You are entitled to your opinion. This is a free world

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PureBULL ... My dearest DK66 ,

U r truly a superb talented investing news writer.
V good n convincing indeed w insider pic n info at Right Timing, I guess.
I have never seen 1 so v v GOOD like you in my 33 years in KLSE stock mkt.
100% fully focused n writing beautifully w endless energy on 1 STOCK onli...

u r likely highly paid, on the insider pay.roll n MORE ...

all accountants have solid concrete advice about 30% JV partner, i.e. about NO controlling stake n power to touch the CASH.flow of this company.

What say U, sir DK66 ???
23/04/2020 4:31 PM

However, do not take this as a sell call by me. I repeat, this is NOT a sell call.

I have chosen to write this risk article now so that less confident readers can take this price rebound opportunity to cash out.

Sarifah, there is no need to be over protective of Jaks. Readers are smart enough to judge the risks in light of current construction progress which is over 90% completed with unit 1 expected to commence operation in Q3 2020.

Those risks were mentioned by Jaks as it is a standard requirement of disclosure.

Sarifah, I m still holding. I just thought of a more balance views should benefit readers.

This should prove my sincerity to Naysayers.

If Jaks is good, it won't derail just because investors are made aware of its risks.

Not many people like to read risk articles :(

Jaks Resources - Risk factors

https://klse.i3investor.com/blogs/Jaks%20resources/2020-04-23-story-h1506102998-Jaks_Resources_Risk_factors.jsp

Aseng, you are right. I shall focus more on risk evaluation. Thanks

---------------------------------
Aseng Good morning my good friends

所谓＂真金不怕红炉火＂
You risk assessment is more valuable than your the potential profit calculation.
你做的对， 做的好。
20/04/2020 9:23 AM

Aseng 讲完好的，再讲讲坏的， 不要太自信， 才对的起自己， 对的起大 众
20/04/2020 9:28 AM

Guidance from MFCB's management RM200m-250m
-----------------------
Ong8888 Anyone did a projection for MFCB's Don Sahong power plant?
22/04/2020 8:44 AM

On behalf of the Board of Directors of PEB, HLIB wishes to announce that the Company and the Vendors have, via an exchange of letter on 20 April 2020 (“Letter”), mutually agreed to terminate the HOA after taking into consideration the uncertainties surrounding the global economy and financial market.

The termination of the HOA is not expected to have any material effect on the earnings per share and net assets per share of the Company for the financial year ending 31 December 2020.

I like this;

"WHEN THE TIME COMES TO BUY, YOU WON'T WANT TO."

johnmasino, you are welcome

--------------------------
johnmasino DK66:- Thanks for the 2 articles! Cheers and god bless!
20/04/2020 4:18 PM

CPECC considered the following major risks to be have been mitigated through Vietnam government guarantee, BOT agreement, PPA, CSA, and joint venture agreement;

sovereign risk
foreign exchange risk
Investment return risk
financing risk
joint venture risk
legal risk
-----------------------------------
johnmasino DK66:- Would be grateful if you could summarize in a nutshell what the article says for the benefit of those who can't read Chinese..thanks
20/04/2020 12:11 PM

CPECC considered the following major risks to be have been mitigated through Vietnam government guarantee, BOT agreement, PPA, CSA, and joint venture agreement;

sovereign risk
foreign exchange risk
Investment return risk
financing risk
joint venture risk
legal risk

investing_bursa, Vin3133 and YONG, You are welcome

YONG, Thank you for translation

Jaks Resources - Risk assessment by CPECC

https://klse.i3investor.com/blogs/Jaks%20resources/2020-04-20-story-h1506044437-Jaks_Resources_Risk_assessment_by_CPECC.jsp

edkfc, you are welcome

winston1, you are welcome

akulamatata,

I do not have the absolute answer but I have done several estimations using various methods. I should not simply give you a figure here without having you read the articles to know the methodologies employed and the assumptions made. Please visit my articles to know the detail computations.

