By MARK RAO / Pic By ISMAIL CHE RUS

KNM Group Bhd has awarded a RM1.9 billion contract to China Western Power Industrial Co Ltd (CWPC) to build a 36MW waste-to-energy plant in Peterborough, UK.

The contract was awarded through KNM unit Peterborough Green Energy Ltd and is part of the Malaysian company’s aggressive move to increase its recurring income stream.

KNM finance director Terence Tan Koon Ping said the Peterborough waste-to-energy plant stands to contribute up to 50% of group earnings by 2020 alongside the group’s now operational bio-ethanol plant in Thailand.

“Next year, about 15% to 20% of our income stream will come from the Thailand plant alone. In the next three to five years, we are looking at just short of a 50% recurring income stream after phase one (of the Peterborough project) is completed,” Tan said yesterday.

“Our ultimate projection is a recurring income stream contribution of 70% after the second phase of works kicks in at Peterborough, but this does not include other RE projects in the pipeline.”

CWPC, which is listed on the Shenzen stock exchange, expects to complete the project in 37 months after its commencement date in the first quarter of 2018.

Construction of the Peterborough plant is now ready to proceed having secured the relevant approvals and with the inclusion of a contractor and financier via CWPC.

Tan said KNM, which is engaged in both the downstream oil and gas (O&G) and renewable energy (RE) industries, has progressively increased its recurring income stream to reduce reliance on project-based works.

“Hitting our 70% target will mark our complete transformation from a downstream onshore player to an RE player,” he said.

“We will have two income streams, but will look more to recurring income rather than purely contracting income.”

In the quarter ended June 30 this year, KNM saw its revenue and profit before tax dip by 14.7% and 45.7% year-on-year respectively, due to works from the Pengerang Integrated Petroleum Complex (PIPC) coming to the end and slower replenishment of new orders amid market uncertainties.

Over the past five years, KNM has been striving to anchor earnings on a stable income base to mitigate the volatility in contract-based works, while simultaneously looking at the RE, power and utilities businesses for long-term growth.

Meanwhile, KNM group CEO Lee Swee Eng said the group’s long-term strategy will help reduce its exposure to the up and down swings from the O&G and other relevant industries.

“When we start production in the UK, KNM will derive 70% of earnings from recurring income. We will be cushioned from the roller-coaster economic and oil situations,” Lee said at the same event, adding that the company is eyeing RE projects in the UK, Thailand, Indonesia and its home base, Malaysia.

The downstream business is to remain a core business under the KNM group and currently retains an orderbook valued between RM2 billion and RM2.5 billion, which will sustain over the next two years.

KNM will also bid for the second phase of awards from the downstream PIPC project based in Johor when forthcoming.