ELECTRICAL and mechanical engineering outfit Kejuruteraan Asastera Bhd (KAB) has found a new market niche vis-à-vis a gradual transformation of its core business into a one-stop engineering and energy solutions provider.
As a matter of fact, the mechanical and electrical (M&E) engineering business has provided an optimistic support for KAB’s transition into the power generation segment while enabling the company to embrace a green vision along the notion that business operation in the post-pandemic era will demand rigorous adherence to environmental, social and governance (ESG) principles.
“Our entry into the renewable energy (RE) sphere will enable us to build both sustainable income as well as recurring revenue stream, hence rewarding our shareholders with the creation of more value in their investments,” founder and managing director Datuk Lai Keng Onn told FocusM.
“Having garnered a strong foothold over the years in the realm of M&E, power generation is certainly not rocket science or an alien field for us. We believe both are able to collate well in weaving a better future for KAB in terms of maximising shareholder’s wealth.”
Describing the company’s leap of faith as “well-calculated and timely”, Lai said KAB has since 2Q 2021 been making inroads in harnessing businesses related to energy efficiency, solar power, cogeneration and waste heat recovery as well as other related new technology.
To-date, its power generation projects encompasses cogeneration facility; waste heat recovery system; and solar projects (with more in the pipeline) and an acquisition of hydropower plant.
“Based on the strong engineering foundation and experience we have built over the years, we are confident of reaping long-term rewards from our plunge into the RE realm as we are not limiting our sight on Malaysia alone but are actively looking for big RE projects outside our home base,” envisages Lai who founded KAB in 1997 and subsequently explored RE potentials in 2018.
“We find the playing field in Malaysia overcrowded because RE is today seen as a so-called low hanging fruit business that even attracted non-technical companies to jump onto the bandwagon.”
This has eventually prompted many Malaysian customers to look at lower pricing which resulted in RE industry players succumbing to a super low margin or even losses.
“That’s why we become very selective and focus on markets where electricity cost is higher and has a tougher barrier of entry such as Thailand, Vietnam, Indonesia and more. In fact, Thailand is set to become an attractive location for RE initiatives – particularly in solar power projects in tandem with the national net-zero emission target by 2065.”
On March 22, KAB through its indirect subsidiaries KAB Gree Solar Thai Co Ltd has sealed five 15 to 20-year power purchase agreements (PPAs) with two renowned Thai industry players, notably Siam Machinery & Equipment (SME) and Aapico Ayutthaya.
The PPAs entail combined installed capacity of 4,284 kilowatt-peak (kWp) solar PV system under the build-own-operate-transfer (BOOT) model which comprises:
- Siam Machinery & Equipment (908 kWp);
- Aapico Hitech Public Company Ltd (508 kWp);
- Aapico Hitech Parts Company Ltd (999.5 kWp);
- Aapico Hitech Tooling Company Ltd (259.2 kWp); and
- Able Sanoh Industries (1996) Company Ltd (1,609.2 kWp)
Currently, KAB has a combined installed capacity of 12,695 kWp of solar projects which include 5,073 kWp in Thailand. The inking of the five of these new PPAs will elevate KAB’s installed capacity to 16,978 kWp, of which Thailand will account for 55.1% or 9,356 kWp of the total installed capacity of the solar projects.
On its home soil, KAB had in July last year received a letter of award (LOA) from Mydin Wholesale Emporium Sdn Bhd for the installation of a grid connected photovoltaic solar system with an estimated capacity of 4,000-kWp for Mydin Mall Tunjong in Kelantan which is the largest Mydin mall in Malaysia.
The solar system will be installed in phases and is scheduled to achieve commercial operation date by 3Q 2022. Designed to generate circa 142 million-kilowatt hours of renewable electricity, the project is expected to reduce energy cost by about RM50 mil while neutralising 33,105 tonnes of carbon dioxide (CO2) emission over 25 years.
Elsewhere, KAB has also inked a principal term sheet agreement with FT Hose & Hose Sdn Bhd for the installation of two solar systems in Ipoh, Perak with 521 kWp and 450 kWp respectively (total of 971 kWp installed capacity). This agreement has been in effect with commercial operation date also slated for 3Q 2022.
Expected to generate around 32 million-kilowatt hours of renewable electricity, both solar system are poised to reduce energy cost by circa RM15 mil and neutralise 7,460 tonnes of CO2 over 25 years.
Under the agreement entered in with Mydin and FT Hose & Hose, KAB or any of its nominated subsidiary is the legal owner of the solar systems, hence both entities are obligated to pay KAB for the electricity generated in accordance with the agreed solar energy rate stated in the LOA and the principal term sheet agreement for a period of 21 years.
At 10.20am, KAB was unchanged at 38.5 sen with 1.24 million shares traded, thus valuing the company at RM692 mil. – March 25, 2022