Thank you

----------------------
akulamatata Bro DK,for first power plant if start generate estimate can contribute how many profit r?
19/04/2020 3:29 PM

Thank you all

elbrutus, Thanks for your "LIKE"

-------------
elbrutus DK66 bro...if tekan salah...minta maaf eh...is definitely LIKE !!!
18/04/2020 8:40 PM

Jaks Resources - An investment story made simple to understand

https://klse.i3investor.com/blogs/Jaks%20resources/2020-04-18-story-h1506021157-Jaks_Resources_An_investment_story_made_simple_to_understand.jsp

2721, you are welcome

------------------
2721 thx DK for numerous detailed sharing, gave many long term investors confidence on potential of Vietnam power plant..nt willing to sell even though paper profit gao gao

I hate to say this again. Please do not come and ask me later if you can buy at 1.50.

The answer is "NO". If you do not wish to buy at RM1.00, why should you buy at RM1.50 ?

Sarifah, many still do not have faith in JHDP. They do not believe in the earnings estimation. They look to market for confirmation. RM0.50 - incorrect, RM1.50 - Maybe, RM2.50 - Confirmed. So, they will probably buy at RM2.50.

A 2% interest savings is roughly USD28m annually for the initial years, translating to additional share of profit of RM36m to RM48m to Jaks.

Mong Duong II has taken advantage of the low interest regime to restructure its borrowings.

https://www.ifre.com/story/2173747/main-awards-winner-y7xqwk7n8c

Frontier Markets Issue: Mong Duong 2’s US$1.1bn refinancing
13 Dec 2019 12:00 IFR Asia Awards 2019 Daniel Stanton

New frontier

Asia’s debt markets reached another milestone in 2019 with the first international bond from a frontier market project.

AES-VCM Mong Duong Power (MDP), which operates the 1,120-megawatt coal-fired Mong Duong 2 plant in northern Vietnam, sold US$678.5m 9.8-year senior secured bonds through Mong Duong Finance Holdings. The bond amortises from the end of the fourth year and has a weighted average life of 6.9 years.

Alongside a US$485m syndicated loan, the deal refinanced MDP’s existing project debt at an attractive fixed coupon, improving returns for the sponsors and giving capital markets investors a rare chance to take exposure to Asian infrastructure.

There are relatively few project bonds in Asia, and there had been very little offshore supply from Vietnam to provide pricing benchmarks, with no sovereign issuance for the past five years. That meant a careful price discovery process was needed.

Pricing tightened from initial guidance of 5.625% area to final guidance of 5.25% area, plus or minus 12.5bp, before printing at 5.125%.

Even with that 50bp tightening, final orders were over US$2.75bn. The 144A/Reg S bond won over a diverse investor base, with the US taking 32% of the deal.

The project’s strong sponsor base undoubtedly helped win over investors. US power company AES ultimately owns 51% of MDP, South Korea’s Posco Energy 30% and sovereign wealth fund China Investment Corp 19%.

Still, as the first deal of its type from Vietnam, the issuer and bookrunners needed to convince investors of the strength of the guarantees and contracts associated with the bond.

MDP has a government guarantee on all payment obligations under a build-operate-transfer scheme, with the plant set to be transferred to the government after 25 years of operation. Its 25-year power purchase agreement with state-owned Vietnam Electricity runs until 2040, and state-owned miner Vinacomin has committed to supply coal to MDP at a regulated price for the life of the project.

To keep these protections in place and avoid lengthy renegotiations, proceeds from the bond and the new loan were used to buy MDP’s project loan from the existing lenders, rather than refinancing the existing loan.

There is a pledge of shares in MDF and security over its assets, but MDP itself does not guarantee the bond, as Vietnam places limits on the total dollar amount of debt that can be issued from the country.

Thanks to these structural features, the bonds earned ratings of Ba3/BB (Moody’s/Fitch), in line with the sovereign. Investors left satisfied, as the gained as much as half a point the following day, finishing IFR’s review period at 101.35.

Citigroup and HSBC led the refinancing as joint global coordinators on the bond and original mandated lead arrangers and bookrunners on the loan. SMBC and Standard Chartered were joint bookrunners and MLABs.

