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Gamuda's RM2bil RE push to make big mark in Malaysia and beyond

KUALA LUMPUR: Gamuda Bhd has earmarked RM2 billion investments in the renewable energy (RE) space in Malaysia and beyond that will be spread across the next five financial years.

Gamuda's top executives said it did not need to raise funds externally for the RM2 billion.

With almost zero gearing and large assets base, it can borrow up to RM8 billion.

"We have almost zero gearing and given our assets base, we can borrow up to RM7 billion-RM8 billion, and a gearing limit of 70 per cent of our net assets," group managing director Datuk Lin Yun Ling said.

Gamuda Engineering managing director Justin Chin said the company viewed the shift towards RE and green electricity as "strong and sustained" in the years to come.

"Our RE plans also reach beyond the Malaysian border. Australia is a very important and key market for Gamuda. As such, we are looking to develop some hydro pump projects in the Australian market in the coming years for example we are bidding in Tasmania.

"We are not particularly attracted to just be a solar farm contractor. We are also in advanced discussion on other large scale RE assets. In the coming months, there will be further moves (for the group) in this direction," Chin said.

Lin and Chin spoke at a virtual press conference after Gamuda's 46th annual general meeting today.

On Wednesday, Gamuda announced plans to acquire a 30 per cent stake in ERS Energy Sdn Bhd for RM200 million, which would be done via the subscription of shares in the latter.

Commenting on the plan, Lin said ERS could potentially be a central player in the green energy sector especially as it was a joint venture partner with Gamuda in Neda Pekan Sdn Bhd to develop a 39 megawatt (MW) solar power plant under the New Enhanced Dispatch Arrangement (Neda) framework.

However, he said Gamuda was not particularly attracted to "just doing solar farms" as a contractor.

"It is more about having sufficient sources of green energy to serve market demand which we think will be huge in the coming years. Currently in Malaysia it seems to me that we are stuck in a chicken and egg situation where the lack of supply causes demand to be stifled.

"Once that vicious cycle is broken, I think we will see a huge surge," Lin said.

Chin said the company was not investing in ERS for its engineering, procurement, construction and commissioning. Instead, it was focused on the fact that ERS had 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. This would be our first key step in what we call liberalisation of the energy market as it would allow more injection of renewables into the grid.

"This would allow for generally a higher uptake of renewables and other associated transitions that go with it. That is the primary angle for our acquisition in ERS," he said. 

On the contribution from the RE sector, Chin said earnings would only reflect in the medium to short term, mainly after Gamuda had built a portfolio of RE assets.

"The earnings contribution will only be tens of millions because part of the ERS deal will only be reflected later. On other investments, some of these developments of RE assets are in the longer scale such as hydro which would take five to six years of development period.

"We can only see a triple digit contribution to the bottomline past financial year 2027," he added.

On the Mass Rapid Transit 3 project, Chin said the government had loosely indicated that the project would proceed.

He noted the company was closely tracking the development of the project.

"We believe we are in a decently good position to secure some work if the project proceeds," he added.

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