Samaiden’s new Johor biomass power plant may translate to higher IRRs
Renewable energy (RE) player Samaiden Group Bhd’s (Samaiden) newly won bid to develop a 7MW biomass power plant in Johor may translate to internal rate of returns (IRRs) of 8 to 10 per cent says analysts.
To recap, it was announced on Jan 30 that the RE player had received approval to construct and operate the biomass power plant in Tangkak, Johor under the Feed-in Tariff (FiT) program.
The 7MW plant is expected to commence its 21-year operation agreement in January 2027 and will supply a net export capacity of 6MW to Tenaga Nasional Bhd (TNB).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research) the FiT rate for the new power plant is set at RM0.34 per kWH which may translate to an annual revenue of RM3 million at a profit after tax margin of 32 per cent.
“Coupled with softening panel prices, we project the IRR for the biomass power plant at 8 to 10 per cent.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) is also estimating the IRR to fall conservatively at 9 per cent but they do not discount the possibility of the IRR reaching double digits as Samaiden aims to improve margins.
As for the funding of the project, MIDF Research opined that the capital expenditure (capex) of the plant is estimated to hover at around RM67 million and will be financed via a mix of internally generated funds and debt.
The equity portion of the capex which is estimated to be around 20 per cent of the project cost or RM13 million is also expected to be easily manageable due to Samaiden’s strong balance sheet that boasts a gross and net cash of RM92 million and RM80 million respectively.
“We estimate equity value accretion of 8 sen per share and levelized annual earnings of RM3 to 4 million, which is estimated to boost group bottomline by 13 per cent once (the plant is) operational in FY28F,” they added.
Overall, both analysts were positive over the new development as it will be the third RE asset under Samaiden’s belt, allowing the group to build up a recurring income stream and highlighting the group’s long-term growth prospects are well supported by the National Energy Transition Roadmap (NETR) and changing energy trends within the country.
Samaiden’s two other RE assets are its 0.5MW Sunway
Nexis solar facility which is already operational and a gross 43MW capacity under the Corporate Green Power Programme (CGPP).
Looking ahead, Kenanga Research guided that the outlook of the RE sector in Malaysia looks bright as it is support by the government’s goal of RE making up 70 per cent of total generation mix by 2050, the increased commercial viability of solar power projects on falling solar pane prices, and the export potential of RE.
They add that they like Samaiden as a pick in the sector due to its current position as one of the top players in the solar engineering, procurement, construction and commissioning (EPCC) market, their ability to provide end-to-end solution, including financing, and its proven track record in delivering projects on time and within budget.