According to MIDF Research, the collaboration aims to address Thailand’s capacity woes given the availability of infrastructure in Malaysia.
“Southern Thailand is underserved with poor connectivity to Thailand’s existing gas pipelines and weak grid connections.
“A few coal plants had been proposed in recent years to serve southern Thailand but were shelved given strong opposition by environmentalists,” the research house pointed out.
Ranhill is expected to take a 70% stake in the collaboration while TS Co acquires the remainder stake.
TS Co is also advising Ranhill for its Thai-based water businesses and is likely to take the lead in the project development in Thailand.
MIDF Research said feasibility studies are expected to be undertaken with regard to the plant’s development.
Moreover, prior to the project’s special purpose vehicle (SPV) proceeding with negotiations with Thailand’s sub-committee on electric power cooperation between Thailand and neighbouring countries, a government-to-government agreement has to be secured for both Malaysia and Thailand.
For capex, at RM2.5mil per MW to RM3.5mil per MW, MIDF Research expects the Kedah CCGT project to be between RM3bil and RM4bil.
“Given the proximity to southern Thailand and availability of existing gas supply infrastructure in Malaysia, we think Ranhill could achieve competitive rates for its power export, relative to Thailand’s wholesale rates of 2.3 baht per kwh – 4.2 baht per kwh,” the research house noted.
On the returns potential, MIDF Research estimates the power plant to entail “reasonably good” internal rate of returns of 10% to 12% based on a typical 21-year power purchase agreement.
“Potential earnings is massive and may more than double Ranhill’s existing profit base, should Ranhill take even a 50% stake in the project SPV,” it noted.
Despite the share price appreciating substantially since late last year, the research house’s current valuation has yet to factor in the potential of the Kedah CCGT power plant and Johor sewerage project.
“Our call and target price of RM1.30 is under review pending a management meeting this week,” MIDF Research said.
Source: The Star