March 17, 2017 8:39 pm JST

YTL Power's Jordan joint-venture secures financial closure for $2.1 billion project

KUALA LUMPUR (NewsRise) - YTL Power International, the utilities arm of Malaysian conglomerate YTL Corp, said its three-way joint venture with Estonian and Chinese partners has secured financial closure for its $2.1 billion power project in Jordan.

The financial closure-which refers to a stage when all necessary project and financing agreements are completed-signals the construction start of the 554-megawatt shale oil-fired power plant in Jordan, YTL Power said in a statement. The power station is scheduled to start operation in mid-2020.

"We believe that this is a unique project that will have a positive impact on the Jordanian economy as well as yield solid returns," said YTL Power Managing Director Francis Yeoh. "We are pleased to... step into a leading role in the development and completion of this exciting project."

Analysts said the long-delayed project, which could meet between 10% and 15% of Jordan ́s annual power demand, will likely pick up speed following the financial closure.

Funding for the project was likely delayed because the fall in crude prices since mid-2014 meant the power plant was not attractive from a financial perspective, Hong Leong Investment Bank's analyst Daniel Wong said.

YTL Power International and its project partners had planned to take advantage of abundant shale oil reserves in the nearby Attarat um Gudran deposit to fire the power station. The drop in oil prices risked the project's viability as financiers would have favoured using a different fuel that offered prospects of higher return, given shale oil mining remains expensive, Wong said.

The project will add "a decent amount" to earnings upon completion in four years based on a projected 10% internal rate of return, Wong added.

A consortium of Chinese banks--Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Export Import Bank of China-have agreed to provide a 15-year $1.58 billion loan for the project.

The financial closure also triggered the transfer of a 15% stake in Attarat Power Company, or APCO, to YTL Power International from Eesti Energia of Estonia and Jordan's Near East Investment. Eesti Energia and Near East, meanwhile, sold a collective 45% stake in Apco to Guangdong Yudean Group.

YTL and Yudean own 45% stake each in APCO while the remainder 10% is held by Eesti Energia following the sale and transfer.

APCO has appointed Guangdong Power Engineering Corporation for engineering, procurement and construction of the project. The company has also signed a 30-year agreement to sell the output from the power plant to National Electric Power Corporation of Jordan.

"Affiliates of the shareholders will be responsible for the operation and maintenance of the power station as well as the fuel supply," YTL Power added.

YTL Corp ended Friday unchanged at 1.47 ringgit while YTL Power rose 2.0% to 1.53 ringgit. The benchmark FTSE Bursa Malaysia KLCI was 0.5% higher.

-- Jason Ng and Alexander Winifred

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