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.
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.
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.