On behalf of all Jaks' investors, I wish to take this opportunity to express our appreciation to sifu DK for his unselfish sharing of his knowledge.

I have obtained DK's consent to disclose his reply email.

30/5/2022

Dear xxxx xxx xxxxx,

Thank you for sharing the document of Mong Duong II. It is indeed very informative and it provides very reliable information for the calculation of tariff charges. 

With respect to your questions on the potential capacity charges and energy charges for JHDP, my best estimate of tariff charges for JHDP using the data from Mong Duong II and Annual Report of Jaks is as follows;

Capacity charges = Pre-agreed Capacity Charge rate x dependable capacity

Capacity charges profit = capacity charges - fixed O&M - depreciation - interest expense 

I derived the capacity charge rate to be between US$256 to US$264 per Kwh (average 260) for year 2016 to 2019. This is inclusive of fixed O&M expenses. 

Dependable capacity  = 1,120,000 Kwh

Therefore, capacity charges = 260 x 1,120,000 = US$ 291m  = RM 1,266 million (ex. rate 4.35)

Fixed O&M cost for a 1200MW coal power plant is about US$30m (RM130m) per year

Depreciation = RM296m

Interest Expense = RM275m

Therefore, Capacity charges profit = 1,266 - 130 - 296 - 275 = RM565m

"The Contract Heat Rate is a pre-agreed number ranging from 9,405 BTU/kWh in the first Contract Year to 9,560 BTU/kWh in the later Contract Years. The Secondary Fuel Charge is equal to the Heat Rate for Secondary Fuel (a pre-agreed amount of 2,783 BTU/kWh"

Energy Charge profit is basically a function of actual heat rate achieved over the agreed heat rate. In short, when you are given 9,405 BTU to produce 1 Kwh of electricity, if you use less than the given BTU, you have cost savings (ie profit), and loss if you need more than the BTU given. On everage, the given amout of BTU translate to a plant efficiency of approximately 36%. Coal fired plants are known to have plant efficiency of around 36%, Hence, very little profit is expected from energy charges. However, there is a catch ! 

Note that the amount of BTU allocated to secondary fuel is about 30% of the total BTU allocation. Secondary fuel is mainly fuel oil which is primarily used only during start up of boilers as well as low plant load factor of below 60%. Fuel oil is substantially more expensive than coal in term of BTU content. Normally, cost of fuel oil usage is less than 5% of total feed costs for coal power plants. Therefore, there is room for the operator to profit from the price differential between coal and fuel oil but I do not have the numbers to quantify the effect. 

I hope the above helps.

Thank you 

DK

Note that Jaks' 30% sharing from JHDP capacity charges per annum alone is RM170m (565 x 30%) = EPS RM0.083

Thank you

This article is purely for educational purposes. This is not a buy or sell recommendation ! You should consult your dealers or remisiers before making any decision.