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This article first appeared in The Edge Malaysia Weekly, on November 2 - November 8, 2015.

 

THE Ministry of Urban Wellbeing, Housing and Local Government may invite tenders again for the RM800 million waste-to-energy incinerator project in Taman Beringin, Kepong, a source familiar with the matter tells The Edge. It is understood that the call for bids could come anytime soon.

In the meantime, it is unclear what happened to the old tender process, which had reached quite an advanced stage last year.

“I don’t know about that [the old tender process] ... there are so many stories circulating ... but I do know there will be another call for tenders for the same project,” the source says, adding that the value of the contract remains the same — about RM800 million.

Four consortiums — Malaysian Resources Corp Bhd (MRCB) in partnership with South Korean giant Hyundai Rotem Co; DRB-Hicom Bhd together with sister company Malakoff Corp Bhd and Japan’s Sumitomo Corp; UEM Environment Sdn Bhd (since renamed Cenviro Sdn Bhd) with Japan’s Mitsubishi Heavy Industries Ltd; and Puncak Niaga Holdings Bhd in a joint venture with Japan’s Hitachi Zosen Corp — were shortlisted in the earlier tender process and the source says the same four Malaysian outfits are still interested in the job.

Officials of some of the companies The Edge spoke to were aware of the latest development but did not want to comment.

The source elaborates: “Some of the Malaysian companies are looking at a model in Singapore, where Mitsubishi and Hyflux (Ltd) won a tender to build a S$750 million (RM2.3 billion) waste-to-energy plant in Tuas this September ... so Mitsubishi is quite a sought-after partner.”

In the third quarter of 2014, the four consortiums had edged out close to 30 companies that had bid for the incinerator job. MRCB (fundamental: 1.30; valuation: 2) and Hyundai Rotem had made a final submission at the tail end of last year but there has been no news of the project since.

Officials of the four Malaysian outfits were not available for comment.

However, it is likely that things will be speeded up. In July last year, Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan had announced a plan to award the incinerator job by the middle of this year, after an environmental impact assessment had been concluded. Construction was slated to commence in early 2016 on a private finance initiative basis.

The silence on the 1,000-tonne per day incinerator project and its award could have been due to the considerable flak it came under after residents in Taman Beringin complained about the environmental risks involved.

Located in the northern suburbs of Kuala Lumpur, the township already houses a waste transfer station on a 5.2ha site, which at present handles 2,400 tonnes of municipal waste a day, about 40% above its capacity of 1,700 tonnes. The station is a central facility for compacting and transferring waste to specially built container trucks which then dispose of it at designated sanitary landfills.

In December last year, the operator of the facility, Umpan Jaya Sdn Bhd, packed up and left, leaving government agencies and Alam Flora Sdn Bhd, a 97.4% unit of DRB-Hicom, to run the show since early this year.

The plan, it seems, is for the incinerator to be built on the site of this waste transfer station.

According to the authorities, the incinerator is necessary because the sanitary landfill in Bukit Tagar, Selangor, which is run by KUB-Berjaya Enviro Sdn Bhd, is reaching full capacity.

As for the five Malaysian companies shortlisted for the incinerator job, little separates them.

In the middle of last month, Puncak Niaga sold its water assets — its water treatment plants held by wholly owned Puncak Niaga (M) Sdn Bhd and its water distribution business held under 70% unit Syarikat Bekalan Air Selangor Sdn Bhd — to Selangor-owned Pengurusan Air Selangor Sdn Bhd for RM1.5 billion. The company is thus cash-rich but left with an oil and gas business that is reeling from low crude prices.

For the first six months of FY2015, Puncak posted a net profit of RM125.2 million on revenue of RM128.9 million, and a profit of RM139.5 million from discontinued operations.

Diversified DRB-Hicom (fundamental: 0; valuation: 2) already owns Alam Flora, a solid-waste management outfit that collaborates with 13 local authorities to provide public cleansing and waste management services and manages an average of one million tonnes of waste a year.

In the first three months of its financial year ending March 31, 2016, the company suffered a net loss of RM19.7 million on revenue of RM2.9 billion.

Malakoff Corp (fundamental: NA; valuation: NA), which, like DRB-Hicom, is controlled by business tycoon Tan Sri Syed Mokhtar Albukhary, raked in a net profit of RM190.2 million on revenue of RM2.6 billion.

MRCB, meanwhile, has been aggressively bidding for jobs and last week, secured three separate contracts: one for the development of Kwasa Utama, one for the regeneration of Bukit Jalil (which are collectively valued at almost RM4.8 billion) and one for the construction of Cyberjaya City Centre.

For its six months ended June 30, the company registered a net profit of almost RM298 million on revenue of RM934.5 million.

The provision of waste disposal and management services is the mainstay of Cenviro, which was previously owned by UEM Group Bhd but divested to Khazanah Nasional Bhd early last year. Khazanah is understood to be looking to list Cenviro. Bagging the incinerator project would certainly boost the latter’s valuations.

Among other assets, Cenviro has a physical treatment plant, a secured landfill, a solidification plant and two incinerators — one with a 130-tonne per day capacity and the other with 30 tonnes per day.

For its year ended Dec 31, 2014, the company registered an after-tax profit of RM44.3 million from sales of RM150.6 million.


Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

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