Tanjong Public Limited Company ("Tanjong") is on track with its plans to expand into the power generation business in Egypt.

At an Extraordinary General Meeting held today, shareholders approved the Group's proposed acquisition of the entire power generation assets of EDF International SA ("EDFI") in Egypt for a total purchase consideration of US$307 million (approximately RM1.16 billion). EDFI is the wholly-owned international power arm of Electricite de France SA, which is in turn a state-owned French national utility company listed on Euronext Paris.

Kuasa Nusajaya (L) Ltd, a direct wholly-owned subsidiary of Tanjong Energy Holdings Sdn Bhd, which is in turn the holding company of the Tanjong Group's power investments, will acquire from EDFI two power generating companies, i.e. EDF Suez Gulf Power SAE ("Suez Gulf") and EDF Port Said East Power SAE ("Port Said"), and a common operating company for both, EDF Egyptian Operating Company SAE ("EEOC").

Suez Gulf and Port Said each owns a gas-fired thermal power plant with a generating capacity of 682.5MW located at each end of the Suez Canal in Egypt. The two plants, which commenced commercial operations in 2003, registered a combined profit after tax of US$21.6 million on the back of a turnover of US$174 million in 2004.

Mr Robert Cheim, Chairman of Tanjong, said "The acquisition is in line with the Tanjong Group’s business development strategy to expand its investment in the power generation business internationally, and the opportunity to leverage on our core competencies and expertise."

"With the acquisition, we will be able to further increase our involvement in the operation and maintenance ("O&M") of power plants at an international level, with a view to positioning the Tanjong Group as a provider of high quality O&M services worldwide."

In January 2005, the Tanjong Group, as part of a consortium, was awarded the 2,000MW and 160 million imperial gallons per day Taweelah B independent power and water project in the United Arab Emirates.

The acquisition also enables the Tanjong Group to invest in a stable cashflow generating business with an immediate income stream. Both plants are already operational and each is governed by a 20-year power purchase agreeement with the state-owned Egyptian Electricity Holding Company ("EEHC") as the off-taker and EEHC's payment obligations guaranteed by the Central Bank of Egypt. Payments under the PPA and the Central Bank of Egypt guarantee are both denominated in US dollars.

Funding of the proposed acquisition will be through bank borrowings amounting to US$150 million and the balance from the Tanjong Group's internally generated funds. The acquisition will not have any material effect on the issued and paid-up share capital of Tanjong.

The proposed acquisition is subject to the conditions precedent in the share purchase agreement which the Group entered into with EDFI on November 29, 2005. "We are confident that we will be able to obtain all other relevant regulatory approvals as well as approvals from the lenders to complete this proposed acquisition in the first quarter of 2006," Mr Cheim concluded

Upon completion of the proposed acquisition, the Tanjong Group's total generating capacity will almost double to 2,855MW. Tanjong currently owns and operates three gas-fired power plants in Malaysia with a total generating capacity of 1,490MW.

Date Posted : 1 Dec 2006
Source : Kuala Lumpur