (the “Project” or the “Plant”), the Board of Directors of JRB is pleased to announce that the various project documents (“Project Documents”) required for the Project have been submitted for review and after intensive negotiations, the relevant authorities and Government agencies in Vietnam have on 8 April 2010 entered into various Memorandum of Agreements (“MOA”) with JRB to confirm the parties agreement to the terms and conditions of the Project Documents and the way forward.

JRB has also concluded negotiations with China Huadian Engineering Co. Ltd (“CHEC”) for the Engineering, Procurement and Construction (“EPC”) Contract for the Project. A Memorandum of Agreement has also been entered into between JRB and CHEC on 8 April 2010 to confirm the completion of negotiations.

The Project

The Project will be developed under a Build-Operate-Transfer (“BOT”) structure and run as an Independent Power Plant with a 25-years Power Purchase Agreement (“PPA”) with Vietnam Electricity (“EVN”), the Vietnamese state-owned national utility company. At the expiry of the concession term, JRB will transfer the Plant to Vietnam’s MOIT. The right to implement the Project on a build, operate, transfer basis is granted by MOIT under a BOT Contract to be entered which will also set out the rights and obligations of each party.

The Project will be fuelled by domestic coal supplied by Vietnam National Coal-Mineral Industries Group (“Vinacomin”), the Vietnamese state-owned entity of coal resources in Vietnam from the nearby coals mines in the Quang Ninh province. The coal supply arrangement is to be specified in a 25-years Coal Supply Agreement (“CSA”) with Vinacomin.

The project site land will be leased from the Department of Natural Resources and Environment of Hai Duong People’s Committee for 25 years under a Land Lease Agreement (“LLA”).

The construction of the Project is slated to begin in the last quarter of this year and the commercial operation for the first unit of 600 megawatt is scheduled in the fourth quarter of 2014 and the second unit of 600 megawatt to follow in the second quarter of 2015.

Memorandum of Agreements

JRB has executed the following MOAs on 8 April 2010 with the following parties:

a) MOA with MOIT, in relation to the BOT Contract, where the parties confirmed their agreement on all terms of the BOT Contract, except for two issues that the parties have identified and are seeking to resolve. The parties also agree to use their best efforts to resolve the two outstanding issues in good faith as soon as possible and further cause all the Project Agreements to be submitted to the Ministry of Planning and Investment, Vietnam for the issuance of an investment certificate for the Project.

b) MOA with EVN, in relation to the PPA where the parties confirmed their agreement to the terms and conditions to the PPA (subject to the finalization of the BOT Contract), including without limitation the tariff stated therein.

c) MOA with Vinacomin, in relation to the CSA where the parties confirmed their agreement to the terms and conditions to the CSA, including without limitation the coal price as stated therein.

d) MOA with the Department of Natural Resources and Environment of Hai Duong People's Committee, in relation to the LLA where the parties confirmed their agreement to the terms and conditions for the lease of the project site land.

e) MOA with CHEC, in relation to the EPC Contract where the parties confirmed their agreement to the terms and conditions for the EPC Contract.

The BOT Contract, PPA, CSA, LLA and the EPC Contract will be executed between a project company to be incorporated in Vietnam and the respective parties upon the issuance of the Investment Licence and the incorporation of the project company.


Information on CHEC

CHEC is one of the largest EPC Contractors in electric power field in China , with 3 design companies, 20 subsidiary and holding companies, 7 joint ventures with foreign companies and 50 cooperative fabrication and construction enterprises. CHEC’s parent company, China Huadian Corporation (CHD) owns and manages more than 180 power stations and the total installed capacity of the CHD Group is 80,000 MW located in 21 provinces and regions in China.

None of the Directors and Major Shareholders of the Company and/or persons connected with them has any interest, direct or indirect, in the Project.

The Directors of JRB are of the opinion that the Project is in the best interest of the JRB Group.

This announcement was dated 8 April 2010."

I think this bodes well for JAKS.