Jababeka signed a power agreement with PLN yesterday.
The price is 2.5c per kw with full pass through of all energy costs. ie this is the net margin that Bekasi Power, KIJA's 100% subsidiary, will make.
The initial contract is for two months supply, starting this month, extendable. Initial supply from Bekasi Power (BP) will supply 35MW.
KIJA is now in discussions of supplying the full 130MW when the plant is fully complete by April next year. This will require a KSO arrangement. Obviously, BP needs to prove itself as a regular supplier of power over the next two months, which would help in negotiations.
While we would naturally like a more permanent solution here, this deal will go a long way to generating cashflow and realising the goal of BP as an emerging power supplier to industrial users in East Jakarta.
At the current price the stock trades at 0.9x BV and 13x forecast consensus earnings for 2010. Sarina has a fair value of Rp200/share which implies 72% upside.
The company has had a chequered track record but this remains a small cap conviction buy for investors prepared to consider more risk in their portfolios.
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