Collaboration is the name of the game in the solar industry to leverage on RM1.3t investment

by AUFA MARDHIAH

IN FULFILLING Malaysia’s grandiose plan of achieving net-zero carbon by 2050, government-linked companies (GLCs) are urged to collaborate with the ubiquitous small and medium enterprises (SMEs) of the green economy to unlock new growth areas.

The exponential growth and capital-intensive nature of the green economy offer ample headroom for the GLCs and SMEs to complement each other in improving the country’s climate resilience and bringing prosperity to Malaysian households and businesses.

Gading Kencana Sdn Bhd MD Datuk Muhamad Guntor Mansor Tobeng said despite market fears that the GLCs could crowd out the SMEs in the green industries, their distinct inherent strengths would benefit the country instead.

“I think it is healthy for the GLCs to come in and participate in the industry, as we have different strengths. We, the SMEs do guerilla warfare (where) we can make decisions on the spot, split (second) decisions, while the GLCs would need to go through a whole process, one committee after another.

“As for the GLCs, they have funds, in excess…The best thing for them to do is to work together with the SMEs…So that we can make the urgent core decision that has to be made (immediately),” he said.

Muhamad Guntor added that in the photovoltaic (PV) solar industry, the SMEs are not fighting with bigger players as they have their output allocations and competing against their own capabilities.

“We are fighting with ourselves, what we can (afford to) do. Some people want to build (for) 100 megawatts (MW)… I also want to do 100MW… But it is too big for me — I can raise the money to make it work but why should I take such a big risk?

“I would take a manageable risk…I can build 30MW (but) you (GLCs), you have money (so) you go and play your game,” he said to The Malaysian Reserve (TMR) in an exclusive interview at Gading Kencana’s headquarters at Shah Alam, recently.

Malaysia’s ambitious goal to achieve net-zero carbon by 2050 required an investment amount between RM1.2 trillion to RM1.3 trillion within a 26-year timeframe.

The industrial transition from a fossil-fuel-based economy into a sustainable, green economy is expected to uplift the industry’s annual GDP value from RM25 billion in 2023 to RM220 billion and generate approximately 310,000 jobs by 2050.

One of the key industries within the green economy is the PV solar industry, pioneered by SMEs over two decades ago, which is poised for further exponential growth with the National Energy Transition Roadmap (NETR) target to increase the share of renewables in the national energy mix to 40% by 2035.

Founded by Muhamad Guntor and his wife, Hasnah Awang, in 1998, Gading Kencana is recognised as one of the most prominent players in the local PV solar industry.

It holds assets valued at ]RM500 million, which Muhamad Guntor aims to reach RM1 billion in the next three years, and currently operating four solar farms — one in Melaka and three in Perak.

Gading Kencana is involved across all five key categories of PV solar, which are solar panel development; engineering, procurement, construction and commissioning (EPCC); installation; vendor services; and testing.

While solar farms provide a steady income, Muhamad Guntor highlighted that profit margins are constrained by the business models set during the bidding process. To enhance revenue, Gading Kencana actively competes for EPCC contracts including for external clients.

Its six-year-old Bidor solar farm, connected under LSS1, shows minimal degradation, thanks to high-quality components sourced from Switzerland, helping to maintain optimal production efficiency.

 

Increasing Bumiputera Participation

According to Muhamad Guntor, since the industry’s inception, Bumiputera participation has largely been overlooked, with no clear agenda to support Bumiputera’s growth.

He therefore praised the recent introduction of distinct Bumiputera categories in the LargeScale Solar Programme (LSS) or LSS-Peralihan Tenaga Suria (LSS PETRA) bidding this year, spearheaded by the Minister of Energy Transition and Water Transformation Datuk Seri Fadhillah Yusof, which has been attributed to more opportunities for Bumiputera players.

Four separate categories were created, including packages specifically designed to catalyse Bumiputera involvement.

Package 1 is for rooftop or ground-mounted solar projects with a quota of 250MW and a generation capacity between 1MW and 10MW. This package is exclusively for companies or consortia with 100% Bumiputera equity, a rating from the Ministry of Finance and SME Corp Malaysia registration.

Package 2 targets similar projects but with a larger capacity range of 10MW to 30MW, requiring at least 51% Bumiputera equity and 100% local Malaysian equity.

Package 3, designed for larger rooftop or ground-mounted projects, has a quota of 1,000MW and permits capacities from 30MW to 500MW. It requires a minimum of 51% local Malaysian equity.

Package 4 focuses on floating solar projects with a 500MW quota and a generation capacity of 10 MW to 500 MW, with similar criteria as Package 3.

Muhamad Guntor however emphasises that these initiatives should always be focused on Bumiputera companies with proven track records.

“It’s not about giving opportunities solely based on being Bumiputera, as that can lead to mismanagement or misuse of projects. Instead, the government should focus on nurturing Bumiputera companies that have demonstrated their ability to deliver projects and contracts successfully,” he explained.

He believes that by doing so, these companies will earn the respect of other players, who will recognise that Bumiputera businesses are capable of producing high-quality results.

He added that banks were hesitant to provide loans to Bumiputera entrepreneurs in the past, limiting the roles of Bumiputera companies to main installers while larger firms benefited from substantial financial backing.

He, however, noted a significant shift in the industry currently, with non-Bumiputera companies reaching out for partnerships under the new packages.

Foreign Investment a Strategic Boost for Solar Energy

The involvement of foreign companies in the local solar industry, in his view, is a positive and strategic move, especially considering the scale of the investments required.

With the huge capital outlay needed, local companies alone may not be able to raise the capital to fund these projects.

Nonetheless, the updated policy ensures that foreign ownership in power plants is capped at 49%, which he believes is essential to ensure energy security while promoting foreign investments.

