You may have to wait for him to finish off Dayang first

The project is US$1.868b and it is financed by 75:25 debt equity ratio. US$1.4b loan was secured in Oct 2015. Note that the it is average interest expense for the entire 18 year loan period.

-----------------------------------
andry_ong @DK66, Thank you for your effort, however I'm in doubt of your interest expense of USD44 millions for a CAPEX of 2.25 billions project. I guess it should be more than 100 mils especially the fund from China.
03/10/2019 5:22 PM

andry_ong, That is based on the deadline for completion agreed with the vietnam government. It is normally completed 6 months ahead of schedule. I expect both units to be completed before end of 2020.

MFCB is shooting up because its hydro plant will start operation soon. I see no reason why Jaks won't move soon.

Let us win together

dailyklse2010,

No worries, everyone was stressed then including myself.

This article provided a calculation methodology that is comprehensible by most readers here. It shows the earning potential of a power plant in Vietnam.

However, I must caution readers that this method can only be used as a reference. Jaks power plant earning is governed by the PPA which is a 2 tiers system; capacity and energy payments.

Nevertheless, this article demonstrates the prospect of power generation business in Vietnam.

dailyklse2010,

Your suffering, patient and confidence will be handsomely rewarded.

Up_down,

The financing arrangement of the power plant needs to be approved by Vietnam government. The financial close was achieved in Oct 2015 and approved by the vietnam government.

-------------------------
Up_down Vietnamese government is restricted borrowing in USD to reduce dollarization recently. Not sure if there is any effect to Hai Duong plant loans.

Vietnam central bank clamps down on foreign currency borrowing for imports
https://e.vnexpress.net/news/business/economy/vietnam-central-bank-cla...

dailyklse2010 ,

Did you subscribe for the warrants ? if you have, your cost should be lower.

dailyklse2010,

You are welcome. All the best.

dailyklse2010,

Thanks, You must be very confident in Jaks to sailang all your savings.

I think you need to have contingency plan for unexpected outcomes.

------------------------------
dailyklse2010 Dear DK66,

Very thanks your sharing which has energized my confidence and reaffirmed my belief with sailang all my 10yr saving in JAKS with average price 0.81 since 1 year ago.

I think 6% interest rate is fair enough given that the 30 years treasury yield is only about 2%.

The US$1.4b borrowing is in US$ and is financed by 3 chinese banks.

-------------------------------
Up_down DK66. Finance cost is rather high in Vietnam. Average interest rate 9% is more suitable in reflecting current prevailing market rate.

Ricky Yeo,

In your opinion, what PE is fair for Hai Duong Plant ?

Sunshine88,

You are welcome
--------------------------

Sunshine88 DK, thanks for your generous sharing
03/10/2019 9:00 AM

investor1458,

You are welcome

---------------------
investor1458 DK66c, Indeed, very informative and insightful write up, many thanks for sharing and will add more.
03/10/2019 7:10 AM

Ricky Yeo,

10 is just a line. I believe 10 is considered fair and reasonable in most cases. Stable and safe businesses will have higher PE.

It also depends on market conditions. For US tech stocks now, anything below 20 is consider cheap.


-------------------------
Ricky Yeo If it is a 'standard', all less than PE 10 stocks are undervalued?
03/10/2019 8:32 AM

Dear Sslee,

Auxiliary consumption is about 8%. As i have said, I wanted to keep my calculation simple. So, I used 77% base load for calculation of output. In any case, Jaks Hai Duong plant is expected to deliver 8b Kwh to the grid under normal conditions.

-----------------------
Sslee Dear DK66,
You need to deduct 10% from the revenue because auxiliary power is for own use or non revenue power generated. You only have renenue for power supply to grid.

Dear Sslee, anyway, Jaks power plant is expected to deliver 8b kWh annually. I didn't want to complicate the calculation.

Ricky Yeo, 10 is kind of like the "standard". Personally, I think it should be 15x PE for power generation business.

I think I should use net profit rather than Ebita to determine Jaks' valuation. So, I made changes to the article.

I think I should use net profit rather than Ebita to determine Jaks' valuation. So, I made changes to the article.

https://klse.i3investor.com/blogs/Jaks%20resources/228009.jsp

I have ignored the coal transportation cost as it is using domestic anthracite coal

This method of calculation is much easier to understand compared to IRR, Payback period, and Discounted cash flow valuation methods

Please comment

https://klse.i3investor.com/blogs/Jaks%20resources/228009.jsp

Please give me a bit of time to write it up.

deMusangking,

Apparently, we are the only two getting excited here. The rests all "no feel" already.

