Analysts positive on Yinson’s continued transition into renewable energy

KUALA LUMPUR: Yinson Holdings Bhd’s (Yinson) second solar project in India generally garnered positive views from analysts as it reaffirms its commitment to its renewable energy expansions.

Of note, according to its filing on Bursa Malaysia, Yinson, via its 80-per cent owned subsidiary Rising Sun Energy (K) Pvt Ltd (RSEK) accepted a letter of award from NTPC Ltd (NTPC) for the development of 190MW grid-connected solar photovoltaic power project at the Nokh solar Park in Rajasthan, India. The plant is expected to be 30km away from Yinson’s existing 140MW Bhadla projecs which are currently operated by RSEK.

With the LOA, RSEK will enter into a power purchase agreement (PPA) to supply 25 year of solar power generated electricity to NTPC.

“We are positive on the PPA, indicating Yinson’s increasing commitments to expanding into renewable energy. This will also be another step towards the group’s mid-term ambitions of reaching 1GW of renewable energy in two years, and long-term target of 5GW in five years.

“The plant is also Yinson’s second project in renewable energy, after the first aforementioned 140MV plant, also in India, giving Yinson a total of 330MV solar production capacity todate,” the research team at Kenanga Investment Bank Bhd (Kenanga Research) opined.

Comparatively, it noted that the tariffs would be actually significantly lower than its first solar project (recall that the first solar project was done at a tariff of 4.35 Indian rupees per kWh, versus this one at 2.25 Indian rupees per kWh).

“In fact, based on media reports, Yinson managed to outbid eight other tenders ranging between 2.47 rupees to 2.75 rupees per kWh in the Nokh Solar Park. Nonetheless, we gathered that land costs will be very minimal, with infrastructures (such as connection to the grid) already provided for.

“Based on our back-ofenvelope calculations, assuming capex of circa US$100 million, and EBITDA margins of circa 80 per cent, we arrived at an IRR of circa 11 per cent - indicating similar level of returns between the two projects,” it added.

Meanwhile, the research team at AmInvestment Bank Bhd (AmInvestment) highlighted that with this latest project, Yinson is currently the first and only oil and gas (O&G) company to proactively invest into renewable energy.

“Based on Yinson’s existing floating production, storage and offloading projects including the Anna Nery vessel expected to commence operation off Brazil by early 2023, management estimates that the group’s carbon footprint can achieve net neutrality if its renewable capacity reaches a gross capacity of 1GW,” it said.