Wah Seong to start Phase One of Nord Stream 2 in 1Q17
KUCHING: Wah Seong Corporation Bhd ( Wah Seong) is poised to start commercial production of Phase One of the Nord Stream Two ( NS2) project at its Finland plant in the first quarter of 2017 (1Q17).
Following a meeting with the company’s management, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) in a report yesterday said the oil and gas (O& G) company’s NS2 project is on track for commercial production in 2Q17.
This follows the success of the project financing from the client.
To date, Kenanga Research gathered that Wah Seong has received approximately EURO80 million from client for both capital expenditure and working capital for the NS2 project.
The research firm observed that the amount will be recognised by the company under the other noncurrent liability in the company’s accounts and subsequently be recognised as revenue in the group’s accounts once pipe coating activities commenced.
It noted a supplementary agreement is likely to be signed finalising the financial charge and other details within two months.
To note, the NS2 project is a planned O& G pipeline through the Baltic Sea, which will transport natural gas over 1,200 km from the world’s largest gas reserves in Russia via the most efficient route to consumers in Europe.
The project involves two parallel 48 inch lines, each starting from southwest of St Petersburg -- a Russian port city on Baltic Sea -- and ending at German coast, Greifswald.
Additionally, Kenanga Research said Wah Seong’s coating plant in Mukran, Germany is in the midst of upgrading, scheduled for phase one of commercial production by 3Q17.
The research firm observed both of the company’s manufacturing plants are capable to coat 250-280 pipes per day each and could be ramped up to its optimal production within four to eight weeks.
Hence, Kenanga Research expects earnings contribution from the NS2 project to improve gradually and reach its optimal production in 4Q17 and stabilise in 2018.
In the meantime, the research firm noted the company has received more enquiries for jobs in the engineering division and is hoping to secure more engineering jobs from other sectors.
Kenanga Research noted the company’s renewable energy segment’s revenue was on an uptrend in the past years except for financial year 2016 ( FY16) due to lower contracts secured for process equipment and boilers.
Going forward, the company is striving to achieve 10 per cent growth from the business unit this year – higher than the five-year compound annual growth rate (CAGR) of five per cent, given the lower base in FY16.