Gamuda big on renewable energy

Firm to invest RM2bil in sector over a five-year period

Petaling Jaya: Gamuda Bhd has earmarked RM2bil to invest in the Malaysian and international renewable energy (RE) space over a five-year period.

Group managing director Datuk Lin Yun Ling said the investments would entail several types of RE sources and “not so much on solar”.

Lin highlighted that Gamuda was looking at developing some hydro pump projects in Australia, describing file country as a “very important and key market” for Gamuda.

“For example, there is one (hydro pump project) that we are bidding in Tasmania.

“We are not particularly attracted to just being a solar farm contractor.

“Our goal is more about having sufficient sources of green energy to serve market demand which we think will be huge in the coming years.”

– Datuk Lin Yun Ling

“It (our goal) is more about having sufficient sources of green energy to serve market demand which we think will be huge in the coming years,” he said in a post-AGM briefing yesterday.

Lin told reporters that Gamuda was also in the midst of advance discussions related to other large-scale RE assets, which will be announced in the coming months.

A day earlier, Gamuda announced the proposed acquisition of a 30% stake in homegrown ERS Energy Sdn Bhd for RM200mil.

The acquisition of ERS Energy a leading solar engineering, procurement, construction and commissioning (EPCC) company; would help Gamuda grow its RE asset portfolio to over 800MW in the next few years.

ERS Energy is currently a joint-venture partner of Gamuda in NEDA Pekan Sdn Bhd to develop a 39MW (29.99 MWac) solar power plant under the New Enhanced Dispatch Arrangement (Neda) framework.

Gamuda Engineering Sdn Bhd managing director Justin Chin Jing Ho, who also spoke at the briefing, said the main reason for Gamuda’s entry into ERS Energy was not because of the latter’s EPCC capabilities.

“This is because it (EPCC) has a very low barrier to entry, installation of solar is not particularly complex and there are a lot of players in the market.

“Instead, one of the key values that we see in ERS Energy is that the company has secured the early quota to develop a power plant under the Neda framework.

“This framework will form the base for the recently announced corporate green power programme by the government.

“There was a 600MW quota announced not long ago and the tendering process is open now,” said Chin.

He also added that ERS Energy brings in an order book of RM1,4bil, which will contribute to Gamuda in the financial years of 2023 and 2024.

In the short term, Chin said the earnings contribution from ERS Energy will only be in “tens of millions (of ringgit)”.

“Part of the ERS Energy deal, which will be finalised shortly; will involve the acquisition of some recurring income assets and that would contribute to our bottom line in the short term.

Firm has no need to raise funds externally

“But some of the big RE investments mentioned earlier by Datuk (Lin) would take a longer development period.

“So, solar (projects) can finish in two years, but assets like hydro would take a five to six year development period.

“After the end of the five-year period, only then we can expect to see a significant, probably triple-digit contribution to the bottom line past the financial year 2027, depending on the timing of the implementation of these projects,” said Chin.

Elaborating further on the expected returns from the RE investments, Chin said the actual contributions will only be seen in the medium to long term.

Fiis is because some of the existing projects are related to EPCC works, but that is not our main target.

“Later on as we build our portfolio of RE assets, that will contribute to a recurring income for us,” he said.

When asked how Gamuda expects to finance its RM2bil RE investment agenda, Lin said the group would not need to raise funds externally.

“We have almost zero gearing and given our asset base, we can actually borrow up to RM7bil to RM8bil in the coming years without going near the gearing limit of 70% of our net assets,” he said.

As Gamuda steps up its effort towards creating clean energy Lin called for a roadmap to decarbonise the nation’s electricity generation.

“With less than 10 years to 2030, we need to accelerate tangible actions towards electricity decarbonisation.

“We must install at least 8GW of renewable energy primarily solar, between now and 2030.

“We still have a long way to go before we reach our target, as, to date, we have only implemented 1.5GW of solar photovoltaic capacity;” he said.

Lin argued that there was a supply-demand imbalance currently in Malaysia.

Nevertheless, he believes that the country will see a huge demand for RE once the vicious cycle is broken.

“With the new government of the day and many new faces, I hope this is a new beginning for the country.

“It is for the government to come up with new ideas, policies and even more effective approaches to ensure the nation’s decarbonisation actions meet the net-zero objective,” he said.