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SHS units obtain extension for Bangladesh power plant, divest Vietnam plant

AN SHS Holdings subsidiary has received an extension of the planned commercial operations date for a delayed solar power project in Bangladesh, potentially dodging US$912,500 in liquidated damages.

SHS Holdings announced on Wednesday night that on Dec 19, the Bangladesh Ministry of Power granted the extension to Oct 31, 2019, subject to the condition that liquidated damages could be imposed in accordance with a power purchase agreement entered into by SHS Holdings unit HDFC SinPower and the Bangladesh Power Development Board.

The 50 MW solar power plant was originally meant to have been completed on April 18, 2018. However, its progress was delayed due to "outstanding land issues, regulatory approvals, delay in obtaining financing and inclement weather conditions", SHS Holdings said in an announcement on Oct 23, 2018.

On Wednesday, SHS noted that if there is a delay in achieving the new extended planned commercial operations date, then liquidated damages assessed at US$2,500 per day will accrue from April 18, 2018 until the day that the plant is commissioned to operate, subject to a maximum cap of 365 days.

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SHS Holdings said that it will provide further updates on material developments to the solar plant project as necessary or appropriate.

Separately, SHS Holdings also announced the divestment of a solar power plant in Vietnam and the signing of a power purchase agreement for the electricity produced by the plant.

On Dec 26, its wholly owned Singapore-incorporated subsidiary Sinenergy Holdings entered into an amended and restated investment agreement to divest its interest in the Sinenergy Ninh Thuan I plant to Super Energy Group (Hong Kong) Co (SEGHK). SEGHK is a unit of Thailand-listed Super Energy Corporation Public Co Ltd.

Sinenergy will transfer ownership of the project company to SHS unit Solar NT Holdings, then transfer 90 per cent of Solar NT's total issued shares to SEGHK. A year after the plant's commercial operation date, or June 30, 2020 - whichever is earlier - Sinenergy and SEGHK will enter a subsequent conditional sale and purchase agreement for the transfer of the remaining stake in Solar NT. The aggregate consideration for the entire divestment is US$5.5 million.

Based on SHS Holdings' unaudited consolidated financial statements for the nine months ended Sept 30, 2018, the completion of the divestment is expected to result in a gain of about US$1.1 million. The group intends to use the net proceeds for working capital, general corporate purposes and reducing its external borrowings.

SHS Holdings said the divestment "is in line with the group’s ongoing strategic review and objective of streamlining its investment activities in its solar business", adding that it also increases the group's overall financial capacity and flexibility for further investments in solar and other business units.

In addition, on Nov 30, the power plant's project company entered into a power purchase agreement with state-owned power distributor Vietnam Electricity for the electricity produced by the plant. Under the agreement, Vietnam Electricity shall purchase all electricity generated by the plant for a period of 20 years from its commercial operations date at approximately US$9.35 cents per kWh. The plant is expected to have a capacity of 50 MW-peak and an estimated annual production of 83.7 million kWh.

SHS Holdings shares closed unchanged at 19.4 Singapore cents on Wednesday before the announcements.