US-China trade war is a gift that keeps on giving for Vietnam

https://www.scmp.com/news/china/diplomacy/article/3009405/us-china-trade-war-gift-keeps-giving-vietnam

越南海阳项目1号干煤棚网架结构安装完成

http://www.apcc2.ceec.net.cn/art/2019/5/10/art_8427_1894990.html

https://v.qq.com/x/page/j082243dnds.html

http://tv.people.com.cn/n1/2019/0415/c364580-31031168.html

Vietnam to increase coal-fired electricity: experts
Source: Xinhua| 2019-03-06 13:52:15|Editor: Shi Yinglun

HANOI, March 6 (Xinhua) -- Though Vietnam plans to enhance its renewable energy capacity, the country is forecast to expand coal-powered generation as this cheap source remains the most feasible option to meet its rapidly rising electricity demand, daily newspaper Vietnam News on Wednesday quoted local and foreign experts as saying.

Tran Viet Ngai, chairman of the Vietnam Energy Association, said coal-fired power would still play a key role in the country's electricity industry next year.

According to the association, coal-fired power output per capita in Vietnam currently stands at 793 kWh, much lower than the world's average level of 1,290 kWh.

According to experts of London-based macroeconomic research firm Fitch Solutions Macro Research, Vietnam's coal-powered generation is likely to grow rapidly over the next decade and dominate the country's power sector expansion, mainly because hydropower potential has already been almost fully exploited, and depleting domestic gas reserves will not sustain a substantial ramp-up in gas-fired generation over the longer term.

However, Vietnamese Deputy Minister of Industry and Trade Hoang Quoc Vuong has said the rapid increase in energy demand and consumption, at around 10 percent per year, had negative impacts on the environment as well as exhausted natural resources and affected energy security.

http://www.xinhuanet.com/english/2019-03/06/c_137872950.htm

Dear Sslee,

https://s2.q4cdn.com/825052743/files/doc_presentations/2016/AES-Q4-FY-...

Page 52 Mong Duong distributed US$46m to AES in 2016

https://s2.q4cdn.com/825052743/files/doc_financials/quarterly/2017/q4/...

Page 46 Mong Duong distributed US$51m to AES in 2017

Dear Sslee,

As i have said, there is not enough information in the AR to draw a conclusive answers to your question 1 and 2. For question 3, I have even provided the link and page numbers on this matter several times already.

I provide my explanations to Q 1 & 2 as follows;

Question 1

USD1.95b is the agreed project cost with the Vietnam government. It is not necessarily the actual construction cost. There could be cost savings as the project was completed 6 months ahead of schedule.

The agreed 1.95b could include inventory, maintenance parts, deposits, working capital, and reserve requirements. These items can't be amortised.

Question 2

The USD253m was derived from the 2018 AR after the new accounting policy was adopted. Only fixed, determined and unconditional payment can be consider interest income. Prior to 2018, apparently portion of the capacity charges was classified as revenue.

Question 3

Let me look out for my past comments

------------------------------------------------
My questions:
1. Why Service concession assets USD 1.543b amortization USD 34m as of 31th Dec 2015 and not the total project cost of USD 1.95b.
2. Base on 2016 AES report how you derived your capacity charge of USD253 million.
3. Where you get the distributed figure of >US$90m to shareholders.

Sniper123,

If you have read my article "Jaks Resources – Peer Comparison With Mong Duong II", you should have a least idea the potential of the power plant to Jaks.

If you have seem the pacific star project, you should know that it can be completed soon.

Star Tower A has been completed, its revenue of RM135m has been 98% billed as at Dec 2018 indicating that the tower is done waiting for approval. The worst case for Jaks is pay the cash and own the property. How bad can that be ? Maybe another private placement to raise fund ? However, it still have over RM200m unbilled sales on the project. Enough ?

Anyway, If you think the legal suit is worrying, you should stay aside first. However, the legal case will not be settled anytime soon. The vietnam power plant could have started operation even before the settlement of the legal case.

It is your call.


