Gamuda in RM4bil Sabah hydroplant joint venture

Petaling Jaya: Gamuda Bhd has entered into a joint-venture agreement (JVA) with Sabah Energy Corp Sdn Bhd (SEC) and Kerjaya Kagum Hitech JV Sdn Bhd (KKHJV) to undertake a private finance initiative for the development of the RM4bil 187.5MW hydroelectric power plant in Tenom, Sabah.

The undertaking will be in line with the group’s long-term environmental, social and governance (ESG) strategies and commitments.

Based on a filing with Bursa Malaysia, Gamuda said there is a need to further increase electricity generation to ensure a stable base load, as Sabah is said to only have less than 12% reserve margin of electricity supply and meet the increasing demand by the industrial sector for green energy.

“As published in the Sabah Energy Roadmap and Master Plan 2040, the state currently has a dependable capacity for electricity of 1,180MW as of 2021,” it added.

The Tenom plant will be able to provide additional generation capacity of 187.5MW for Sabah and deliver a total of up to 1,052GWh of clean energy per annum, upon completion.

The JVA entered into yesterday concerns entire equity interest in holding company UPP Holdings Sdn Bhd, in which Gamuda will hold a 45% equity interest, with SEC 40% and KKHJV 15%.

The development of the Upper Padas Hydroelectric Power Plant will be delivered via a wholly owned subsidiary of the JV company, namely, Upper Padas Power Sdn Bhd, which will fulfil the role as a project developer.

The Gamuda filing noted the JV members intended to use a minimum debt to equity ratio of 80:20 in conjunction with internally generated money and borrowings to finance the proposed JV.

A power purchase agreement (PPA) for the proposed facility is yet to be finalised and entered into between Upper Padas Power and offtaker, Sabah Electricity Sdn Bhd.

The RM4bil project has an initial operating period of 40 years, and construction works are slated to commence in the first half of 2024 (1H24) and are expected to complete in five years, with commercial operation to start in 2029.

According to Gamuda, the current paid up capital of the JV company is RM1 with one ordinary share issued, and further capital enlargement will be done at the appropriate stage to inject funds into Upper Padas Power for it to meet funding requirements.

The amount of which will depend on the project’s ultimate cost and funding, as well as the final tariff, which Suruhanjaya Tenaga is now reviewing and approving.

Gamuda said it will make a due announcement on the tariff details and developments on the PPA once approval is obtained.

The proposed JV will not have any material effect on the earning or net assets of Gamuda for the financial year ending July 31, 2024.

It is only expected to contribute positively to Gamuda upon commencement of construction for the next 45 years.