FILE PHOTO: The Nasdaq Market site is seen in New York City, U.S., March 26, 2024. REUTERS/Brendan McDermid/File Photo
KUCHING: Reservoir Link Energy Bhd
’s (RLEB) 51%-owned subsidiary Founder Group Ltd (FGL), which is targeting a listing on the Nasdaq Stock Exchange soon, says the issue price of shares under its initial public offering (IPO) will be at least US$4 each.
Based on the assumed IPO price of US$4 per issue share, the floating exercise is expected to raise up to US$21.16mil under the maximum scenario and US$4.6mil under the minimum scenario, said chairman Datuk Tai Hee.
FGL is an investment holding company while its key subsidiary, Founder Energy Sdn Bhd (FESB), is involved in the solar industry in Malaysia.
FESB, a pure-play, end-to-end engineering, procurement, construction and commissioning solutions provider for solar photovoltaic (PV) facilities, focuses on large-scale solar projects and commercial and industrial solar projects.
RLEB, which diversified into solar renewable energy business via the acquisition of 51% stake in FESB for about RM21.2mil in 2021, has completed a total of 1,513MW in solar projects.
Tai said FGL is awaiting the approval of the US Securities and Exchange Commission for the draft prospectus it filed in February 2024, while the approval from Nasdaq on its proposed listing is also pending.
Subject to all relevant approvals obtained, FGL is expected to be listed in the current quarter (3Q24).
“As a result of the IPO, RLEB’s effective equity interest in FGL will be potentially diluted to 41.33% under the minimum scenario and 32.20% under the maximum scenario.
“Pursuant to the letter of assignment, FGL will be assigned between 20.34% to 26.11% of the voting rights and shall remain as a subsidiary of RLEB upon completion of the proposed IPO,” he added in a circular to shareholders.
The circular is to seek shareholders’ approval on the proposed listing of FGL on the Nasdaq and proposed extension of the profit guarantee period from Aug 31, 2023 to Dec 31, 2023 in relation to the company’s acquisition of 51% equity interest in FESB at the forthcoming shareholders’ meeting on July 24.
In the acquisition of FESB from Lee Seng Chi, the vendor has provided a net profit guarantee (PG) of RM13.836mil for a 24-month period up to Aug 31, 2023.
The vendor had on July 13, 2023 requested RLEB to consider the proposed PG extension period due to unforeseen delays in project implementation because of the Covid-19 pandemic, which had resulted in delayed recognition in revenue.
“The proposed PG extension is considered a reasonable extension given the effects of the Covid-19 outbreak in Malaysia, during which there were implementation of movement controls by the government, causing delays in award and commencement of projects by customers due to prolonged time spent to obtain necessary approval and prerequisite to commence works,” said Tai, adding that the vendor had, however, met the PG based on the audited after-tax profit of FESB as at Oct 31, 2023.
He said the proposed listing of FGL would enable the RLEB group to unlock the value of its investment in FESB and provide a transparent valuation benchmark for its investment.
“In addition, it will promote a clearer segregation of business responsibilities and operations for our group’s solar PV business, allowing our company’s management to efficiently allocate our resources to accelerate the expansion and growth of the business.
“Separately, the listing status of FGL will enable it to leverage on the Nasdaq brand to enhance its reputation for our group’s solar PV business, thereby improving our visibility which allows it to achieve greater market penetration and gain a broader client base.”
Tai said by listing on the Nasdaq, FGL will have the financial flexibility to raise future funding requirements through the equity capital market independently from RLEB, reinforce its equity position and raise substantial cash to fund its future investment opportunities and growth.
On the proceeds from the IPO on Nasdaq, Tai said these would be utilised to fund the group’s geographical expansion (30%), expansion of renewable energy (RE) potential (30%) and for general working capital requirements (30%).
The balance 10% of the money raised would be to pay for mergers and acquisition costs.
He said FGL planned to expand to Singapore, the Philippines and Indonesia to undertake future solar PV projects.
On expansion of RE potential, he said FGL is still exploring viable RE investment options and opportunities, which may include the provision and implementation of hydro/biogas projects.
On the prospects of the PV industry in Malaysia, Tai said the Sustainable Energy Development Authority (Seda) Malaysia expects the country’s net energy metering (NEM) programme to contribute 1,287MW to RE generation by 2025.
NEM 3.0, which went into effect on Feb 1, 2021, comprises three categories: NEM rakyat programme (100MW), NEM GoMEn programme (government ministries and entities – 100MW) and Nova programme (net offset virtual aggregation – (600MW).
According to Seda, to date, a total of 10,530 projects for all three categories expected to generate 492.17MW of RE have been approved.
Of this, 7,610 projects are already operational and generating 193.43MW of green energy. The lion’s share of 51% goes to the industrial sector, followed by the commercial, domestic and agriculture sectors.
With the Covid-19 pandemic now under control, Seda expects things to pick up, with more projects to be approved for implementation under its NEM 3.0, according to Tai.