Mong Duong II has taken advantage of the low interest regime to restructure its borrowings.

https://www.ifre.com/story/2173747/main-awards-winner-y7xqwk7n8c

Frontier Markets Issue: Mong Duong 2’s US$1.1bn refinancing
13 Dec 2019 12:00 IFR Asia Awards 2019 Daniel Stanton

New frontier

Asia’s debt markets reached another milestone in 2019 with the first international bond from a frontier market project.

AES-VCM Mong Duong Power (MDP), which operates the 1,120-megawatt coal-fired Mong Duong 2 plant in northern Vietnam, sold US$678.5m 9.8-year senior secured bonds through Mong Duong Finance Holdings. The bond amortises from the end of the fourth year and has a weighted average life of 6.9 years.

Alongside a US$485m syndicated loan, the deal refinanced MDP’s existing project debt at an attractive fixed coupon, improving returns for the sponsors and giving capital markets investors a rare chance to take exposure to Asian infrastructure.

There are relatively few project bonds in Asia, and there had been very little offshore supply from Vietnam to provide pricing benchmarks, with no sovereign issuance for the past five years. That meant a careful price discovery process was needed.

Pricing tightened from initial guidance of 5.625% area to final guidance of 5.25% area, plus or minus 12.5bp, before printing at 5.125%.

Even with that 50bp tightening, final orders were over US$2.75bn. The 144A/Reg S bond won over a diverse investor base, with the US taking 32% of the deal.

The project’s strong sponsor base undoubtedly helped win over investors. US power company AES ultimately owns 51% of MDP, South Korea’s Posco Energy 30% and sovereign wealth fund China Investment Corp 19%.

Still, as the first deal of its type from Vietnam, the issuer and bookrunners needed to convince investors of the strength of the guarantees and contracts associated with the bond.

MDP has a government guarantee on all payment obligations under a build-operate-transfer scheme, with the plant set to be transferred to the government after 25 years of operation. Its 25-year power purchase agreement with state-owned Vietnam Electricity runs until 2040, and state-owned miner Vinacomin has committed to supply coal to MDP at a regulated price for the life of the project.

To keep these protections in place and avoid lengthy renegotiations, proceeds from the bond and the new loan were used to buy MDP’s project loan from the existing lenders, rather than refinancing the existing loan.

There is a pledge of shares in MDF and security over its assets, but MDP itself does not guarantee the bond, as Vietnam places limits on the total dollar amount of debt that can be issued from the country.

Thanks to these structural features, the bonds earned ratings of Ba3/BB (Moody’s/Fitch), in line with the sovereign. Investors left satisfied, as the gained as much as half a point the following day, finishing IFR’s review period at 101.35.

Citigroup and HSBC led the refinancing as joint global coordinators on the bond and original mandated lead arrangers and bookrunners on the loan. SMBC and Standard Chartered were joint bookrunners and MLABs.

You are welcome
--------------------------
johnswj90 DK66, thank you for your clarification which has cleared my queries and doubts. Really appreciate it.

johnswj90, yes, the excess over the loan receivables repayment is taken up in the P/L as interest income.

As payments are collected from the customer over the term of the contract, consideration related to the construction performance obligation is split between the repayment of loan receivables and interest income. You are right to determine the annual loan receivables repayment amount as simply the equal portion of the loan receivables over the concession period, i e straight line.

There is no specific formula to determine the proportion of capacity payment to be repayment and income. I suppose the profit element is determined by the required returns of the investors. In this case IRR of 12%.

---------------------------------
johnswj90 DK66, I am not an accountant. I am an engineer by profession.

I am interpreting in such a way that for a capacity payment of USD 253 Million for a period of 25 years for a USD 1.868Billion project, that provides a 12.9% of IRR. Well if we normalize against the capacity of both plants (Hai Duong is 1200MW while Mong Duong II is 1240MW), a USD245Million capacity payment gives rise to an IRR of 12.4% which is also rather in line with Jaks management's projection. I might be wrong in such interpretation.

Regarding the capacity payment, I created an amortization table over 25 years payment based on the Project costs of USD 1.868Billion for capacity payment of USD 244 Million (Mong Duong II is 1240 MW while Hai Duong is 1200MW) so, slightly lesser capacity payment, which gives an effective interest rate of around 12.4% (well, similar to the IRR value calculated previously). This is an equivalent to we are receiving a higher interest income in the beginning than principal, and vice versa and time goes by approaching the end of 25 years. Similar to a standard home loan.