“With this policy in place, we can manage around RM700 billion of the total RM1.3 trillion.”

Talent Challenges

One of the most significant challenges faced by Gading Kencana was the lack of technical know-how.

The company had to bring in experts from Germany and Singapore to train its staff, investing heavily in knowledge transfer to build internal capabilities rather than outsourcing the work.

Convincing local engineers to embrace renewable energy (RE), especially solar, was another challenge, added Muhamad Guntor. The engineers generally preferred stable government contracting jobs over the uncertain future of the solar industry.

However, Gading Kencana remained committed to RE, collaborating with top-tier technology providers, including SMA Solar Technology AG and Robert Bosch GmbHfrom Germany, to build their expertise.

Today, Gading Kencana owns a dedicated workforce of 90 staff members including 30 skilled engineers.

Driving Growth Through Solar Innovation

Sharing the company’s plans, Muhamad Guntor said Gading Kencana is set to focus on organic growth as it aims to expand its business operations. The company’s income is driven by two key streams — recurring revenue

from its solar farms, which are expected to generate income for the next 21 years, and additional revenue from EPCC contracts.

These developments align with the company’s long-term plans, including listing on Bursa Malaysia. “We are on the right track,” he remarked.

In preparation for the listing, the company has already made significant progress, engaged a well-known audit firm and adjusted its accounting standards to meet the requirements of the ACE Market.

The company is also working with investment bankers to explore bond issuance and green sukuk to raise funds for future projects.

According to Mohamad Guntor, a listing would also offer employees and the public a share of the company’s success. He is particularly keen on rewarding longserving staff, some of whom have been with the company for over a decade.

As Malaysia’s RE sector continues to grow along with NETR, the company is positioning itself to remain competitive. With LSS projects now requiring investments of up to RM400 million for 100MW farms, Muhamad Guntor views public listing as a strategic move to finance future growth and capitalise on the evolving energy landscape.

Solar Energy Initiatives for Community and B40 Group

Being at the forefront of solar energy projects, Gading Kencana has a particular focus on community engagement and supporting the B40 group.

Initially, the company leveraged the feed-in tariff mechanism, where Tenaga Nasional Bhd purchased solar energy at a premium rate. However, as the scheme is no longer available, the company has shifted its focus to programmes that directly benefit local communities.

The company has launched several initiatives and one such project involved the installation of solar panels on 12 mosques in Johor, where donors contributed funds to equip the mosques with the panels.

Another key initiative, SuriaKu, was developed in partnership with the Northern Corridor Economic Region to assist B40 households.

In addition, Muhamad Guntor said that the company is also exploring alternative models to further expand solar energy accessibility. One approach under consideration is a “rent-to-own” programme, noting, “that is something doable, and we are looking at that mechanism now.”

The programme, announced by Economy Minister Rafizi Ramli, allows Malaysians to lease their rooftops for solar panel installations without any upfront costs.

It helps lower electricity bills and provides extra income, as companies cover the installation costs and sell the generated energy to the national grid.

The initiative is part of Malaysia’s plan to boost RE use through NETR, making solar energy more affordable for households nationwide.

Looking ahead, Muhamad Guntor said the company plans to shift its attention to exploring business programmes such as renting rooftops to install solar panels and selling the resulting carbon credits to industries.

“I believe this is one of the most sustainable projects we can offer the community. Unlike other initiatives that end once the ribbon-cutting ceremony is over, solar projects require long-term maintenance to ensure they last up to 21 years,” he said.

By integrating both LSS projects and rooftop programmes, Gading Kencana remains committed to sharing the financial benefits of solar energy with households, contributing to the country’s energy transition efforts and ensuring that the community reaps the rewards of RE initiatives.

Local and International Project Development

Gading Kencana plays a key role as the developer of the Sandtown Solar 30MW project, an important part of Malaysia’s RE efforts. The project operates under the New Enhanced Dispatch Arrangement, a system where electricity prices change based on supply and demand.

What makes the project unique is its use of a 4.5MW battery energy storage system, which helps balance the power supply and keep the grid stable, especially during periods of fluctuating demand. The RM6 million investment in the battery system is the first of its kind on such a large scale in Malaysia. The project is 90% complete, with commercial operations expected to start on Dec 22, 2024.

The project also aligns with the government’s Corporate RE Supply Scheme, which enables solar farms to sell energy directly to businesses.

On the international front, Gading Kencana is approaching its US$1 billion (RM4.31 billion) partnership with Saudi Arabia’s March Global with a focus on securing financially viable international projects.

Drawing on lessons from past ventures, the company is meticulously reviewing power purchase agreements to avoid pitfalls like those experienced in Vietnam, where curtailment clauses led to financial challenges when the government halted energy purchases.

As Gading Kencana expands into the Middle East and North Africa (MENA) region, particularly Saudi Arabia, it is carefully evaluating project sizes and regulatory requirements.

“The Saudi Arabia project is still in development. We are in the process of identifying additional land, but we may need to scale down, similar to our current approach. Previously, March Global aimed for a larger project with a capacity of 300 megawatts,” Muhamad Guntor told TMR.

While March Global initially aimed for a 300MW project, Saudi regulations mandate local ownership for projects under 100MW. Concurrently, it aligns with Gading Kencana’s strategy of pursuing manageable projects, which the company views as an advantage, allowing for better control and execution.

Nevertheless, the company’s passion for RE drives its commitment to completing projects successfully, even if it means accepting lower profit margins to maintain timelines and uphold the company’s reputation for integrity.

Muhamad Guntor further noted that the approach is crucial as the company expands into new regions like ASEAN and North Africa while maintaining a solid track record in the RE sector.

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