NRA Capital Pte Ltd

Written by: Jacky Lee

Wednesday 23 Oct 2013

ISDN – press release

More power filled up

ISDN inks second MOU with Japanese corporation IDI for the development of 540 megawatt coal-fired power plant in North West Myanmar.

Singapore, 23 October 2013 -- ISDN Holdings Limited made new strides in its foray in the energy sector with the inking of a Memorandum of Understanding with Japanese corporation, Industrial Decisions, Inc (IDI). The MOU spells out a joint venture in the development of a 4 x 135 megawatt (MW) coal-fired power plant in Myanmar. The development is planned for in two stages, the first phase will install twin turbines of 135 MW each to power the plant with an initial installed base capacity of 270 MW. The second phase will be equipped similarly. When fully completed, the coal-fuelled power plant will have a total electricity generating capacity of 540 MW.

Raising the Bar for Future Energy Projects

Mr Teo Cher Koon, ISDN Managing Director and President said, “We see this MOU as a ground-breaking step towards a strategic partnership that would potentially bring exceptional value and depth to our energy ventures. To have an esteemed partner with an accomplished track record such as IDI on board would pave the way for ISDN to consider projects with increased complexity, technological know-how and size in diverse markets.”

IDI is an energy-focused strategic consulting and financial advisory firm comprised of investment professionals with extensive expertise and experience in the energy and finance sectors. It supports IDI Infrastructures, Inc (IDI-I), a fund management company focused on energy infrastructure funds investing in energy projects and enterprise-owned power assets in Japan and South-east Asia.

Planting the Seeds for Joint International Power Production Ventures

This latest MOU between IDI and ISDN follows an earlier MOU signed in June this year between IDI-I and ISDN to collaborate and explore opportunities to develop and invest in energy projects and expand international power production business in Asia. The earlier MOU outlined collaboration in areas such as funding, financial structuring and management as well as feasibility studies and technical support.

The coal-fired power plant has been identified by both companies as the first project for joint development and investment. Situated 1.5 km from the Chindwin River Bank and 18 km north of Kalewa in North West, Myanmar, the Kalewa coal power facility is located near the mouth of a coal mine. Based on earlier feasibility studies, the coal mine has a coal-grade exceeding 6,000 calorific value.

Under the MOU, IDI shall participate with an equity interest of up to 49% in ISDN Myanmar Power Pte Ltd, a Singapore-registered wholly owned subsidiary of ISDN. ISDN Myanmar Power has on 30 May 2013 entered into a joint venture agreement with Myanmar-based Tun Thwin Mining Co., Ltd (TTMCL) for the formation of a joint venture company in Myanmar to engage in the business of investing, developing, constructing, operating and managing the Kalewa power plant. Under this agreement, ISDN Myanmar Power will own 85% of the joint venture power company, while the remaining 15% will be owned by TTMCL.

Win-win Partnership

After ISDN Myanmar Power enters into a Memorandum of Agreement with Myanmar’s Ministry of Electric Power, both ISDN and IDI shall inject capital into ISDN Myanmar Power. Both parties’ respective contribution shall be in proportion to their shareholding and to be disbursed in tranches when required. The total project cost for this 540 MW power plant is estimated at USD $1.1 billion.

Mr Teo added, “Both ISDN and IDI together offer a wealth of expertise and resources to develop and invest in this joint effort. Besides financial structuring and advisory on IDI’s part, both parties bring to the table a synergy of strengths in funding resources, local liaison and connections such as necessary government liaisons and partnerships with global engineering contractors; financial advisory, structuring and consulting and access to support from Singapore and Japanese government agencies.

On 23 September 2013, Reuters reported that IDI, through its offshore investment arm, Asian Energy Investments Pte Ltd, is expected to launch a USD $100 million venture capital fund to invest in clean energy projects in South-east Asia with the Malaysian Government.

Our view:

After successfully diversifying its business into the Energy sector, the group has revealed plans to develop a series of hydropower plants in Indonesia amounting to 168 MW, including the 126 MW Laa River hydropower facilities in Sulawesi, Indonesia (an estimated total investment cost of US$333m).

ISND is now setting another footprint in Myanmar with total project cost of US$1.1 bn for 540 MW coal power plants. We believe these power projects are positive for its long term prospect with strong JV partnership. After a few rounds of fund raising this year, we believe ISND should have enough funding for most of its power projects now. Maintain Neutral recommendation given its share price as not compelling in the near-term. High risk investors may want to invest for its long term prospect as Myanmar's energy power is considered a high barrier market to enter and tricky sector.  

Myanmar produced up to 9.73 billion kilowatt-hours of electricity in 2012-13, far short of the country's demand for electrical power, latest statistics from the U.S. Energy Information Administration show that only 22% of Myanmar's population had access to electricity in 2011.

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