The Year in Review
In 2016, we have focused our resources to develop a company of change and keen competition in a regional economic environment, despite the headwinds in several sectors that our assets are operated in. We believe that a balanced portfolio of assets in the energy and resources sector and property development sector will continue to broaden the revenue basis. We continue to position ourselves to capture the opportunities of future growth.
The acquisition of PT Kariangau Power (“PT KP”), which was completed in June, has made its maiden contribution to our financial results for the year ended 31 December 2016. It generated revenue of S$8.0 million in six months of operation, boosting topline growth for the Group by 62%. Streamlining our shipping business has also improved our overall results for the Group by 51%.
PT KP’s second power plant unit has obtained the commercial operational status and commenced sales of electricity in end April 2016, while the first power plant unit has been providing electricity since February 2015 (i.e, before the acquisition by our Group). PT KP’s two power plant units in the Kariangau industry area of Balikpapan, East Kalimantan, Indonesia, are now fully operational.
To recap, PT KP has been given the right by the Indonesian government to supply electricity exclusively within the Kawasan Industri Kariangau (“KIK”) zone for a period of 15 years from 1 April 2013. It also has existing power purchase agreements, providing for minimum monthly guaranteed sales. It is also supplying to the Indonesian state-owned utility company which has committed to purchase excess power that has not been sold to other customers.
Given the growing demand for electricity in Indonesia, especially in East Indonesia where demand is forecasted to grow at 11.2% per annum, and in East Kalimantan alone, production is expected to more than double to 6,702 GWh from 2014 to 2022, we are very excited about the growth potential of the power sector in Indonesia. We will continue to work on the pipeline of projects to enhance our competitiveness in the region with our experience and expertise gained by PT KP.
In June 2016, we completed the share swap for 25% of the shares of Giantminer Pte. Ltd. (“Giantminer”) with our 60% interest in Starsmind Capital Pte. Ltd. (“Starsmind”) (“Share Swap”). Giantminer owns 100% of China-based mining company, Urumqi Jinshi Huilong Mining Co., Ltd (“UJHM”), which holds mining exploration permits in three concession areas covering a total of 26.99 sq km in Tuoli County, Tacheng Area, Xinjiang Uygur Autonomous Region, PRC.
The Group now holds 25% shareholding interests in Giantminer and cease to hold any interest in Starsmind. We took this strategic step after evaluating our plans, and believe that this is in the best interests of the Group and our shareholders. We will make further announcements as and when there are any material developments.
Property Development in PRC
Manhattan Resources (Ningbo) Property Limited, our property development arm in China, has appointed Zhong Tian Construction Group Co., Ltd to undertake construction works for the Ningbo Yinzhou Manhattan Tower. The preparation works have been actively carried out with our supervision. This iconic tower will be a 56-storey building, which sits on land area of approximately 24,000 sq m, will have built-up area of approximately 260,000 sq m. The approximately 260 meters tall building will be one of the tallest buildings in Ningbo City. Construction period is approximately five years.
Strategically located in the South Commercial Park in Yinzhou District in Ningbo City, Zhejiang province, this development will cater to the South Business District which is primed to be an emerging commercial hub in Ningbo City with a large proportion of mid to mid-upper office properties and retail facilities.
Designed and inspired by nature, the Ningbo Yinzhou Manhattan Tower will be an iconic building that combines the illusion of the gracefulness of a willow tree and the tall structure of a poplar tree. It will also adopt world-class sustainable design features and sky gardens. At an imposing height of approximately 260 meters, it will be the tallest building in the South Business District area.
We believe that this will be a landmark that will change the skyline of Yinzhou District, and we are very excited about its potential. Ningbo City is the second largest city in Zhejiang, and one of the most important in the Yangtze River Delta. Given its continued rapid development and growth, the demand for quality commercial space remains strong. We are confident that this project will be well-received, and upon completion, should add a new source of revenue stream to the Group.
Barging and shipping
To achieve long term sustainable growth and to reduce reliance on our core business of barging, taking into consideration the trend and outlook in the coal industry, the Group has decided to partially divest its barging assets. In October, we have entered into a sale and purchase agreement with a third-party industry player to transfer 22 tugs and 22 barges for a purchase consideration of IDR 170,580,000,000 (approximately S$18.4 million based on prevailing exchange rate) (“Proposed Disposal”). This represents a premium of approximately 76% to the book value of these vessels.
With this divestment, our balance sheet and cash position will be improved and our directors and management team will also be able to devote more time and resources towards our other businesses.
These various corporate achievements would not have been possible without the commitment and hard work of our management and staff, to whom I express my deepest appreciation. To my fellow board directors, thank you for your guidance and insightful leadership. I would also like to express my gratitude to Mr Choo Hsun Yang and Mr Lim Say Tai who stepped down from the Board during the year.
Finally, I want to thank all our business partners and shareholders for their support. We will continue to strive towards delivering long term sustainable growth for the Group.
Liow Keng Teck
27 March 2017