Gunung Capital

It derives the bulk of its income from transporting National Service trainees, is going into mini hydro projects – deemed an unchartered territory for many local public private listed companies in a big way.


For a start, the group is investing rm200 million in two mini hydro projects in Perak that have an installed capacity of 10MW each. The investment will be funded by the issuance of sukuk. The JV is between Gunung and PHREC to develop the mini hydro projects.

Gunung had tightened its grip on the business in Aug 2013 by acquiring an 85% stake in PHSB – which in turn owns 60% of PHREC – for rm9 million. The Perak government owns the remaining 40% in PHREC.

The rationale for Gunung’s investment in PHREC is the latter’s exclusive water rights agreement to build, operate and own 25 mini hydro dams.

Gunug was looking for a long term concession.

Expects the two mini hydro projects to generate cash by 2016. The concession is for 21 years.

It is also looking at acquiring 100% ownership of a few Greenfield projects, which are expected to contribute an additional installed capacity of 57MW. Eventually, the company plans to have access to some 240 MW of hydropower in Perak.

The common perception is that hydro dam projects require heavy capex. In Perak’s case, the cost of developing its mini hydro projects with an estimated combined installed capacity of 240MW could be as much as rm2.4 billion based on an average cost of rm10 million per MW.

The financing for the project, the group only has to fork out 15% of the total cost of constructing the hydro plants.

The model is similar to that of a first generation IPPs where Tenaga must take up all the capacity generated by the power plant.

At the moment (Sept 2013), only seven of Gunung’s JV or associates with an estimated installed capacity of 58MW have secured FIT approval and PPAs.

It had already got support letters from a bank for rm200 million. The only thing outstanding is a power system study to be submitted to Tenaga.

Moving forward, mini hydro business will be Gunung’s core business although it will still be involved in transport.

The company has reaped rm12 million in profit a year from transporting National Service trainees since 2011. However its agreement with the government is up for renewal in 2014.