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KNM gets RM100m financing to acquire UK land

KUALA LUMPUR (Sept 20): KNM Group Bhd has secured RM100 million financing to go ahead with the acquisition of land in Peterborough, UK, where it plans to build a RM2.1 billion renewable energy plant.

The group yesterday announced that United Overseas Bank (M) Bhd had approved a RM100 million credit facility for it to acquire Poplar Investments Ltd from Poplar Holdings Ltd.

Poplar Investments, a real estate holding company, owns the 22ha of land in Peterborough that will house the proposed Peterborough Energy Park project, which will convert waste into reusable products or energy.

KNM had initially encountered delays in its acquisition of the land but now appears to be on track to finalise the acquisition by end-October.

Including land cost, the Peterborough project in which KNM owns an 80% stake will cost a sizeable £450 million (RM2.2 billion). KNM plans to begin construction in 2013 and complete the mega project by 2016.

During the construction phase, some contract flow in terms of process equipments orders will benefit KNM’s German unit Borsig GmbH, which manufactures compressors, boilers and so on.

KNM is planning to list Borsig on the Singapore Exchange in the second half of next year, to raise an estimated RM450 million to RM475 million by divesting a 25% stake.

Once completed, the Peterborough renewable energy project will provide KNM with a steady income stream, and stabilise its current cyclical business model, said analysts.

The project has a projected internal rate of return of 23% over 25 years which would give KNM about RM225 million a year in revenue, said a report by Maybank IB Research.

However, the report remained neutral on KNM, citing execution risk of the Peterborough project at the start of construction as a concern.

This story appeared in The Edge Financial Daily on Sept 20, 2012.

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