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Mudajaya: Indian Power Project Completion

About 7 years ago, CIMB research had a buy recommendation for Mudajaya because of the Indian power project as shown in the report below. Investors have waited for 7 years and all of them are tired and disappointed in waiting for the completion of the Indian power project. Finally the 1st unit of 360 mw will start firing in a few weeks and most likely all the 4 units of 360 mw will be operational by year end. How will this benefit investors?

Mudajaya

What is this Indian power project?

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About 40 years ago, when I was the CEO, Mudajaya built the 1st power plant called Tungku Jaffaar Poer Station, Port Dickson, Negri Sembilan, Malaysia.  Subsequently Mudajaya completed 18 more power plants in Malaysia as a construction contractor. Mudajaya is a specialist in power plant construction.

But in India, Mudajaya holds 26% in an independent power producer (IPP) joint venture with an Indian partner to undertake the construction of 4 units of 360 mw coal power plant and the sale of electricity to the Indian Government.

Perhaps if I tell you some brief details of the Indian project, investors can imagine the difficulty of completing such a large project and forgive Mudajaya for the long delay.

The size: 4 units of 360 mw, totaling 1440 mw.

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Cost: The total construction cost is about 1440 mw X US $ 1.5 million X 3.20 = RM 6,912 million.

Coal consumption: 1440 mw X 4,500 ton = 6,480,000 ton per year

Coal consumption cost at US $ 30 per ton = 6,480,000 X 30 X Rm 3.20 = Rm 622 million per year.

Power line construction cost: Rm 2 million per kilometer, total length required ??

Mudajaya holds 26% in this joint venture and its estimated profit is about Rm 70 million per year for 25 years which all investors have been waiting for.

The price chart shows Mudajaya share price has been depressed for many years. I believe it is due for re rating when the company makes the announcement of the completion of the Indian power project.

Mudajaya is one of my major investment holdings. I am not asking you to buy it but if you buy, you are doing at your own risk.

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