Keppel interested in PT Jawa Power
Monday, September 29 2003 - 11:51 PM WIB
"We are looking at the PT Jawa project," a Keppel Corp spokeswoman said as quoted by Dow Jones without giving further details.
Government-linked Keppel Corp is expected to join a consortium in bidding for British company Powergen's 35% stake in Jawa Power.
Jawa Power - which operates a 1,220 megawatt coal-fired plant in Indonesia - confirmed bidders have to submit their final bids to Powergen Monday.
It added that Powergen - owned by Germany's E.ON AG - may need one to two weeks to review the bids.
Jawa Power was built at a cost of US$1.6 billion and is half-owned by Siemens AG (SI), and 15% owned by a company linked to a son of former Indonesian president Suharto.
Analysts said the US$1.6 billion price tag may seem relatively high but noted that the cost of coal-fired plant was typically twice as much as the newer gas-fired plants.
Assuming the purchase is to be financed by a 70:30 debt-to-equity deal, the equity investment in 35% of Jawa Power would cost US$168 million, an analyst with a local brokerage estimated.
Companies involved in merger and acquisition activity tend to prefer a 70:30 debt-equity arrangement given the relatively low cost of debt in the current interest rate environment.
While analysts say Keppel Corp is likely to make the investment as part of a consortium, they are unsure how large Keppel's role in the consortium will be. Despite the unknown size of Keppel's likely investment in Jawa Power, analysts say the company should have no problems financing the investment.(*)