20091203 1234 Malaysia Corporate News.

It's a misconception that Petronas is granting large subsidies to IPPs. Energy, Green Technology and Water Minister Datuk Peter Chin said the government had stipulated that Petronas cannot sell gas beyond the market price to IPPs and Tenaga in order to ensure electricity tariffs in the country remained low. Chin said the government would not allow Tenaga to pass the entire cost of spiralling fuel prices to consumers as practised by neighbouring Singapore and Thailand.

• On PPA reviews, he said negotiations were on-going to formulate a supplementary agreement for existing PPAs, led by the Private-Public Cooperation Unit under the Economic Planning Unit.
• Chin also said there were no plans to increase the number of IPPs and by 2015, the energy reserves would reduce to 25%. (Bernama)
  

The minister’s statement on not allowing Tenaga to pass on the entire cost of spiralling fuel prices seemed to imply that the government is not keen on the implementation of a transparent fuel cost pass-through formula. While such a stance appears negative for Tenaga, we take some comfort in the government’s earlier commitment to review tariffs once in every six months to allow rates to move in tandem with international coal and gas prices.

WCT has received a LOA from Malaysia Airports to undertake the earthworks for the new low-cost carrier terminal. The RM363m project is scheduled to be completed in 12 months. WCT will undertake the entire scope of works which involves site preparation, earthworks and main drainage for the terminal building and apron. (BMSB)

The due diligence exercise on Selangor’s water assets has been completed and a fresh offer by Pengurusan Aset Air Bhd (PAAB) is expected to be made next week, its CEO Ahmad Faizal said. The offer was “just the first step” towards negotiations, he added. Without revealing details, he said the offer would be “somewhat similar” to what the Selangor government had previously offered for the assets. The Selangor government’s last offer had valued all the state’s water-related assets at about RM9.2bn. (Star)
The timing of PAAB's fresh offers is a positive surprise. Indications that the offers would be somewhat similar to Selangor government's proposals are consistent with our expectations and should be viewed positively by Konsortium Abass and Splash. This also means that the offers for Syabas and PNSB would include the O&M contract which is positive and would translate to better valuations.

Indonesia and Malaysia, the world's largest palm oil producers, may experience slower output growth next year due to resurgent El Nino weather conditions, said Dorab Mistry, head of vegetable oils trading with Godrej International. Drier weather from El Nino may hit yields, leading to tight palm oil supplies just as US and South American soyaoil from a record soya harvest enter markets from May, Mistry added. (Reuters, BT)

Proton's talks with a global original equipment manufacturer (OEM) for a strategic alliance are underway and the national car maker is confident of clinching a deal soon, MD Datuk Syed Zainal Abidin Syed Mohamed Tahir said. Syed Zainal Abidin said once the specific collaboration with the global OEM was announced, he was confident it would bring better future for Proton not only in the Malaysian market, but also other markets where Proton was already in or going to enter. He, however, declined to identify the OEM involved or whether German auto giant, Volkswagen, was the company Proton was talking to. (Bernama)

Proton will start mass production of a fuel-efficient hybrid car by early 2011 to beat rising costs and address environmental concerns. 

• MD Datuk Syed Zainal Abidin Syed Mohamed Tahir said Proton will collaborate with a few companies, including UK unit Lotus Cars, to produce the vehicles.
• Syed Zainal Abidin added that Proton was producing the Exora hybrid version in the UKfor testing and research. It will take delivery of the first car by month-end or early next year. "This is the first phase. The second phase will involve producing up to 60 units for the Malaysian government to use in Putrajaya. If that is successful, we will then enter the next phase for mass production," he said.
• Besides the Exora, the hybrid car will include its other models: Persona and Saga 1.3.
  

On the investment to produce a hybrid car, he said that cost would be manageable. (BT)

German car manufacturers are willing to cooperate and impart their knowledge, expertise, experience and skills they had acquired over the years, but it must also be worthwhile for the companies, says German Ambassador to Malaysia Dr Gunter Gruber. 

