Cypark's RE project to reach full capacity by 2013

KUALA LUMPUR: Cypark Resources Bhd's RM94.29 million pilot Renewable Energy (RE) Park project in Pajam, Nilai may be running at full capacity of 10MW by 2013 although implementation is dependent on other factors, said group CEO Daud Ahmad.

These include the passing of the RE Bill which would allow for more favourable feed-in-tariffs (FiT), he told The Edge Financial Daily recently, adding that the Bill was expected to be tabled soon.

The Pajam project will see the integration of three potential resources, namely solar, landfill gas and waste (biogas and biocell).

The site is expected to generate up to 8MW of solar power and 2MW of bio energy, contributing up to RM12 million to gross national income annually for the next 21 years, he said.

"We have completed our Commercial Scale Pilot Project in Pajam and we plan to officially launch it this month," said Daud. "The park will be the first integrated RE Park project in the region, putting Malaysia in the forefront of RE development. We intend to register the project with the United Nations."

Last week, Prime Minister Datuk Seri Najib Razak announced that Cypark would invest in the 26ha- remediated site to build an RE Park in Nilai as one of the Entry Point Projects under the Economic Transformation Programme.

In a recent note, OSK Research said a higher FiT could see the Pajam project contributing an estimated additional 22% to Cypark's forecast profit after tax in 2011.

"At current RE tariffs (21 sen/kWh), we believe that there is a chance that Cypark may actually lose money in this venture given the depreciation and finance charges," it said.

It added that the proposed higher FiT, however, could be up to six times higher for solar compared with the present rate.

It is worth noting that Tenaga Nasional Bhd has also announced its own RE plans, including a joint venture with Felda Global for a RM120 million fresh fruit bunch (FFB) biomass plant, as well as undertaking feasibility studies for a RM60 million solar power plant.

Cypark, an environmental rehabilitation and landscaping company, has been eyeing RE as its next frontier for business as it could utilise the non-sanitary landfills while generating additional power supply to support the surrounding area's energy needs.

According to Daud, the project, including several others, will be funded through "an optimal debt-to-equity ratio based on a site-to-site basis".

"However, the company is also looking at an option of having strategic partners to invest in the project especially for the other sites. We also plan to tap the government's Green Technology Funding Scheme which offers low interest rates," he said.

"Pajam is our first move. Within a short term, we plan to replicate the RE Park model in the other 16 landfill sites nationwide by 2015 which the government has entrusted us with the safe closure of these sites," he said.

During his announcement on March 8, Najib had also said the success of the plant could catalyse 31 similar projects in other landfill sites in the peninsula.

Daud said the project would benefit the country by delivering "substantial cost savings" to the government by reducing their annual maintenance costs of the closed landfills, as well as by reducing carbon emissions.

"Also, our shareholders would benefit as we are able to carry out green projects while providing attractive return on investment," he said.

Daud explained that the value of properly closed landfills was limited due to ground settlement and waste decomposition.

"The best use of it would be an RE park (like the one in Pajam) as it would allow for cost saving while generating additional income," he said, adding that he expected more than 100 jobs to be created at the site during its development phase with over 20 more jobs during its operational phase.

Daud added that Cypark is unique as its niche is closing unsanitary landfills before transforming them.

"We are the only company with proven landfill closure technology in this country and we have been mandated to carry out all 17 landfill safe closure projects undertaken by the government so far," he said.

"With our integrated expertise and technology in landfill closure and RE, we are confident that we hold a competitive advantage against our competitors."

Some fund managers have touted Cypark as an "undiscovered gem" as they like the company's dominance in its sector, strong growth prospects and solid order book.

OSK Research estimated that the counter was trading at a price-to-earnings ratio of about 15 times.

Cypark's share price has been on the uptrend since its debut in the Main Market of Bursa Malaysia on Oct 14, 2010 at RM1.10.

It is under coverage by MIMB Investment Research, which has a "buy" call on the stock with a target price of RM1.45, while it is still a "trading idea" by OSK Research, which has a target price of RM2.98.

Cypark closed 12 sen lower last Friday to RM2.37 in line with broader market sentiment.