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sniper123 DK on 1 hand d Q1 2019 results were laudable but on d other hand JRB continues 2 b hounded by Star wit d RM177.0 liability. So where do v go from here???
09/05/2019 10:22 PM

I m glad that Optimus has turned positive on Jaks. At least I can have peace from now on. Hopefully ?

Current qtr earnings from Vietnam has not been utilised for equity commitments. Wonder how much earnings are still sitting in suspense on the balance sheet waiting to turn into equity capital.

Jaks EPC work was 52% billed as at 31 March 2019. Still 4% behind overall project completion of 56%.

Dear Sslee,

Just to bring to your attention, the RM58.3m profit from Vietnam IPP is the net total for the entire construction segment.

-------------------------
Profit from Vietnam EPC
Year revenue Profit Profit Margin%
2016 150.10m 36.00m 23.98
2017 251.20m 55.10m 21.93
2018 324.70m 84.00m 25.87
2019 Q1: 255.8m 58.3m 22.8

Way above expectation

------------------------
qqq3 DK did a lot of the hard work. I just ride along only...so how is latest result, DK?




above/below expectations?
09/05/2019 2:36 PM

How much earnings from Vietnam IPP to justify buying Jaks at RM0.73 ?

10 times PE = RM0.73 / 10 = EPS 0.073

EPS 0.073 x 584m shares = RM42.6m

So, you need RM43m earnings from vietnam IPP to justify buying at RM0.73. Is this achievable ??


Mong Duong II distributed >US$90m to shareholders in the last 3 years

Minimum 30% sharing = US$90 x 30% = US$27m x 4.1 = RM110.7m !
Maximum 40% sharing = US$90 x 40% = US$36m x 4.1 = RM147.6m !

Based on capacity charges of US$253m (Mong Duong II), the earnings for Jaks will be AT LEAST RM180m (This has not taken into consideration the Energy charges)

Do your own maths.


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

BenPg, placement price not fixed yet

That is critically important for vote of confidence.

------------------------
qqq3
me? I like to see them doing the private placement successfully.......

Article "Jaks Resources – Peer Comparison With Mong Duong II" was updated for AES Q1 2019 results which suggested that the total capacity charges for year 2019 is likely to remain at US$253m.

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

Article was updated for AES Q1 2019 results.

Dear Sslee, page 111 AR 2018

Dear Sslee,

To your question 1, based on historic profit margin of 24.12%,

Year revenue Profit Profit Margin%
2016 150.10m 36.00m 23.98
2017 251.20m 55.10m 21.93
2018 324.70m 84.00m 25.87
Total 726.00m 175.10m 24.12

Unbilled sales of RM450m as at 31 Dec 2018 = RM109m profit.
Q1 2019 revenue of RM144m = RM35m profit
1.02b EPC work revenue = RM246m
Total = RM390m
Capital commitment = US$92m x 4.1 = RM377m

So, yes, the vietnam construction profit is able to fund the capital commitment.

To your question 2, Can you please assist to find out the answer ? Is it No workers ? No money to pay contractor ? Or other more sinister plot behind the scene? or is it just behind schedule ? TQ


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Sslee Dear DK66,
My questions:
1. Can the unbilled RM 1.02b Vietnam Power plant EPC works profit pay for USD 92 million remaining to be injected into JAKS 30% equity portion of JV as of 31th Dec 2018? If not how is JAKS going to get the new capital?
2. Why Pacific Star seem to be unending jobs because of what? No workers! No money to pay contractor! Or other more sinister plot behind the scene?

Thank you
05/05/2019 9:18 AM

Kyou,

The progressing on the vietnam EPC works is a decisive factor on Jaks' coming qtr earnings. I have reposted my earlier comment.

So, potential earnings would be;

= 35m - LTIP Expenses - Property Losses

Property losses in 2018 = 118m - 50m BG
= 68m x 51% = 34.68m
Property losses per qtr = 34.68 / 4 = 8.67m

Therefore, earnings = 35m - 19m - 9m = RM7m

As at Dec 2018, Jaks' progress billings was 40% while overall completion was 46%
Now the overall completion is 56%, I think Jaks' progressing could be more than 46% which is the estimate used in this calculation.


