Malaysia: Renewables turning favourable

Malaysia: Renewables turning favourable

Green businesses used to be looked upon as the province of idealists - you
couldn't make money with good intentions. But the tide seems to have turned,
the founders of bio-gas company, Green Lagoon Technology, tells JOY LEE.

THE idea of sustainability and green businesses has garnered quite a bit of
attention of late. But it wasn't too long ago that such businesses weren't
taken seriously.

Raymond Cheah and Chan Sow Keong, who founded bio-gas company Green Lagoon
Technology (GLT) in 2010, remember having to work hard to prove themselves
in the green energy industry and instil customer confidence in their
business model.

Back then, not many people were ready to take a bet on the green energy
industry.

But Cheah notes that the industry's hesitance was also due in part to how
the renewable energy sector was evolving in those days.

In its early days, GLT mainly dealt with carbon credit projects under the
Clean Development Mechanism (CDM) scheme. However, the CDM market started
faltering around 2012, and the company was forced to shift its focus to a
different segment to stay in business.

At around the same time, the Feed-in-Tariff (FiT) model started gaining
ground in Malaysia where approved producers of renewable energy were allowed
to sell electricity generated from renewable resources through the power
grid. This enabled GLT to move into FiT power generation projects.

Although this presented the company with a potentially big business, it had
to contend with the scepticism of bio-gas providers.

"We deal with palm oil mill owners. The collapse of the CDM market gave mill
owners the impression that this would also fail. It was a new industry. The
FiT programme needed time to mature and there was no success story at the
time," recalls Chan.

GLT currently provides build-own-operate-transfer projects and turnkey
solutions for palm oil millers to manage the bio-gas emitted from palm oil
mill effluents. The company specialises in bio-gas trapping, harvesting,
storage, treatment and utilisation.

"A lot of palm oil millers, in a way, got burnt. That was a barrier. It was
a challenge to get them to see that times had changed although we were still
dealing with biogas. Only now, we were going into power generation," adds
Cheah.

Cheah and Chan were certain that this was the way of the future, and GLT
embarked on its FiT projects in 2013, braving critics and doubters.

A typical project starts off with them carrying out feasibility studies once
palm oil millers agree to participate. GLT would also need to enquire if the
area could be connected to the power grid. Once these have been established,
the company engages Tenaga Nasional Bhd (TNB) to carry out a power systems
study, and then it applies for the FiT quota from the sustainable Energy
Development Authority (Seda).

Next, you have to obtain the money, explains Cheah.

Funding proved to be another big stumbling block for GLT. It was a catch-22
situation.

"We needed money to be successful but we couldn't get money without being
successful," says Cheah.

They knocked on many doors, including banks and venture capitals, but failed
to secure the funding needed to get their projects off the ground. Potential
financiers were generally unfamiliar with the renewable energy industry and
would set unfavourable terms to cover the perceived risks.

"I guess you could say the green industry was still quite green," laughs
Chan. But it was no laughing matter at the time, he acknowledges.

Out of options, Chan went back to his former employer, an established
renewable energy firm, and managed to get them to come in as project
partners. Once the initial projects kicked off, every bit of profit was
reinvested back into the company to continue growing GLT.

Cheah remembers that the period required lots of personal sacrifices and
quite a few instances of "shouting at people in the middle of the night".

Fortunately, the industry - well supported by policies - began to see steady
growth. Additionally, businesses such as palm oil millers were becoming more
environmentally-conscious and began to view the FiT programmes as an
opportunity to invest in bio-gas.

"Palm oil millers are not necessarily early adopters. They wait and see,"
remarks Cheah.

"Thankfully, we have been involved in some of the more successful projects,
so we've become a role model and people see that these projects have become
successful. Now, more people are considering this. I think over the next two
years, there will be more millers who will participate in this kind of
projects," says Cheah.

These days, millers are looking to them to turn their waste into gold. Palm
oil mills supply GLT with palm oil mill effuents in exchange for royalty fee
of between 10% and 13% from the sale of electricity generated and sold to
TNB or other millers.

Chan and Cheah's company has grown with the industry. GLT expects to record
net profit of RM2.6mil on the back of RM29.6mil in revenue this year. Net
profit is expected to more than double to RM5.9mil and revenue is expected
to grow 22% to RM36.1mil in 2017.

Earlier this year, GLT raised more funds via equity crowdfunding platform,
Crowdplus Asia, to fund ongoing and future projects. The company raised some
RM800,000, double the amount of its initial target, which is equivalent to
about 6.52% stake.

The tide has certainly turned and this proved a positive validation from
investors, Cheah enthuses.

While the industry has also attracted more players, Chan says GLT has the
advantage of being one of the forerunners with a good track record. In any
case, there is room for more players.

Chan notes that only about 2% of power generated in Malaysia is renewable
energy. The company is looking at using other feedstock apart from POME and
may venture downstream.

Chan is also hopeful of an initial public offering exercise in 2018. The
road ahead is still long with plenty of opportunities. And for GLT, there is
only upside from here on.

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Link to Original Article:
http://www.thestar.com.my/metro/smebiz/focus/2016/12/19/renewables-turning-f
avourable/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com