Press Metal to fully utilise electricity from Sarawak Energy from Oct 2020 onwards
Press Metal Aluminium Holdings Bhd (Press Metal) has been projected to be able to fully utilise the 500 megawatt (MW) electricity, purchased from Sarawak Energy Bhd (SEB), from October 2020 onwards.
In a filing on Bursa Malaysia, Press Metal revealed that the group entered into a power purchase agreement (PPA) with Syarikat SESCO Bhd (SESCO), a wholly-owned subsidiary of SEB.
According to a statement, the PPA signed yesterday provides long-term access of up to approximately 500MW of electricity for a 15 years period with 300MW to commence first drawdown by October 2020 and the balance 200MW to be made available on a reasonable endeavour basis by SESCO.
“Regardless of the division of drawdown stages, we believe the group will be able to fully utilise the full 500MW electricity from October 2020 onwards,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said.
Press Metal also announced plans to construct a proposed third aluminium smelter in Samalaju Industrial Park, Sarawak, which will potentially increase its total smelting capacity up to 1,080,000 tonnes per annum upon full power drawdown, from the current 760,000 tonnes per annum.
“The plant’s construction should begin as soon as next month, and take about 11 months to complete, meaning that the plant is likely to be ready before the drawdown of power in October 2020,” Kenanga Research said.
“The plant is expected to incur capital expenditure (capex) of circa RM1.5 billion, which would be fully financed by debt. The new debt should raise gearing to 0.8-fold in financial year 2020 (FY20) from our previous estimate of 0.5-fold in the same forecast year.”
The research arm deemed this manageable given Press Metal’s excellent cash flow generation capabilities, as demonstrated by how rapidly the group pared down its gearing from 1.9-fold in FY13 to 0.7-fold in FY18.