VPower Group (SEHK: 1608), one of Southeast Asia’s largest gas-fired engine-based Distributed Power Generation (DPG) owner and operator, has signed a non-binding Letter of Intent (“LOI”) with F.K. Generators and Equipment Ltd (“F.K.”) for the co-development in F.K.’s 80 MW installed capacity HFO-Fired Distributed Power Generation project in Iquitos, Peru on 12th December. Under the terms of the LOI, upon a satisfactory due diligence, VPower Group shall invest by way of convertible security initially with a view to converting into a substantial share in a project company after Project’s commercial operation date, targeted in 2H 2017.

The Project, to run on 7 units of medium speed HFO Power Generation System (“PGS”) has an estimated capacity availability revenue of approximately USD 350 million (before any Operation and Maintenance Services revenues) over the 20-year concession period granted by the Peruvian Ministry of Energy and Mines, and guaranteed by the state of Peru which is rated BBB+ by S&P. Peru enjoys a World Bank distance to frontier score of 70.2, making it an attractive new market in Invest, Build and Operate (“IBO”) for the VPower Group.

VPower Group believes the co-development with F.K.’s 80 MW Project will have the following benefits:
1) The Project runs on cost effective HFO which diversifies our fuel source;
2) Our successful partnership with F.K. in IBO business can strength our business relationship with current SI customers;
3) The Project can speed up VPower Group to penetrate to attractive potential new market in South America for IBO business; and
4) A long term concession of 20 years Project can provide stable revenue to VPower Group.

Within 2 months of the signing of the LOI, VPower Group is expected to complete its due diligence process on the Project. If the Company agrees to sign the formal binding agreement, the Company will make further announcement as and when appropriate and comply with the necessary requirements under the Listing Rules. As both parties have not entered into any legally binding agreement as of the date of this announcement, the proposed investment may not materialise. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the shares of the Company.

About F.K.

F.K. is an Israeli-based power solutions provider with operations in Israel and South America. The Group has had a long standing System Integration (“SI”) customer relationship with F.K. and has sold over 600MW of Power Generation Systems to F.K. over the years, making it one of the Group’s top 5 SI customers.

About VPower

VPower Group is one of the leading gas-fired engine-based DPG station owner and operator in Southeast Asia, and one of the world’s leading large gen-set system integration providers. The company derives operational synergies between its System Integration (SI) and Invest, Build and Operate (IBO) businesses. Under its IBO business, the company designs, invests in, builds, and operates utility-grade DPG power stations. It is headquartered in Hong Kong and was listed on the Stock Exchange of Hong Kong in November 2016.

VPower Group (SEHK: 1608), one of Southeast Asia’s largest gas-fired engine-based Distributed Power Generation (DPG) owner and operator, was awarded an extension to its Kyauk Phyu DPG station phase I (“KP-I”), to make the same power generation capacity available all the way to 2021.

The 5-year renewal took effect immediately after the original contract has ended, and KP-I continues to supply power from the strategically located Rankine state of Myanmar. The renewal is signed with financial terms similar to the original agreement. KP-I first went online in Q1 2015, built within 4 months after its contract signed. The total installed capacity doubled in Q1 2016 with the completion and launch of KP-II, taking the total installed capacity of the utility-grade gas-fired DPG stations to just under 100MW at the same location.

“We welcome the contract extension, as it is a recognition of our past performance. We are committed to support the well development of Myanmar for the long term, and our rates reflect that, which have been kept constant for the renewal,” said Rorce Au-Yeung, Co-CEO of VPower. “The reliability and capabilities of our fast-track power station are recognized by the government of Myanmar hence a longer renewal period is resulted, and we are proud to run the power station for another 60 months.”

Operating under VPower’s Invest, Build and Operate (“IBO”) business segment, KP-I is the company’s first power station in Myanmar. The business focuses on addressing regions with power shortages, where DPG can meet their immediate electricity needs with installations that are modular in design, making it highly mobile and scalable.

“On top of advantages including lower capital investment upfront compared to traditional centralized power plants and improved predictability on financing over the leasing term, DPG can also be expected to play a key role in the imminent shift in power mix many fast-developing regions are transitioning into.” He added.

KP-I also includes a 230kV power substation to connect to the national grid and complements the existing power supply. KP-I has been awarded ‘Gas Power Project of the Year’ and ‘Fast-Track Power Plant of the Year’ by the Asian Power Awards in 2015.

About VPower

VPower Group is one of the leading gas-fired engine-based DPG station owner and operator in Southeast Asia, and one of the world’s leading large gen-set system integration providers. The company derives operational synergies between its System Integration (SI) and Invest, Build and Operate (IBO) businesses. Under its IBO business, the company designs, invests in, builds, and operates utility-grade DPG power stations. It is headquartered in Hong Kong and was listed on the Stock Exchange of Hong Kong in November 2016.