Apr 22, 2019 2:47 PM | Report Abuse

Profit from Vietnam EPC in Q1 2019

Year revenue Profit Profit Margin%
2016 150.10m 36.00m 23.98
2017 251.20m 55.10m 21.93
2018 324.70m 84.00m 25.87
Total 726.00m 175.10m 24.12

If the unbilled sales = 1.02b as of now (from Kenanga)
Note that this is only 46% completion
The proposal of pp stated that the overall completion is 56% at LPD

Total billings = 1.89b - 1.02b = 870m

Hence billings in Q1 2019 = 870m - 726m = 144m

Profit from Vietnam EPC in Q1 2019 = 144m x 0.2412 (ave margin) = 35m

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Kyou in next QR ...jaks may hv make lost base on your calculation and estimation ?@DK66
04/05/2019 10:40 PM

This court case will take a year or two to fight it out. By then, Pacific star and power plant would have been completed.

a) specific relief for the Company to complete or cause to be completed JIC’s obligations under the SPA namely the completion and delivery of STAR’s Entitlement by 31 October 2019 in full and proper compliance with the terms of the SPA;

(b) damages in the sum of RM43,216,876.71 being Late Payment Interest calculated at the rate of 8% per annum on the Balance Purchase Price of RM134.5 million from 25 October 2015 (“1st Extended Completion Date”) to 31 October 2019

My lawyer friend interprets the above as follows;

Star is claiming RM134.5m on (a), if Star Tower not delivered by 31st Oct 2019. However, this is subject to discretion of the court.

Star is claiming (b) RM43m late payment interest. However, not sure whether this is equitable as it has already claimed the RM50m BG.

No wonder there was a big jump on visit to my latest article "Jaks Resources – Peer Comparison With Mong Duong II" in the last 2 days.

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

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WiseEye I wonder why there are so many people who do not own JAKS come to this thread and make so many negative comments about it. Common sense tells that if you do not own shares of that company, u wouldn't even waste time and bother commenting on the thread.

Then it struck me that actually it is a blessing in disguise because these negative commentators have a hidden motive which is to collect JAKS at a lower price since they missed the ship long time ago at 0.50cents. That means all these people want to buy JAKS and see great potential in it, just that they are not willing to pay a premium now, lol. How sad and pathetic.

March 2019

According to Daine Loh, power and renewables analyst of Fitch Group’s Fitch Solutions Macro Research, Việt Nam’s coal-powered generation growth is expected to increase rapidly over the next decade and dominate the country’s power sector expansion.

“While the Government also intends to increase LNG imports and non-hydro renewable energy generation capacity, coal would remain the more attractive option over the next decade as it is cheaper and more reliable at present. As such, we forecast that coal generation will reach 50.5 per cent of the total consumption power mix by 2028, with gas at 22.5 per cent, hydropower at 22.8 per cent and non-hydro renewables at 3.8 per cent,” Loh told Việt Nam News.

“This is due to relatively slow supply growth from traditional sources of energy such as hydropower and natural gas, with the Government set to turn to coal to meet the surge in demand for power,” he explained.

According to Loh, traditionally, Viet Nam has relied on hydropower and natural gas for its power generation, but there are several obstacles to see continued growth in these two sectors.

Firstly, hydropower potential has already been almost fully exploited at present. Furthermore, recent droughts and decreasing water supplies highlight the threats facing Viet Nam’s hydropower generation output reliability.

Secondly, domestic gas reserves are depleting and will not sustain a substantial ramp-up in gas power generation over the longer term, Loh said.

“As a result, we expect the Government to turn largely to coal power to meet Viet Nam’s increasing power demand, which stems in particular from an expanding industry and manufacturing sector, in order to support continued economic growth. Rapid urbanisation and Government efforts to up electrification levels to 100 per cent will further boost electricity consumption growth rates.”


Read more at http://vietnamnews.vn/economy/506534/coal-fired-power-set-to-grow-to-meet-vietnams-needs.html#75sLv6TYI3Zegf6w.99

edkfc, thanks for the information.

Newbie8080,

Given a choice, no government in the world wants to build coal power plants. All will prefer hydro, wind, and solar, but these are subject to unpredictable weather conditions.

