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Pestech plugs into power sector ahead of listing

Malaysian power infrastructure provider Pestech International is looking to establish its Cambodian subsidiary as a top player in the local energy market, and operate it as a hub for regional expansion ahead of its planned listing on the local stock exchange, a company spokesman said yesterday.

“A local presence is very important to us,” said Charles Tan, senior manager of Pestech’s corporate development department. “We have a long-term plan for business here and we want Pestech Cambodia to be our hub in Indochina as we establish a presence in Laos and Myanmar.”

Operating since 2010, Pestech (Cambodia) Ltd (PCL) is an indirect wholly owned subsidiary of Pestech International, which constructs electrical substations and transmission lines.

The company has clinched three electricity infrastructure contracts to date, completing the first – a development of a 230kV transmission line between Phnom Penh and Kampong Cham – in June 2013, seven months ahead of schedule, according to Tan.

The company is currently completing two projects. One is a contract to build a 230kV electricity line from Phnom Penh to Sihanoukville, which is slated for completion by 2018.

The company is also working with another Pestech subsidiary, Diamond Power, to develop a 230kV transmission line between Kratie and Kampong Cham on a 25-year BOT basis, marking Pestech’s debut as an independent power transmitter. The delivery deadline is November 2017.

“As a group, we really like to see the company take up opportunity in BOTs,” said Tan. “Our intention is to build this section of the business.”

Tan said Pestech sees growth opportunities in Cambodia’s underdeveloped energy sector both as an infrastructure provider and as a hub for the group’s regional operations.

He said the Kingdom’s operating environment is “much more stable and developed” than in Laos or Myanmar, making it better suited as a regional base.

“And there is a big need for power infrastructure here, so lots of opportunities for us to take up more projects,” he added.

In a July 2015 company report, Malaysian financial services company K & N Kenanga Holdings noted that Cambodia needs at least seven new transmission lines built to serve its near-term electricity supply demand.

It noted that Pestech was one of two preferred contractors of state-owned Electricite du Cambodge (EdC), which favoured the firms “for their prompt attention to requests and solving problems, unlike the bigger firms which are always bogged down by [bureaucracy] and red tape”.

In February, Pestech International announced its intention to list PCL on the Cambodian Securities Exchange (CSX). Tan said the company plans to submit its initial public offering (IPO) application to the market regulator by May and is hoping for approval by the end of the year. It has not yet selected an underwriter or determined the offering size.

“The main aim for us to IPO is not about raising money,” Tan said. “It is about establishing a good foothold here and building Pestech Cambodia into a hub for Indochina that is operationally and financially independent.”

He said PCL will use the ensuing time to firm up its financial position.

“We’ve never actually done any corporate exercise to capitalise the company’s retained earnings, so the listing process will be the chance for us to do this and strengthen the company,” he said.

Last July, Pestech signed a memorandum of understanding with Chinese firm Shandong Electrical Engineering and Equipment (SDEE) to establish a factory to produce transformers and other electrical transmission equipment for the local market.

“We’re still negotiating the terms, but would need funding [for the factory] and this would tie back to the listing.”

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