KUCHING: Metal Bhd (Press Metal) and three other foreign companies have signed a power purchase agreement (PPA) with Sarawak Energy Bhd (Sarawak Energy).
AmResearch Sdn Bhd (AmResearch) reported that apart from Press Metal, the other three companies are Japan’s Tokuyama Corp, Singapore listed OM Materials and Asia Minerals Ltd.
Sarawak Energy chief executive officer Torstein Dale Sjotveit was quoted as saying that the four companies would require long-term supply of 1,300 megawatts (MW) of power to their plants.
The analyst gathered that part of the electricity would be supplied via the 2,400MW Bakun hydroelectricity dam which was expected to commence production of its first 300MW in three months’ time.
The proposed plants, including Press Metal’s, are the first batch of investors in Samalaju, Bintulu within the Sarawak Corridor of Renewable Energy (SCORE) growth area. Commercial production was expected to commence next year and in 2013.
Sarawak Energy would proceed to finalise the PPA with the four companies following the signing of the agreement.
The latest development marked another significant step towards the crystallisation of a tariff structure for power off-take for Phase 2 of Press Metal’s US$600 million expansion plans.
The group announced that it received approval from the state planning authority to construct a new aluminium smelter in Samalaju Industrial Park with a capacity of 240,000 tonnes per annum. The land was to be developed over a period of five years and could potentially triple Press Metal’s existing capacity to 360,000 tonnes.
AmResearch believed that Press Metal’s strong bargaining leverage to secure 600MW of power from Sarawak Energy should help solidify the group’s position as an integrated aluminium producer within the region.
AmResearch’s current net profit forecast of RM128 million for financial year 2011 (plus 60 per cent year-n-year) only assumed contributions from Phase 1. It pegged Press Metals’ fair value at RM3.28 per share compared with the last traded value of RM2.37 per share.