Coal power is consistent and reliable.

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newbie8080 DK66,

It's not the isolated event in 2015 that triggers me.

I'm looking at the hydropower plants and their capacity.

If hydropower is able to generate more electricity either through technological advances and getting through the dry season as well,

could it mean EVN would request other thermal powerplant to shutdown the reserves as well?

Is this a distinct disadvantage to thermal powerplant vs hydropower plant in Vietnam?

Why is the Vietnam government favouring hydropower plant over thermal power plant?

Newbie8080,

2017 is the only unusual year since operation in 2015 due to unusually heavier rainfall.

Any reason why you see this to be a frequent future event ?

Maybe you can enlighten us.

------------------------------
newbie8080 @ Icon8888

Read between the lines bro.
Venting your anger only reflects your low EQ.
Take a step back and look at it again.

EVN can request MDII to shutdown reserves for 5 months to priorities hydropower plants.

What does it say?

I hope DK66 can provide some insights on this.

Vietnam government will not build a power plant only to use it for 7 months annually.

I have made changes to the article to add the analysis of financing requirement on earnings of MD2.

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

I have made changes to the article to add the analysis of financing requirement on earnings of MD2

You can use 2017 results as a reference.
However, why do you want to make such unusual assumption ?

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newbie8080 Any impact assuming consistent annual shutdown for 5 months?

MD2 earnings to AES Corporation is not significant. However, to Jaks, it is a world of difference.

I m quite sure on the capacity payment of US$253m received by MD2. It was clearly stated as such by the new accounting standard.

The distribution is another concrete evidence.

That is why I believe Jaks is a life time opportunity. Where to find such deal ?

Coal power plant is best to operate at base load of 77% or higher.

In 2017, Mong Duong II was on reserve shutdown for 5 months at the request of Electricity of Vietnam, given that the hydropower plants were running at high capacity due to unusually heavier rainfall.

-------------------------------------
newbie8080 Why is the capacity for Mong Duong II is low?
Shouldn't it operate at least between 70%-80%?

I think once a year or once every two years.

------------------
SarifahSelinder Ni a one time process or repeating many times misalan every month must prove capacity requirement is satisfied?

Yes, capacity payment is unconditional.

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Dlm situasi unlikely klau coal x cukup mcm mana cerita nya capacity payment still payable?

Sarifah,

capacity payment is based on the design of the power plant. In MD2 case, its power plant has total rated capacity of 1,242MW. However, it has to satisfy the capacity performance test to determine its dependable capacity. Once the maximum dependable capacity is established, it is used to calculate the capacity payment. It does not depend on the actual operation and output.

Sarifah,

It was not possible to determine the capacity charge prior to 2018. It is my believe that the new accounting standard ASC606, adopted in 2018, requires less judgement on the management to determine financing component of the construction obligation. Hence, capacity payment which is determinable and unconditional was entirely taken up as "loan and interest repayment". That is why there was a big increase in interest income in 2018.

As a result of the new accounting treatment, capacity charge became obvious in 2018.

In any case, as the capacity charge is solely based on the dependable capacity made available to EVN, there should not be any great variation in capacity payment over the years.

What Jaks really needs is investors' confidence. How many can really deny that Jaks hai duong power plant is great ? It is proven in every manner that it is guaranteed to make big money for Jaks.

But most would rather wait until the plant is operational. I won't argue against safe investing. One could argue against buying Jaks now on safety ground but not because Mr Koon has sold out or why 冷眼 not buying.

There were fresh funds buying additional 35m shares, and big individuals buying additional 30m shares after Mr koon sold out. Why are they buying ? I think the answer lies in this article.

All inclusive except Coal cost

I have made changes to the my article "Jaks Resources – Peer Comparison With Mong Duong II" to include Jaks' perspective under Mong Duong II models.

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

Annual report

I have made changes to the article to include Jaks' perspective under Mong Duong II models.

Big individuals bought around 30m shares

As expected, new funds bought 35m shares during this period.

Who is this No. 3 Saw Chai Soon who bought 12.35m shares? He/she was not in top 30 last year !

Good guess. But that is not me. I can't make it to top 30.