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Malakoff CEO issue still unresolved
Khairul Khalid 
The power producer has settled its dispute with vendors of its Tanjung Bin power plant
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Shareholders of Malakoff Corp Bhd would have been relieved when the power producer settled a long-standing dispute over its Tanjung Bin power plant recently. However, a cloud of uncertainty still hovers over the company’s top post.

Malakoff has been without a CEO since last June and there is little indication as to who might take over the job.

An analyst says the constant changes at the top could hurt market perception of the company.

“It would be having a fourth new CEO in almost as many years (since 2014). It has had some high-profile personalities in the top job. The revolving door (of CEOs) could be construed by some in the market as a negative.

“Although the recent resolution of the Tanjung Bin plant issue is good news, it still has to appoint a new CEO soon to assure investors,” he says.

In response to our queries, Malakoff’s representative told FocusM that it has not been notified of any changes in the CEO yet and will make an announcement in due course.

On June 20, Malakoff’s previous CEO Datuk Wira Azhar Abdul Hamid announced his resignation, citing personal and professional reasons. He had joined the company only on May 1, 2016. Malakoff’s executive vice-president of operations, Habib Husin, was named acting CEO.

Azhar’s abrupt departure led to speculation that he was about to be named the new CEO of Felda Global Ventures Holdings Bhd (FGV).

At press time, this appointment has not materialised, although FGV is still without a CEO. Its current CEO Datuk Zakaria Arshad has been suspended, pending investigations into alleged irregularities in business dealings with a FGV client.


Well-versed in plantations

Prior to joining Malakoff, Azhar was CEO of Mass Rapid Transit Corp Sdn Bhd (MRT) from 2011 to 2014, but it is his working experience in plantation giant Sime Darby that had many saying he was a prime candidate for the FGV job.

In 2003, Azhar was business development director of Sime Darby Plantation Sdn Bhd. Subsequently, he held various top posts in the Sime Darby Group. He was the MD of Tractors Malaysia Holdings Bhd, MD of Sime Darby Plantation, and acting president and group CEO overseeing the entire Sime Darby Group’s operations until 2010.

The analyst adds that although acting CEO Habib has the industry experience, based on precedence, he is not likely to be given the top job on a permanent basis.

“He was acting CEO twice before. This is his third time. So, it is not a likely scenario (Habib getting the CEO job),” he rationalises.

Fifty-seven-year-old Habib has been the executive VP of operations at Malakoff since Aug 3, 2015. He was previously chief operating officer of the group from October 2010 to August 2015, and senior vice-president of the asset management division of Malakoff between April 2006 and October 2010.

Habib has also held positions at Segari Energy Ventures Sdn Bhd, Sarawak Shell Bhd and Lembaga Lektrik Negara.

Currently, he also holds directorships in Malakoff Power Bhd, Port Dickson Power Bhd, Tanjung Bin O&M Bhd and Tanjung Bin Energy Issuer Bhd.

His second stint as acting CEO was when Azhar’s predecessor Datuk Seri Syed Faisal Syed Ali Rethza Albar resigned on Dec 31, 2015, just over a year after joining in July 2014 from his previous job as CEO of Gas Malaysia Bhd. Syed Faisal left to become group CEO of DRB-Hicom Bhd.

Habib first became acting CEO when Syed Faisal’s predecessor, Zainal Abidin Jalil who held the Malakoff top job since 2011 stepped down in 2014.

The company began facing problems with its Tanjung Bin power plant, reportedly due to faulty boilers, in 2013.

Early this month, Malakoff announced that its 90%-owned unit, Tanjung Bin Power Sdn Bhd (TBP), had entered into an agreement with IHI Corporation Japan, ISHI Power Sdn Bhd, and IHI Power Systems (M) Sdn Bhd (IPSM), as well as Sumitomo Corporation, Zelan Holdings (M) Sdn Bhd and Sumi-Power Malay-sia Sdn Bhd, to settle the disputes related to previous operational issues at the plant.

Malakoff did not disclose the terms and conditions of the settlement, but on Dec 1, 2015, it was seeking damages of around RM785 mil due to 22 different boiler tube failure incidents at the power plant and the inability of the plant to meet certain required output conditions.

IHI is the manufacturer and supplier of the equipment, parts and components for boilers and boiler system at TBP. ISHI and IPSM provide services for the boilers and mills. Meanwhile, Sumitomo, Zelan and Sumi-Power are the EPCC contractors for the plant.

A report by Public Investment Bank sees the settlement as good news for the group.


Settlement seen as one-off gain

“Although this will be a one-off gain in FY17F, we see this piece of news as positive to Malakoff as this will cushion the earnings pressure from the unexpected lower capacity payment from Tanjung Bin Energy (TBE) in the second quarter (Q2FY17), as well as lower contribution from Segari Energy Ventures (SEV) from the second half.

“While we are encouraged that Malakoff is (i) looking for opportunities in the renewable energy (RE) segment, waste-to-energy and projects in the Middle East and North Africa (MENA) region, and (ii) plans to maintain dividend payment of seven sen per share for FY17, translating to a yield in excess of 6%, greater risks to earnings are expected to come from (i) lower capacity payment for TBE and (ii) lower contribution from SEV from H2,” the research house adds.

The company has submitted bids for the solar and waste-to-energy (WTE) projects in Kuala Lumpur and has tendered a bid to develop a new coal-fired power plant and desalination assets in the MENA region.

However, Public Bank does not anticipate these to materially boost the group’s earnings in the near term.

Malakoff is the country’s largest independent power producer with an effective capacity of 6,346 MW from seven power plants that run on oil, coal and gas. It is part of the MMC group which is controlled by tycoon Tan Sri Syed Mokhtar Albukhary.

MMC’s key businesses are its ports and logistics divisions that include the operations of Port of Tanjung Pelepas (Malaysia’s largest container terminal) and Johor Port (leading multi-purpose port).

MMC is also the single largest shareholder of Gas Malaysia (sole supplier of reticulated natural gas in the peninsula), and wholly owns Aliran Ihsan Resources Bhd (water treatment plant operator).

MMC’s engineering and construction division was also the project delivery partner and underground works package contractor for the 51km Klang Valley Mass Rapid Transit (KVMRT) project (Sungai Buloh-Kajang Line).

This article first appeared in Focus Malaysia Issue 245.