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Malakoff buys Khazanah unit Desaru Investments for RM288m

TheEdge Thu, Jul 11, 2019 09:10pm - 4 months ago

KUALA LUMPUR (July 11): Malakoff Corp Bhd is acquiring Khazanah Nasional Bhd's wholly-owned Desaru Investments (Cayman Island) Ltd (DIL) for US$70 million, which will result in Malakoff doubling its effective interests in the Shuaibah water and power plants in Saudi Arabia, for approximately RM288.08 million.

In a statement, the group said its indirectly-owned Malakoff Gulf Ltd signed the share sale agreement with Khazanah today to effect the deal, and that it plans to pay cash for the proposed acquisition using internally generated funds.

Malakoff said the acquisition is in line with its growth strategy as it will increase and consolidate its total effective generation capacity for power and water to 6,708 megaWatt (mW) and 544,375 cubic metres per day, respectively.

This is compared with its existing per day power capacity of 6,600 mW and water capacity of 420,925 cubic metres.

“This will provide immediate earnings accretion to the company as well as [an] increase in cashflows, derived from the remaining contract periods of approximately 10 years under both Shuaibah Water & Electricity Co Ltd’s (SWEC) power and water purchase agreement for Shuaibah 3 Independent Water and Power Plant, and Shuaibah Expansion Project Company’s (SEPCO) water purchase agreement for Shuaibah 3 Expansion Independent Water Plant,” said chief executive officer of Malakoff Datuk Ahmad Fuaad Kenali.

Commissioned in January 2010, the Shuaibah 3 Independent water and power plant is the first and largest of its kind in the Kingdom of Saudi Arabia. The Shuaibah 3 Expansion, meanwhile, was commissioned in 2009.

Khazanah, through DIL, holds 40% equity interest in the consortium Malaysian Shoaiba Consortium Sdn Bhd (MSCSB). Malakoff, via Malakoff Gulf, holds 40% in the consortium and Tenaga Nasional Bhd holds the remaining 20%.

The consortium has a 50% equity interest in Saudi-Malaysia Water & Electricity Co Ltd (SAMAWEC), which in turns owns a 60% stake in SWEC, and 60% in Shuaibah Expansion Holding Company (SEHCO) which owns a 97.5% stake in SEPCO.

DIL and Malakoff each holds a 20% equity interest in SEPCO’s operations and maintenance (O&M) company, Al-Imtiaz O&M Co Ltd, which has a tenure of 20 years.

Following the completion of the proposed acquisition, Malakoff’s indirect effective equity interest in SAMAWEC and Al-Imtiaz will increase to 40% whilst MSCSB will become its indirect 80%-owned subsidiary.

Malakoff expects the proposed acquisition to be completed by the fourth quarter of 2019.

At the closing bell today, shares in Malakoff slipped half a sen or 0.58% to 86 sen, bringing it a market capitalisation of RM4.2 billion.

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