What I do not understand is that how the capacity payment of USD 253million is split among the USD 67M (loan receivables) and USD 186M (interest income). Maybe the USD67 Million is obtained by dividing the remaining number of years of operation (tenure) over Remaining Costruction costs (Total loan receivables), and the rest are interest income? Which is the reason of me raising my query here in order to understand the article better.

Anyway, I really appreciate your time to attend to my queries as a newbie here. Please feel free to correct me should there be any flaw in my interpretation.

For those who wish to read more on PPA tariff.

https://esmap.org/sites/default/files/esmap-files/ESMAP%20IFC%20Re%20Training%20World%20Bank%20Nehme.pdf

Project IRR 12% is on net return basis. ie already netted of interest cost.

12% IRR does not equal to 12% interest rate. Those interested can google.

Capacity payment is dependent on capacity made available. It does not depend on availability of fuel. There is a coal supply agreement with Vinacomin, a state company, guaranteeing supply of coal for 25 years.

johnswj90, you are welcome.

By the way, are you an accountant ? It is easier for an accountant to swallow the article.

---------------------
johnswj90 Dk66, OK will slowly digest them Thanks.
14/04/2020 10:19 PM

johnswj90, please read this article first. If you still do not understand, i will explain further.

Jaks Resources – Peer Comparison With Mong Duong II

https://klse.i3investor.com/blogs/Jaks%20resources/2019-04-29-story204451-Jaks_Resources_Peer_Comparison_With_Mong_Duong_II.jsp

--------------------
johnswj90 DK66, thank you for the clarification. As of now I would take 6% as the guideline for my own calculation.

I would like to seek further advice from you in terms of the capacity payment. Based on the latest accounting standard, how do we determine the portion to be recorded as loan receivables and interest income? Sorry for taking your time to answer my queries.

johnswj90, you understanding is correct except the 6% borrowing cost is only an estimate, and 12% IRR is not equivalent to 12% interest charge to EVN. Loan receivables represents the cost of the power plant not exactly the bank borrowings.

---------------------
johnswj90 Dear DK66, thanks so much for your clarification. I would like to summarize this into layman term. Please correct me if I am wrong. JHDP will position itself as an operator of the Plant as well as a "Bank" to EVN. JHDP took loan from a bank with a loan tenure of 18 years (quoted from one of your article) which it has to serve the interest (expense) and the principle (loan payable), 6% for a period of 18 years. At the same time, JHDP will receive capacity payment from EVN for 25 years which the costs will be recorded as interest (income) and principal paid (loan receivables). Given the IRR of 12% over a period of 25 years, it is like JHDP will serve as a "Bank" who charges a 12% interest to EVN and EVN will pay a certain amount as capacity payment for a tenure of 25 years. Energy payment will be a separate story related to the operation of the Plant. In short, EVN pays you the amount based on the agreed efficiency (heat rate) to cover your costs. Any savings/optimized cost (given same amount of electricity dispatched) realized shall be kept by JHDP as additional profit.

Feel free to comment if there is any mistake here.

This is not bad news. You must understand that the costs will only be recorded as "loan receivables" upon power plant COD, not now.

Portion of the capacity payment will be recognised in the book as Repayment of loan receivables, and balance will be recognised as Interest income in P/L.

-----------------------
qqq33333333 by DK66 > Apr 14, 2020 11:32 AM | Report Abuse

Instead, the costs is recorded as "loan receivables" and gradually reduced (by capacity payment) over the concession period.
========


that is bad news for u.........now capacity payment cannot take to PL account..........

cash flow problems..............Jaks got huge cash flow problems for 2020............now, whole world also cash flow problems...makes it even more difficult to solve its cash flow problems which is normally solved by private placement..........................
14/04/2020 11:41 AM

johnswj90, under the new accounting standard, the construction costs will no longer be recognised as concession assets hence amortised/depreciated over the concession period. Instead, the costs is recorded as "loan receivables" and gradually reduced (by capacity payment) over the concession period.