Yes, you are right !


deMusangking Ha ha, now I know for greater certainty why ang is buying!!!
haha

Ha ha, now I know for greater certainty how much Jaks could make from its power plant !!

Andy Ang not Robert Ang :)

Sumitomo begins construction on 1.3GW coal-fired power plant in Vietnam
https://www.nsenergybusiness.com/news/sumitomo-vietnam/

While US and China are moving away from coal energy, vietnam is still very much into it. why?

This is because when US and China shunt away from coal, the drop in demand will reduce the price of coal making it a cheaper source of energy in the long run.

For those who are new to this forum, I have written the following articles to help you understand the potential of Jaks Hai Duong power plant in Vietnam.

Understanding Jaks Hai Duong thermal power plant in Vietnam
https://klse.i3investor.com/servlets/forum/600189891.jsp

Jaks Resources – Peer Comparison With Mong Duong II
https://klse.i3investor.com/blogs/Jaks%20resources/204451.jsp

Jaks Resources - Comparison with MFCB Hydro Plant
https://klse.i3investor.com/blogs/Jaks%20resources/226512.jsp

Jaks Resources - Valuing the Future Cash Flows of Hai Duong
https://klse.i3investor.com/blogs/Jaks+resources/227063.jsp

Charlie Munger's Big Lesson: Prepare for Opportunity

What is the most important personal quality an investor can have?

Patience... followed by pretty aggressive conduct. It is given to human beings who work hard at it—who look and sift the world for a mispriced bet — that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.

-----------------------------

All my calculations using various valuation methods point to Jaks as a hugely mispriced bet.

Hng33, do you have a longer term valuation for Jaks?

Personally, among the various methods including IRR, Payback and DCF, used to forecast the cash flow or profit of Hai Duong power plant, I found peer comparison with Mong Duong II the most convincing. Especially the capacity charge of US$253m in 2018 gave me a base price for evaluation purposes.

Mong Duong II is a very close model for Hai Duong Plant, much closer than any business comparison you can find. I m very confident in their resemblance; their capital structures, the locations, their sizes, their PPAs, CSAs, BOT contracts etc.

If you are interested, you can visit;

"Jaks Resources – Peer Comparison With Mong Duong II"

https://klse.i3investor.com/blogs/Jaks%20resources/204451.jsp

Personally, among the various methods including IRR, Payback and DCF, used to forecast the cash flow or profit of Hai Duong power plant, I found peer comparison with Mong Duong II the most convincing. Especially the capacity charge of US$253m in 2018 gave me a base price for evaluation purposes.

Mong Duong II is a very close model for Hai Duong Plant, much closer than any business comparison you can find. I m very confident in their resemblance; their capital structures, the locations, their sizes, their PPAs, CSAs, BOT contracts etc.

If you are interested, you can visit;

"Jaks Resources – Peer Comparison With Mong Duong II"

https://klse.i3investor.com/blogs/Jaks%20resources/204451.jsp

Personally, among the various methods including IRR, Payback and DCF, used to forecast the cash flow or profit of Hai Duong power plant, I found peer comparison with Mong Duong II the most convincing. Especially the capacity charge of US$253m in 2018 gave me a base price for evaluation purposes.

Mong Duong II is a very close model for Hai Duong Plant, much closer than any business comparison you can find. I m very confident in their resemblance; their capital structures, the locations, their sizes, their PPAs, CSAs, BOT contracts etc.

If you are interested, you can visit;

"Jaks Resources – Peer Comparison With Mong Duong II"

https://klse.i3investor.com/blogs/Jaks%20resources/204451.jsp

Yes, depending on the purchase price, the solar plant could take more than 10 years to recoup initial investment.

-----------------------------------------------
Ricky Kiat solar mou should lapse, better focus on coal powerplant first.
30/09/2019 9:31 PM

It looks like the solar MOU lapsed without agreement

Hanyeong1105,

Jaks management was rather muted in giving earnings guidance on its Hai Duong power plant. Hence, I had to use various methodologies to provide some valuations to the power plant with certain degree of comfort.

I m glad that you like my sharing. Thanks.

------------------
Hanyeong1105 Dear DK66, i have deeply appreciated your contribution on the forum and fellow who join the discussion.

Kcchongnz,

You are right, whatever discussion we are having now won't change the fact that Jaks is definitely undervalued at 75 cents.

I thank you for sharing your views.

-----------------------------------------
kcchongnz
Jaks' worth in this power plant per share basis, in my opinion, is definitely worth a lot more than its 75 sen per share, no matter how we slice it. If you are investing in Jaks based on this assumption, I don't think you should worry about it. There is a big margin of safety.

