RENEUCO Bhd’s subsidiary plans to dish out RM90 million in a deal that will see it control a feed-in approval holder (FiAH) for the development of three small hydro plants located in Kota Marudu, Sabah.

In an exchange filing today, Reneuco’s wholly owned subsidiary, Reneuco RE Sdn Bhd, formerly known as KPower RE Sdn Bhd, will wholly acquire Adat Sanjung Sdn Bhd for RM20 million cash and 318.2 million new shares in Reneuco.

The proposed acquisition entails the indirect acquisition of 70% equity interest in One River Power Sdn Bhd, the FiAH for the hydro projects.

In September 2014, One River Power had signed three exclusive renewable energy (RE) power purchase agreements (PPAs) with Sabah Electricity Sdn Bhd for the hydro project involving the development, design, financing, construction, installation, testing, operation, management and maintenance of three small hydro power plants with a total combined power generation of 29.1 megawatt (MW).

The proposed acquisition is deemed a related party transaction in view of the interests of Reneuco executive chairman Datuk Mustakim Mat Nun who holds a 7.09% direct equity interest in Reneuco and Reneuco group CEO Amirul Afif Abd Aziz. Both have links to OHP Ventures Sdn Bhd which signed the conditional share sale agreement with Reneuco RE.

Reneuco is mainly involved in the sustainable energy and utilities business involving construction-related activities in the RE industry. Other than the construction-related activities business segment, the company operates in other business segments including logistics, healthcare, property development and property investment.

It said the proposed acquisition is an opportunity to expand its business and related activities of RE in terms of geographical expansion in East Malaysia and asset ownership under the RE spectrum.

It will also enable the company to build on its own capabilities in the RE spectrum, resulting in the group’s asset ownership under the RE spectrum to increase to approximately 120MW, thus strengthening the group’s concession-based recurring income for a long-term sustainability, on top of its engineering, procurement, construction and commissioning contracts.

One River Power had been granted with a feed-in approval dated May 15, 2014, for each of the RE PPAs by Sustainable Energy Development Authority (SEDA).

As a FiAH, One River Power is regulated by the Renewable Energy Act 2011.

SEDA is a statutory body whose key role is to administer and manage the implementation of the feed-in tariff mechanism which is mandated under the Renewable Energy Act 2011. The RE PPAs are valid from their respective effective dates and cover a period of 21 years from their respective commercial operation dates.

As at the time of announcement, Hydro Plant 2 has commenced its commercial operations, whereas Hydro Plants 1 and 3 are still in the construction phase, according to the exchange filing. — TMR / pic source: reneuco.com