PETALING JAYA: Renewable energy (RE)-based Sunview Group Bhd
expects its growth momentum will be supported by the stabilisation of its overseas expansion plans, moving upstream in the solar industry and diversification into other RE related segments.
While raw material pricing, foreign exchange rates and energy market price volatility have always been tricky maneuvers in the solar industry, chief executive officer Ong Hang Ping told StarBiz that “Having an integrated ecosystem and value chain to mitigate these risks is increasingly crucial.”
He noted the group’s profit margins are between 4% and 5%, which is quite on par with its peers.
“While there may be some fluctuations of about 0.5%, the margins will most likely be within that range.
“Nevertheless, in order for us to continue to achieve rapid growth, we need to establish a stable presence in overseas markets,” Ong pointed out.
For the fourth quarter ended March 31, 2023, the turnkey engineering, procurement, construction and commissioning service (EPCC) provider’s revenue grew by 44% quarter-on-quarter (q-o-q) to RM139.6mil.
Net profit increased by 141.4% q-o-q to RM5.6mil in the fourth quarter of 2023 or earnings per share of 1.48 sen.
The results were mainly underpinned by revenue recognition from the progress of the ongoing large scale solar (LSS) and EPCC projects.
As of March 31, 2023, Sunview’s order book amounted to RM547.9mil.
The group also has nine ongoing LSS projects with an aggregated installation capacity of 234 megawatt alternating current, and a total contract value of RM873.9mil, mostly to be recognised in financial year 2024 (FY24) and FY25.
In addition, Sunview has submitted a quota of 200 megawatt AC (MWAC) of solar PV assets under the 800-MW Corporate Green Power Programme (CGPP).
Ong explained that, “The CGPP is an advantageous policy as it allows us to participate in project power plants, while our offtakers will be able to get Renewable Energy Certificate.
“Given that the CGPP is on a willing-buyer, willing-seller basis, we can negotiate for a better tariff rate and EPCC commercial terms.”
The CGPP initiative coupled with the lifting of RE export ban by the government in May appeals to local RE players with many eyeing the lucrative RE market in Singapore.
The attraction of selling local-generated RE to Singapore lies in the latter’s higher average regulated household electricity tariff, higher gross domestic product per capita income, and stronger currency which improves the return on investment.
In preparation for cross border selling with Singapore, Ong noted that Sunview is conducting technical studies and land preparation while waiting for the official guideline from the local government.
“We are currently in discussion with several potential offtakers in Singapore,” he added.
Meanwhile, Sunview is also establishing its market presence in Eastern Europe and Africa, which holds high potential for RE development, underpinned by their open-minded RE policies, and rising electricity consumption.
Currently, discussions are still ongoing and the group has yet to secure any agreements, said Ong.
“When we sell electricity to Eastern Europe, the deal is transacted in euros, which enables us to reap higher profits from the exchange rate difference.
“The tariff rates in that region can average around 10 euro cents to 12 euro cents (RM0.51 to RM0.61), which is significantly higher than that in Malaysia,” he noted.
Furthermore, there are also multiple electricity distribution companies in Europe.
“As such, the competition in the European market can lead to higher tariff rates, which present opportunities for us to gain favourable returns.
“Moreover, the electricity consumption in Africa is growing at a rapid rate of 8% annually compared with Malaysia’s 3% increase,” said Ong.
RHB Research in its recent report said the rise in polysilicon prices, the key material solar panels are made of, was the main bottleneck for the past two years. However, a recent price correction saw polysilicon prices dropping by 60% since the beginning of the year and 75% from the decade peak of US$39 (RM182.13) per kg in August 2022
Another key material in the solar industry is aluminium, used in solar panel frames and mounting structures.
In March 2022, aluminium prices hit a 13-year high of US$3,800 (RM17,746) a tonne on the London Metal Exchange, before easing to a low of US$2,100 (RM9,807) last September.
Against this volatile backdrop, Sunview took the proactive approach to acquire a 20% shareholding in Winstar Aluminium Manufacturing Sdn Bhd via a share sale agreement and shareholder agreement, for RM12mil in April.
“In the solar industry, the major equipment comprises solar panels, inverters, and mounting structures. These three components make up 70% to 80% of the cost in a project. While we address the currency fluctuations for panels and inverters by purchasing them in yuan, the integration of Winstar’s aluminium manufacturing expertise will allow us to produce our own mounting structures.
“The acquisition also enables us to gain more control over tender processes, deliveries, and raw material prices,” Ong saidGoing forward, Sunview intends to expand its horizon into the EPCC of biogas plants and other renewable energy facilities like battery energy storage systems.