At the end of the concession period, the power plant will be transferred to the Vietnam government free of charge.

-------------------------
johnswj90 DK66, I would like to seek your opinion on the depreciation calculation for this plant, whether will it be a straight line 25 years with no recovery cost or the company can recover a certain residual amount after 25 years based on the BOT contract.
14/04/2020 11:04 AM

Thanks, hng33

cskek81, Thanks, I got it

Those who find this article "shocking", you are welcome to drop a comment.

Ayoyo, this article is not meant to promote Jaks. It serves to explain how the current situation is affecting Jaks. It listed out both pros and cons.

With respect to your questions;

1. Almost all Malaysian businesses will run into cash flow problems if covid19 stays longer than expected. That is why the government has set aside RM100 billion to assist businesses.

2. No comment as I m not a property expert. My article merely pointed out that inflation normally raises property prices.

3. I can't comment as your statement is too general. I can only see strong USD/RM is good for Jaks as far as its investment in JHDP is concerned.

4. Agreed

Thank you for your comments

-------------------
Ayoyo A surprisingly weak justifications from otherwise solid dk66 articles..my layman arguments...

1..a reduction in opr still means that loans and interest costs needed to be serviced.. So, at 400m borrowings at 4% pa, a back of the envelope calculation suggests jaks needs to produce revenue of at least 12mil just to service the interest costs alone.. Can they under current circumstances?

2. There is a structural issue with real estate and that is oversupply.. Do not listen to property gurus who'd tell you the best time to buy is now because the sector will bottom in 6 months and recover from there.. The glut in residential and commercial will take years to absorb

3. usd borrowing can end up a double edged sword - if economic situation deteriorates further, flight to safe haven currencies will return - did anyone forgot what brought the hakim Saad, teh soon Seng etc down to their knees during the Asian financial crisis - the depreciation of local currencies against usd... Do not overlook this aspect

4..only true if they start producing revenue which is still some months away.. If successfully commissioned, then these usd revenue can be a natural hedge against the usd borrowing
12/04/2020 10:24 PM

johnmasino, thanks for the video
---------------------------
johnmasino DK66:- Checkout this link. The bear market is officially dead! The bulls are back!

The Bull Market in Stocks is Back! By Adam Khoo
https://www.youtube.com/watch?v=Q73WH09Uc9E
12/04/2020 6:10 PM

stockwin and johnmasino, you are welcome.

https://klse.i3investor.com/blogs/Jaks%20resources/2020-04-12-story-h1505928000-Jaks_Resources_Impact_of_Covid19.jsp

What is the point of killing each other here ?

CEEC is also the contractor of Duyan Hai 2 power plant in vietnam which is 40% owned by Janakuasa, a malaysian company owned by Syed Mokhtar Albukhary. Duyan Hai 2 is currently under construction estimated at 50% completion.

And CEEC was also the contractor of Vinh Tan 1 power plant

JHDP awards the EPC1 jobs to a subsidiary of CEEC which is a sister company to CPECC. EPC2 jobs awarded to Jaks were also fully subcontracted to a subsidiary of CEEC.

Newbie0916, You are right, CPECC is a subsidiary of CEEC, not the other way. The fault is mine. I believe OTB took the info from one of my article. I did not verify the relationship between the 2 companies. In any case, no harm done. Which ever is the holding company does not affect anything that I have presented. OTB's statement still hold truth despite the mix up.

Thanks for the correction.

----------------------------
Newbie0916 I just want to verify something. Are u sure CEEC is a subsidiary of CPECC but not the vice versa?My friend from China told me CEEC is parent company, whereas CPECC is one of the sub company under CEEC. I don't think he is bluffing me. As what u can see, CPECC don't have their own official portal. When they need to make any official announcement on progress of JHDP, they will make the announcement through CEEC official portal. Besides, CPECC also use CEEC logo on fb portal to announce their JHDP's current progress. So, it is quite hard for me to believe CEEC is a subsidiary of CPECC like what u claimed. Sorry, no offence, I just interested to know the facts only.
https://en.m.wikipedia.org/wiki/China_Energy_Engineering_Corporation