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Sunday, March 14, 2010

Leader Universal helps power Cambodia growth

Leader is now charting a first in Cambodia by constructing the country's first coal-fired power plant.

During a ground-breaking ceremony for a coal-fired electric power plant in a coastal town in Cambodia last month, Malaysian cable and wire group Leader Universal Holdings Bhd (LUH) (4529) donated books to children of several villages in the area as part of its corporate social responsibility.

The smiles of wonder and gratitude on the faces of the youngsters matched the mood of the older folk in the port town of Sinhanoukville, for whom power supply is considered a luxury.

While hotels and other places of business and the homes of the rich are wired with electricity - via generators - most of the Cambodian population have to contend with either few hours of electricity or none at all.

As a small, predominantly rural nation of some 12 million people bordering the Lao People's Democratic Republic, Thailand and Vietnam, Cambodia has often been tagged as among the poorest countries in the world.

It is only in recent times that the country has emerged from many decades of war and internal conflict, which saw many of the foundations for growth and development - such as physical, human, social and economic - shattered.

The government's efforts in improving access to basic infrastructure such as water, electricity, transport and telecommunications services have seen the participation of many Malaysian companies such LUH.

Cambodia has today significant experience in power sector participation in infrastructure, ranging from major projects involving foreign investors such as Malaysia's Muhibbah Engineering Bhd and Telekom Malaysia Bhd - in the airports and telecommunications sectors.

The presence of Malaysian banks like Public Bank Bhd and Malayan Banking Bhd, via its branches scattered across Phnom Penh is yet another show of how Malaysian companies are participating actively in developing Cambodia.

In 2008, Malaysia was reported to have been the biggest investor in Cambodia for the14th consecutive year, with investments totalling US$2.19 billion (RM7.24 billion).

Apart from power generation which LUH has been an active investor for more than a decade in Cambodia, other businesses carried out by Malaysian companies include textile manufacturing, construction, hotels, restaurants, insurance, gaming, media, food and petroleum.

For Leader Universal Holdings, its legacy in Cambodia as the country's first independent power producer is one which has earned the company a position of respect and authority.

"An opportunity opened up in 1994 for us in Cambodia when one of our current partners - Cambodia Utilities Pte Ltd (CUPL) - introduced a new project to us in the form of an independent power producer power plant of 35 megawatts," said LUH managing director and chief executive officer Datuk Sean C.H. H'ng.

"We negotiated the Power Purchase Agreement together, found the returns to be commensurate with the risks of the country then, so we proceeded to develop the project," he recalled.

CUPL is a 60 per cent-owned subsidiary of LUH, which was incorporated in 1994 to develop the diesel engine heavy-fuel oil-fired power generating plant on a build-operate-transfer basis in Cambodia.

The electricity generated, is sold to Electricite du Cambodge (EDC), a department of the Ministry of Industry, Mines and Energy in Cambodia.

CUPL is the first Malaysian-owned company to have successfully ventured into Cambodia's power industry and secured the first IPP contract from the country's government.

The contract is on a take-or-pay basis for a period of 18 years from 1997 to 2015.

"When we first started CUPL, we had a workforce of some 180," said H'ng.

LUH's workforce in Cambodia today is made up of 30 expatriates and 150 Cambodians.

"Going forward with the two new projects (a 100MW power generation project in Sihanoukville and the North Phnom Penh-Kampong Cham power transmission project) under construction, we estimate the total workforce will grow to around 450 by year 2012," H'ng added.

As the first IPP in Cambodia 15 years ago, Leader is now charting a first in the country again by constructing the country's first coal-fired power plant.

"LUH has been long in Cambodia and established ourselves as a serious investor and developer, doing what others deem as not being easy, as a pioneer.

"Like in many countries, power plants attract industrial estates being built adjacent to it as their mere presence instill confidence in many downstream investors. We see an acceleration of industrial development in the Sting Hav region where the power plant is located. This will have spillover effect in terms of job creations and developments within the region," said H'ng.

The economic spinoffs to the Cambodian economy should be already seen during construction of the new plant in Sihanoukville, where employment opportunities for the locals are expected to be seen both during and post-construction.

"During construction, peak manpower requirement is expected to hover at some 2,000 people and when fully operational, at 250," said H'ng.

In pointing to the fact that power plants are often viewed at the precursor to more industrial development in the region, H'ng said: "With a port nearby and our power plant, much development will be attracted to the Kampong Som and Stung Hav regions."

"The Cambodian government's investor-friendly approach is also viewed by us as one way many investors will flock to this area, with cheaper power and expedient access to the port."

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Leader Universal will continue to make its mark in Cambodia

WITH some 15 years of investment history in Cambodia, Leader Universal Holdings Bhd (LUH) (4529) is set to continue making its mark in the country where many investors are now flocking to.

But with horror stories of how certain Malaysian investors got badly affected for focusing mainly on one country and placing their "eggs in one basket" such as Dubai, some may question whether LUH has over-committed itself in Cambodia.

"We have always invested with caution," said the company's managing director and chief executive officer Datuk Sean C.H. H'ng.

Pointing to its first independent power producer (IPP) project via Cambodia Utilities Pte Ltd which was completed and started operations in 1997, he said the investment has provided LUH with fairly good returns.
"We did not pursue the next two fuel oil-fired IPPs nor the hydro IPPs in Cambodia that came after this, but we pursued this coal-fired power plant (in Sihanoukville).

"There has been a span of 13 years before we embarked on any expansion in the country although we have many years of operating experience and extensive business networks in Cambodia," he added, saying that Leader is also looking at good investment opportunities outside of Cambodia but did not elaborate.

On where else in Cambodia is LUH looking to set up power plants in 10 years from now, H'ng said: "We have land for many years of expansion. We are leasing 20ha from our joint venture partner for the use of our 100MW coal fired power plant project.

"Our joint venture partner CIIDG, has sufficient land in the same area to cater for the expansion of an additional 700MW that has been planned to be implemented in the next few years."

LUH's strategic location near the deep sea for its latest power plant project in Sihanoukville, makes the area a logical site for any future expansion.

On how tough is it for a Malaysian company to be investing overseas, especially in a developing country like Cambodia, H'ng said: "I think it is always a challenge for any investment overseas, and not necessarily in Cambodia alone."

"There are many things to adapt to, from the local partners and local authorities, to local manpower capabilities and local cultures.

"Even growing the workforce can be a challenge. We have, however, been managing this aspect quite well and are confident that we can continue to do so," he said. - By Marina Emmanuel

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