RESERVOIR Link Energy Bhd, an upstream oil & gas (O&G) well related services provider, has embraced renewable energy as a strategic move to build a sustainable business while simultaneously reducing its carbon footprint.
Towards this end, the group has acquired a 51% equity interest in a new special purpose vehicle (target company) to undertake solar renewable energy projects in Malaysia.
The identified business and assets of Solar Bina Engineering Sdn Bhd which is valued at RM41.5 mil will be injected into the target company by Eric Lee Seng Chi, the sole shareholder and managing director of Solar Bina.
Upon completion of the acquisition, Reservoir Link will be able to consolidate the financial results of the target company which is expected to contribute positively to the group’s long-term earnings.
Underpinning this is a profit guarantee by Lee that the target company will achieve an aggregate net profit of RM13.8 mil for 24 months from the completion date of the acquisition.
“Our pivot into the renewable energy industry has been in our strategic pipeline and we are optimistic that this venture will be a new stream of long-term recurring income for Reservoir Link,” commented Reservoir Link executive director Thien Chiet Chai.
“We are confident of Solar Bina’s capabilities and will leverage on each other’s expertise to bid for more solar renewable projects going forward.”
Based on the valuation of the identified business and identified assets to be injected into the target company by Solar Bina, Reservoir Link’s acquisition cost works out to be RM21.2 mil, of which RM8.5 mil will be settled in cash with the remaining RM12.7 mil to be settled via the issuance of 18.2 million new Reservoir Link shares at an issue price of 70 sen each.
The shares will be issued in two tranches: 30% on the completion of the acquisition while the remaining 70% upon the target company achieving the profit guarantee.
Established in 2015, Solar Bina, a solar systems service provider, is involved in the provision and implementation of solar photovoltaics (PV) projects for:
- Residential, commercial and industrial properties; and
- Large scale solar PV plants which include supply and installation of solar mounting system and other engineering works involving civil, structural, mechanical and electrical engineering works.
To date, Solar Bina has a total of 300 megawatt (MW) of on-going solar PV projects. It has also completed more than 350MW of solar PV projects with the largest single project completed in one location being 60MW.
At the close of the morning session today, Reservoir Link was up 5.5 sen or 7.48% to 79 sen with 7.92 million shares traded, thus valuing the company at RM225 mil. – April 12, 2021
