Federal Int'l: Turns On 1st Power Project

Federal International's move to diversify into the energy sector has been

powered on. Its 60%-owned JV, Banyan Utilities (BU), has just signed a contract

with ASX-listed Natural Fuel's Singapore subsidiary (NFS) for a BOT (Build-

Operate-Transfer) energy plant to supply both electricity and steam. The plant,

which will cost BU around S$20m and generate around 5.5 megawatts of

electricity, will bring in revenue worth a minimum of S$54m for a period of 12

years starting in Dec 2007, with an extension option of 5+5 years. The reason

for Federal to plug into the energy sector is to secure more recurring income

and the NFS project will bring in at least S$2.7m revenue per annum for the

next 12 years. Despite the diversification, Federal has not neglected its

mainstay trading business. It has been expanding its geographical reach and

we understand it has been making good progress in the Middle East and

FEDERAL INTERNATIONAL (2000) LTD

(Incorporated in Singapore)

Company Registration No. 199907113K

SUBSIDIARY ENTERS INTO AGREEMENT FOR THE PROVISION OF ELECTRICITY AND STEAM

The Board of Directors of Federal International (2000) Ltd (the "Company") wishes to announce that the Company?s subsidiary, Banyan Utilities Pte Ltd ("Banyan Utilities") has entered into a Power and Steam Purchase Agreement (the "Agreement") with Natural Fuel Pte Ltd ("Natural Fuel"), a wholly-owned subsidiary of Natural Fuel Limited, for the provision of electricity and steam.

Under the Agreement, Banyan Utilities will construct a Co-Generation facility costing approximately S$20.5 million on a "Build, Operate and Transfer" basis to provide electricity and steam to Natural Fuel?s bio-diesel facility on Singapore?s Jurong Island. The Agreement, which has a guaranteed contractual value of S$54 million, is for a period of 12 years commencing from December 2007, with an option to extend for an additional five plus five years.

Construction of the Co-Generation facility will commence immediately and will be funded by a combination of internal resources and bank borrowings. It is expected to be operational by the second quarter of 2008.

Banyan Utilities is also obtaining a licence to sell surplus output from its Co-Generation facility to third parties. Banyan has projected a minimum of S$300 million revenue over the next 12 years from the Agreement and the sale of electricity and steam to Natural Fuel and other third parties.

The Agreement is not expected to have any material impact on the earnings per share and net tangible assets per share of the Company for the financial year ending December 2007.

None of the Directors or substantial shareholders has any direct or indirect interest in the Contract.

By Order of the Board

Chng Geok

country it wants to focus its energy on.Federal International is diversifying into

Recurring income to sustain growth.

the energy sector is to secure recurring income to sustain growth - a strategy

that management has adopted for its marine logistics business. The sole FSO

vessel that Federal operates is leased to PetroChina on a 10-year charter

worth US$9m per year, with extension option of five years. Federal is also

looking to expand its fleet to 5 such vessels over the next few years, subject to

it getting more long-term charter deals. Likewise, its Indonesian JV - Federal

JWR - has started to reap the fruits of oil & gas BOT project initiated in 2005

and can expect around US$0.5m of monthly sales from June 2007 onwards for

the next five years.One reason for Federal to plug into

Funding is not an issue.

by the increase in recurring income, the company's plan to invest as much as

S$100m this year, nearly doubled what it spent last year, should not be an

issue. Besides expanding into the energy sector and its FSO fleet, we

understand that Federal is looking for more BOO and BOT projects in the oil

and gas sector, as well as expansion into new markets like Middle East and

Vietnam. Armed with nearly S$40m in cash and with almost zero net gearing,

bank borrowing is a viable option and can also give some financial leverage.But with operating cashflow expected to be boosted

Billion dollar ambition.

revenue threshold, it has its sight set on achieving one billion dollar in sales

within the next five years. Growth by acquisitions will be one way to achieve its

target and we understand that management is looking for small companies

that can offer different services to complement its current skill set. We do not

have a rating on Federal. Now that the company has breached the S$150m(Carey Wong, OCBC)