Citaglobal-Reneuco consortium wins 30-year concession to power up ECRL

• The concession includes the development of power transmission and interconnection facilities valued at RM600 million, which is expected to be commissioned in stages by mid-2026.

KUALA LUMPUR (Feb 21): A consortium between Citaglobal Bhd and Reneuco Bhd has secured a 30-year concession to supply electricity to the East Coast Rail Link (ECRL) from project owner Malaysia Rail Link Sdn Bhd (MRL).

The concession includes the development of power transmission and interconnection facilities valued at RM600 million, which is expected to be commissioned in stages by mid-2026, the two companies said in separate statements.

It also carries an option for MRL to renew the concession for an additional 30 years, the companies said.

Citaglobal, which is in engineering and construction, owns 60% of the consortium, while Reneuco, a utilities services firm that recently fell into Practice Note 17 (PN17) status after its external auditor issued a disclaimer of opinion on its accounts, owns the remaining 40%.

The conditional contract follows a separate tender won by a 50:50 joint venture between the two companies in December 2022 to develop an independent power producer (IPP) project for the rail network.

At the time, the proposal submitted by the JV involved the supply of electricity to commercial and industrial parks along the ECRL’s 665km alignment from Port Klang, Selangor to Kota Bharu, Kelantan.

While Citaglobal and Reneuco did not reveal the size of its IPP tender then, the latest win on Wednesday includes plans for their 60:40 consortium to provide up to 100MW of renewable energy (RE) to enable the ECRL network “to achieve an energy mix of 30% green energy”, the statements read.

The power supply contract is exclusive and will provide electricity for both traction and non-traction systems of the rail project, they noted.

Under the terms of the conditional contract, Citaglobal and Reneuco will have to create a special purpose company, of which 70% will be held by the consortium and 30% by MRL, to operate and maintain the transmission assets.

The contract will allow Citaglobal to broaden its presence in the energy sector, particularly the RE segment, and further diversify its revenue and earnings base to build recurrent income streams, said executive chairman Tan Sri Mohamad Norza Zakaria.

For Reneuco, the concession is expected to pave way for further expansion in RE and utilities, as the company explores new business opportunities, said its executive chairman Datuk Mustakim Mat Nun.

The award, it said, is conditional upon the finalisation of a definitive agreement to be executed in three months, as well as approval from the relevant authorities.

Citaglobal, which also makes steel products, is linked to the Sultan of Pahang, Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah with a direct interest of 9.9%. Norza is the group's largest shareholder with a 33.8% stake, of which 0.99% is directly held.

The group, whose market capitalisation stood at RM593.45 million on Wednesday's market close, had cash of RM91.91 million as at end-September 2023, against short- and long-term borrowings of RM49.78 million. It also had accumulated losses of RM176.34 million, while net assets were at 90 sen per share.

In the nine months ended Sept 30, 2023 (9MFY2023), it reported a net profit of RM8.09 million or 2.02 sen per share, up 25.74% from RM6.43 million or 3.04 sen per share a year ago, largely due to lower cost of sales, as revenue was little changed at RM144.68 million, compared with RM142.94 million previously.

At its last close of RM1.42 per share, Citaglobal was trading at annualised historical earnings per share of 52.7 times. It was loss-making in FY2022.

Over at Reneuco, its chairman Mustakim is also its largest shareholder with a 17.06% stake, of which 16.98% is indirectly held.

As at end-September, the PN17 outfit had cash of RM14.45 million against total borrowings of RM94.67 million, and retained losses of RM67.8 million. Net assets were valued at 18 sen per share.

The utility services firm, which changed its financial year end to Sept 30 from June 30 last year, incurred a net loss of RM125.05 million or 21.96 sen per share in its July-to-September 2023 quarter, which it blamed on an impairment of RM132.53 million. Its revenue for the quarter came in at RM4.57 million.

Reneuco fell into PN17 status on Feb 8 after its external auditor Al Jafree Salihin Kuzaimi PLT issued the opinion disclaimer on the group’s financial statements for the 15 months ended Sept 30, 2023 (FY2023) due to insufficient appropriate audit evidence to support, among others, the group's cumulative revenue of RM321.26 million and cost of sales of RM196.31 million between FY2020 and FY2023.

The company, however, said it has had a special independent review conducted on its accounts, which found that its sales and costs to be "sufficiently supported” by relevant documentation.

Reneuco’s shares settled two sen or 26.67% higher at 9.5 sen on Wednesday, valuing the group at RM99.93 million. The counter has dropped 56.8% this year.

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