Tuesday, 7 August 2012

Integrax poised to seal 25-year TNB coal contract

Business & Markets 2012
Written by Ho Ching-Ling and Jose Barrock of theedgemalaysia
Friday, 27 July 2012 10:15

KUALA LUMPUR: Port operator INTEGRAX BHD [] is said to be close to
sealing a 25-year port utilisation agreement with utility giant TENAGA
NASIONAL BHD [] (TNB) for the handling of coal for the latter’s coal-fired
Janamanjung power plant in Manjung, Perak.

It is believed that the deal would entail Integrax handling an additional
three million tonnes of coal per year for TNB’s new 1,000mw coal-fired
power plant which is expected to be ready for commercial operations by

Integrax currently handles six million tonnes of coal per year for TNB to
power up its 2,100mw Janamanjung power plant located on Lekir Island.
This new agreement would be a substantial boost for Integrax as it would
increase its coal throughput at its deep-water terminal, Lekir Bulk
Terminal (LBT) by 50% to nine million tonnes per year.

“The negotiations have been on-going for some time now, (so) it should be concluded soon, at the latest, maybe late this week,” a financial executive familiar with the negotiations said on Thursday.

It is also noteworthy that TNB emerged as a substantial shareholder of Integrax in 2011 after it bought out Integrax’s former CEO Harun Halim Rasip’s 22% stake in the company

The acquisition by TNB came after an iron ore project by Brazilian mining giant Vale International SA in Sitiawan sparked disagreements between Harun and his brother Amin Halim Rasip, who is currently the co-CEO of Integrax.

Vale wanted Integrax to expand its capacity to facilitate the handling of iron ore, something Harun was not agreeable to because the expansion would involve huge capital. After Harun’s exit from the company, things were a little frosty between the management of Integrax and TNB.

In May 2011, Integrax received a writ of summons and statement of claim filed by TNB over the outcome of an extraordinary general meeting. However, the impending signing of the 25-year coal handling agreement seems to indicate that things are well between TNB and the Integrax management.

The new contract is likely to be a boon for Integrax. For its financial year ended December 2011, Integrax posted a net profit of RM43.8 million on the back of RM87.9 million revenue.

Earnings per share for the year stood at 14.58 sen. In contrast to a year earlier, net profits slipped 12.7% while revenue dipped only marginally. Nevertheless, the company’s outlook seems bright.

In notes accompanying its financial results, Integrax said, “The Lumut–Manjung corridor is expected to benefit from TNB’s 1,000mw Manjung 4 Power Plant project and Vale’s iron and steel investment in Teluk Rubiah.

“Integrax is currently in discussions with these parties to determine Integrax’s level of participation in these projects,” the company said. It was previously reported that Integrax is still keen to pursue a second attempt to tie-up with Vale after the lapse of its conditional contract to provide transshipment services for the latter for 10 years.

The Perak government has since given Vale the green light to construct its own jetty to serve the iron ore project. Integrax manages Lumut Port, which is made up of LBT and Lumut Maritime Terminal, which the company co-owns with Perak state.

Integrax closed unchanged at RM1.37 on Thursday.

This article appeared in The Edge Financial Daily on July 27, 2012.

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