KUALA LUMPUR: Mestron Holdings Bhd's (MHB) subsidiary, Liziz Biogas Sdn Bhd (LBSB), received approval from the Sustainable Energy Development Authority (SEDA) on the feed-in tariff (FiT) rate for its biogas plant at Gua Musang.
In a Bursa Malaysia filing today, the company said the rate has been set competitively at 39.75 sen/kW and will commence on July 26, 2023, for 21 years.
This approval marks an important milestone following MHB's strategic move into the renewable energy sector in 2021.
Managing director Por Teong Eng said MHB's renewable energy segment has taken another leap forward with the effective date of the FiT.
"We anticipate this change to contribute an additional RM2 million to RM3 million annually to the company's bottom line for the next 21 years.
"Diversifying from our core manufacturing business allows us to generate additional income, solidifying our position in the market," he said in a statement.
To put it into perspective, MHB's net profit in FY22 stood at around RM10 million and with the FiT rate of 39.75 sen/kW, the biogas renewable energy business segment is poised to contribute approximately 20 to 30 per cent of the company's total income.
According to the letter received by LBSB, SEDA endorsed the rate, recognising that the company has met the criteria for the FiT rate.
The biogas renewable energy segment has huge potential for growth for MHB.
Over the next two to three years, the company aims to expand its plant capacity from the current 2.4MW to 3.2MW.
The FiT rate will translate into net earnings of around RM3 million annually, suggesting a strong double-digit growth over the next few years.
Por said MHB is in a strong position to ride on the growth momentum in its manufacturing business, led by the rising demand for its specialty poles, mainly in the telecommunications sector.
He said the renewable energy business allows MHB to generate another consistent stream of recurring income.
"The FiT rate is timely and justifies our investment in the biogas renewable energy segment. This expansion offers a lucrative prospect for MHB, especially in a market increasingly leaning towards sustainable investment.
We believe we will have the advantage of being one of the first movers in the market," Por said.
Aside from that, the LBSB biogas plant is also strategically located next to a palm oil mill, which allows the plant to benefit from a consistent supply of raw materials and palm oil mill effluent (POME).
This will streamline waste collection from smaller mills, ensuring a steady flow of materials, especially during millers' low seasons.
Further, this will also provide a competitive advantage to MHB in terms of its capability to expand its capacity.