• Explaining why Proton should tie up with a German company, he said: "They must have a competent and aggressive partner to survive in the highly competitive and challenging automobile industry. I don't have precise information, but I see the automobile industry is currently at a crucial stage in the industry's history. The financial implication and latest prices are also not helping the car industry," he said.
• Proton is currently negotiating with a global Original Equipment Manufacturer (OEM) for a strategic alliance partnership and is confident of clinching a deal soon. (Bernama)

The partnership between DRB-HICOM and Suzuki Motor Corp of Japan remains strong, said DRB-HICOM's group director (Automotive) Datuk Nik Hamdan Nik Hassan. Commenting on a recent news report that the group is facing problems with Suzuki Motor, Nik Hamdan said their relationship has only grown stronger over the years since they established their alliance in 2005. "The group considers the article as baseless and untrue. The report is also damaging us because it is disturbing our principal partner," he said. The group is looking to renew another five years exclusive distributorship deal with Audi, Nik Hamdan said, adding that it will receive a letter of intent by end of this month. (Bernama)

Mah Sing Group plans to develop an upscale condominium worth RM280m at Pykett Avenue in George Town. The group is in the process of buying the 1.37ha prime freehold land from owner Khaw Bian Cheng Sdn Bhd for RM38.7m or RM262.19 psf. At present, there is a dilapidated unoccupied small bungalow on the site. The transaction is expected to be completed in FY10. (BT)

Mah Sing Group said it will partner Chinese counterpart Danlong Realty (Beijing) Co Ltd to develop a US$620m (RM2.1bn) mixed property development project in Wujin, China. This will be its maiden property venture in China. Mah Sing said the Wujin government has also given the 51:49 JV the opportunity to explore two additional plots of land. (BT)

The managers of 11 Malaysian REITs have teamed up to set up the Malaysian REIT Managers Association (M-REITMA), allowing players in the sector to work closer with the authorities to grow the industry. (BT)

AirAsia will increase its KL–Hong Kong flights to three flights daily, from two flights currently, from 21 Jan 10. Kathleen Tan, Regional Head of Commercial said: “The response has been extremely good for this route and we are running at an average of 75% load factor on the KL-HK flights since its launch on 15 May 08. Short after the first launch, we added the second daily flight in Aug 08. AirAsia also flies to HK from Penang (4 flights weekly) as well as the Thai cities of Bangkok (two flights daily) and Phuket (one flight daily). (AirAsia press release)

MAS Aerospace Engineering Sdn Bhd (MAE), a wholly owned subsidiary of Malaysia Airlines sealed 2 Memorandum of Understanding (MoUs), one with Pratt & Whitney (PW), and another with KRAUSS GmbH Aviation Technologies, in its pursuit to be at the forefront of new aircraft technology. The MoU with PW will see both parties exploring possibilities of setting up a JV company for nacelle and composite repair and overhaul. The MoU with KRAUSS is aimed at providing parts repair for engines, landing gears and airframe. Malaysia aims to capture 5% of the global aviation MRO market by 2015. (MAS press release)

Green Packet has secured a RM41.5m contract from the government to provide broadband to underserved areas in Malaysia. The universal service provision project tender from the Malaysian Communications and Multimedia Commission was to roll out broadband services using 4G WiMAX in Perak and Kedah. (Financial Daily)

Bernas plans to acquire a 75% stake in Bernas Logistics Sdn Bhd from MMC Corp’s Johor Port for RM11.76m. The proposed acquisition, which was part of its plan to expand and rationalise its operations in the logistics division, is expected to be completed by 1Q10. (Bernama)

Boustead Heavy Industries Corporation’s associate, Boustead Naval Shipyard Sdn Bhd, has secured a RM703.8m contract from the Ministry of Defence. The contract, for the service life extension programme of Kasturi Class Corvettes, has an implementation period of 53 months. (Bernama)

The 22-acre Legoland theme park under construction in Medini Iskandar here is expected to be ready by 2012, a year ahead of schedule, said Johor MB Datuk Abdul Ghani Othman. He said the theme park in Iskandar Malaysia would be the first in Asia, and the fifth in the world. (Bernama)

Jerneh Asia and Paramount Corp have received the central bank approval to start talks to sell their stake in Jerneh Insurance Bhd. Press reports highlighted last week that at least three foreign insurers - Italy's Assicurazioni Generali SpA, UK's HSBC group and South Korea's Samsung Fire and Marine Insurance - are believed to be making a bid for Jerneh Insurance. (BT)