A pure renewable energy firm emerges
Takeover of little known Pimpinan Ehsan garners interest
A corporate exercise quietly announced a week ago seems to have gotten the notice of some investors.
Pimpinan Ehsan Bhd (PEB), a company that was controlled by tycoon Tan Sri Rozali Ismail, a cash shell looking for an acquisition target, made two stock exchange filings on Feb 19.
One, that Rozali and other shareholders had sold out of the company to new parties, thereby triggering a mandatory general offer (MGO) and two, that PEB was planning to acquire solar power assets.
Since the announcement, PEB shares have almost doubled in a matter of a week.
So why the excitement?
It is likely to do with the fact that PEB is morphing into a pure play renewable energy company, a move which sits well with the global push towards environmental goals. Another reason could be the presence of seasoned corporate personality Lim Beng Guan as the new major shareholder of PEB.
Lim is a co-founder of a boutique financial advisory firm ZJ Advisory Sdn Bhd, that has helped numerous corporations to raise funds and embark on mergers and acquisitions.
Lim and parties acting in concert have acquired 65.5% of PEB from Rozali and other shareholders for a price of RM1.07 a share, spending some Rm48.5mil, thereby triggering the MGO.
PEB intends to acquire a few renewable energy assets from the RENIKOLA Sdn Bhd group. The vendors are businessman Boumhidi Abdelali (Adel), Tengku Zaiton Ibni Sultan Abu Bakar and Lim.
The assets will be acquired through the issuance of new PEB shares at RM1.07 a piece at a price to be determined later by an appointed valuer.
The RENIKOLA group of companies, no doubt borrowing the name from the scientist known for designing the alternating-current electric system, boasts of having a portfolio totalling 418 megawatt peak (MWP) capacity of solar assets, across four sites in Kedah, Pahang and Perlis. That would make it the largest listed solar operator on Bursa Malaysia.
The closest peer would be Cypark Resources Bhd which operates around 47 MW of solar plants currently, with some additional 350 MWP of capacity in the pipeline comprising olar, waste-to-energy and biogas/biomass projects.
RENIKOLA’S target is even more ambitious – to hit 1GWP of capacity in the next five years, says its managing director Adel, who has been involved in palm oil cultivation and developing and managing several iron ore mining concessions in Malaysia and Morroco.
He subsequently turned his attention to renewable energy and then founded RE Gebeng Sdn Bhd, a solar photovoltaic developer company in 2015 and was instrumental in the successful implementation of its 38MWP solar project in Pahang, which is now part of RENIKOLA.
For now, RENIKOLA’S operating capacity sits at only 43MWP (see table).
Another 45MWP plant in Pekan, Pahang will become operational by April.
It’s big plant, a 330MWP in Bukit Kayu Hitam in Kedah is the one which will boost the group’s total capacity to 418 MWP.
So at what stage is the 330MWP plant?
Adel explains that the Bukit Kayu Hitam (330MWP) solar plant will be under a corporate power purchase agreement (PPA), where it sells electricity directly to large corporates, using the power grids of Tenaga Nasional Bhd. This will be the first such arrangement in the country.
“These tripartite agreements are common in developed countries,” says Adel.
On the commencement of the 330 MWP plant, he says: “We are conducting power studies with the target to begin construction by end of this year and to commence delivering electricity by first quarter of 2023. We are in discussions with a number of large local and multinational companies to supply green energy to them,” he says.
“Green energy is a must for many corporations going forward. And we must have green energy in the country’s ecosystem as one of the factors to attract more investments from global MNCS. RENIKOLA wants to be at the forefront of this. Our mid-term target of 1GWP is achievable as we have all the necessary expertise to grow our business, be it organically or through acquisitions,” he adds.
“Green energy is a must for many corporations going forward.” Boumhidi Abdelali
He says that RENIKOLA is better described as a renewable energy producer and not just a solar player.
While PEB’S plans are interesting, its prospects are a work in progress.
For starters, the valuation of RENIKOLA will determine how many new shares of PEB are issued and its ensuing dilutive impact, considering PEB’S current market capitalisation of just under Rm130mil.
On a positive note, none of RENIKOLA shareholders are “cashing out”, says Adel.
He also points out that their solar plants are profitable, with EBITDA (earnings before interest, tax, depreciation and amortisation) margins of around 85%.
“We place importance on the efficiency of the plants, using the latest technologies to ensure the yield is high,” he explains.
RENIKOLA is also looking into mini hydro power plants, Adel adds.
It should be noted that last November, RENIKOLA announced a Rm390mil via an “Asean green sustainable and responsible investment” sukuk programme, which is yet to be drawn down. Such funds will help the group grow their renewable energy portfolio, says Adel.
In ascribing an Aa3/stable rating to the sukuk, RAM Rating Services Bhd noted that RENIKOLA has sound project fundamentals, underscored by the favourable terms of their power purchase agreements in addition to being deemed to have strong debt-servicing metrics.
Pegging a value to a pure play solar or renewable energy company is also unknown at the moment.
Cypark, for example, trades at a mere multiple of 10 times its earnings.
However, other solar-related firms both in the United States and on Bursa Malaysia have seen their share prices skyrocket in recent months. The latter group includes the likes of Solarvest Holdings Bhd which now trades at a massive 100 times its earnings and Samaiden Group Bhd, whose price has risen some 270% since its listing four months ago.
Both are EPCC or engineering, procurement, construction and commissioning players that build solar plants and help companies design their solar projects to reduce their energy bill.
Other red hot solar related companies include Greatech Technology Bhd and Pentamaster Corp Bhd who are said to benefit from the US government’s new push for renewable energy. The companies are in the supply chain of the production of solar technology.
Going back to PEB, its shareholders will have to vote in the proposed acquisition of RENIKOLA.
Lim is an interested party and hence will not vote, considering he has interest in RENIKOLA. It should be noted that PEB has
Rm70mil in its coffers, which works out to around RM1 a share. This money is now being earmarked for PEB to grow its renewable energy business.
Commenting on the deal, Lim says that his offer price of RM1.07 is above the net assets of PEB which stood at RM1.02 per share as at Sept 30, 2020.
“It is also above the 90 sen level that the stock was hovering at prior to our entry,” he adds. Minorities now have a chance to exit at the offer price of RM1.07 or consider riding along with us to build a formidable presence in the renewable energy space,” says Lim.