However, when we invest in Jaks, bear in mind we are not investing in the power plant, but the whole of Jaks; its other businesses, its management especially. In this respect, I think may be good to be in it, but if one sailang on it, it is another matter. This is just my opinion.

Good luck.
29/09/2019 6:10 PM

9月18日，越南海阳2X600MW项目公用11KV高压配电柜一次带电成功，为后续调试工作开展奠定了良好的基础。
　　面对业主关于公用11KV高压配电柜19日必须完成带电的要求。电仪专业积极响应，在收到相关通知后，电仪科立即组织人员对此区域的受电方案及步骤进行讨论，对现场受电环境进行严格检查。最终，于9月18日组织总包，调试，监理，业主，运行等各方进行现场联合检查验收，对送电范围内安全、质量、工艺逐一检查，最终送电一次成功，提前1天完成送电要求。
　　送电期间，电气试验室严格执行操作程序对公用11KV母线、电缆进行受电前绝缘二次检查，核实各保护投入情况。整个受电过程处于受控状态，各段受电正常，所有仪表、DCS信号、画面指示准确无误。

That is why Trump is demanding Vietnam to buy Coal from the US

US has abundant natural gas nowadays. Naturally, it becomes a better choice for them to develop gas power. Can it be the same for Vietnam ?

A country must have a diversified power supply landscape. That is why vietnam is still developing coal power plant.

Solar power has its limitations, unpredictable weather conditions, limited operating hours, etc

Jaks Hai Duong power plant is protected by the PPA. I trust that the vietnam government has its reasons for coal power plants.

Even US today is still very dependent on coal power albeit a smaller amount.

----------------------------------
qqq3 dk....


I have read a lot of literature recently that prices of alternative energies dropping so fast so far that variable cost of some coal plants cannot compete with full costing of the newer solar plants.......resulting in closures of coal plants in America left, right and center..........


so...if that is correct......the only protection for this plant are the signed agreements..............that is not a good basis for investors, and the reason it is still below $ 1............

one has to be a coal plant expert to dig through all the data ...well....who can say he is an expert? so even fund managers who has no idea would stay away for now.............
29/09/2019 11:23 PM

Kcchongnz,

---------------------------------------------------------------------
Payback period = PI/Operation Cash inflows of the firm

Note PI is the total cost of the project
Hence to be consistent, the operation cash flows must be the total cash inflows for the shareholders + debt holders

Total operation cash inflows, OCF = inflows for equity shareholders (E) + Inflows for debt holders (D+I)

Hence OCF = E+D+I

Whereas you call your OCF as E+D

Where D is the principle repayment = 77.8m, I is interest repayment

Inflow for debt holders = principle payment + Interest payment
= $77.8 + I

Hence payback period is 1870/(E+D+I)

-----------------------------------------------------------------
I think maybe it is best that I carry on my explanation within your context

Yes, I agree that the total cash flow from the power plant has to include E,D and I which are all included in my definition of OCF. ie, my OCF = E+D+I

My point is to determine the Payback period of the JV, the interest component (I) must be excluded because it represents a cost item to the JV. This is precisely the point made in the article by Kavous Ardalan on Payback Period. I wasn’t referring to his point on NPV.

Hence payback period should be PI/((E+D+I) – I) in your context, or PI/(OCF – I) in my context.

edkfc,

Thanks for joining the discussion.

Please carry on, I need to see what you can achieve with

R = PV/ {1 − (1 + i)power-n }/i

I think I have been terrible at explaining myself. I should have known adding Interest costs to cash flow is very confusing to many.

Let me digest your points and I shall find a better way to express my logic.

Please wait till tomorrow as I m not feeling well. Feeling sleepy after medication.

Thanks

----------------------------
I think I can see where you have gone wrong now, doubly wrong.

Payback period = PI/Operation Cash inflows of the firm

Note PI is the total cost of the project
Hence to be consistent, the operation cash flows must be the total cash inflows for the shareholders + debt holders

Total operation cash inflows, OCF = inflows for equity shareholders (E) + Inflows for debt holders (D+I)

Hence OCF = E+D+I

Whereas you call your OCF as E+D

Where D is the principle repayment = 77.8m, I is interest repayment

Inflow for debt holders = principle payment + Interest payment
= $77.8 + I

Hence payback period is 1870/(E+D+I)

Instead, you use payback period as 1870/(E+D-I), a double whammy.

You have the wrong interpretation of the article by Kavous Ardalan, where he was talking about when computing the present value of a project, one must use not deduct the interest expense, or should not use(OCF - I), or {(E+D+I)-I}, because you use WACC, which is the discount rate for the firm, not just for the equity shareholder, to be consistent.
29/09/2019 10:21 PM