LONDON: BiON Plc has entered into the solar photovoltaic (PV) market with the establishment of BiON Suria Sdn Bhd, a solar-focused subsidiary, and its conditional acquisition of solar assets.
This represents the first expansion of the Company’s activities into renewable energy sectors beyond biogas, in line with its stated strategy.
BiON Suria has been established to expand the Company’s activities into the solar PV market, which the Board believes offers great potential as an incremental revenue stream.
The Malaysian government is supporting the growth of the industry with several incentives and initiatives as it seeks to achieve its target of renewable sources accounting for 20% of the national energy mix by 2025.
In late 2018, the government introduced the Net Energy Metering (“NEM”) programme where any excess power generated by solar panels can be sold to the national utility company, Tenaga Nasional Berhad (“TNB”).
In its COVID-19 economic relief package, the government announced approximately US$2.9bn in expenditure for the installation of new grids, LED street lights and rooftop solar panels. Alongside the NEM programme, the government also introduced the Large Scale Solar (“LSS”) competitive bidding programme for the development of large scale solar PV plants.
Malaysia is well suited for the generation of solar PV thanks to the availability of sufficient sunlight and irradiance levels, and it is estimated that there are over four million buildings with rooftop solar potential in the peninsula.
As a result, and with the backing of the government, the electricity generated by solar PV is expected to increase from 194 GWh today to 13,540 GWh by 2050.
The Company intends to leverage this market opportunity primarily through strategic acquisitions where it can purchase existing assets, at an attractive value, that have completed the Feed-in-Tariff (“FiT”) bidding process and secured a power purchase agreement.
As such, these acquisitions are expected to be immediately earnings accretive and support the Company’s cash flow on completion. This would strengthen BiON’s financial position while it continues to develop its pipeline of other renewable energy assets. The Company also intends to participate in selective opportunistic projects and partnerships.
BiON Suria is a wholly-owned subsidiary of BiON Ventures Sdn Bhd, which is wholly owned by BiON plc.
BiON has completed its first transaction in the solar PV market with the conditional acquisition, through BiON Suria, of a 77% interest in the right-of-use assets of rooftop solar panels that supply 0.95MW to TNB under the NEM programme.
The assets have been acquired for a purchase consideration of RM6m from Motion Ventures Sdn Bhd, a construction company. The initial payment of RM200,000 was made on signing with RM400,000 due on fulfilment of the conditions precedent and the remainder due periodically over the 12 months following Second Payment.
The solar PV panels are atop 54 religious buildings (mosques and suraus) in the state of Perak and in the Sandakan district in the state of Sabah. They have long-term power purchase agreements in place, at attractive FiT rates, with the majority expiring in Q4 2040 and a small number in Q4 2038. The Company expects to recognise approx. RM0.9m in revenue and RM0.4m in profit after tax from these assets per annum, commencing from 2021.
Datuk Syed Nazim bin Syed Faisal, CEO of BiON, said: “The establishment of our BiON Suria subsidiary and acquisition of solar PV assets marks an important milestone for BiON as we enter into a new renewable energy sector for the first time – delivering on our stated strategy to diversify our portfolio.
“We believe solar PV offers great potential for supporting our cash flow while we continue to focus on developing our biogas power plants and expanding into further waste-to-energy activities. The solar PV opportunity is demonstrated by this acquisition, which is earnings accretive and provides a secure income for the next 20 years. With the solar market in Malaysia expected to grow substantially, supported by government incentives, we look forward to expanding our portfolio in this sector.”
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