Wah Seong Corporation Berhad Annual Report 2019

26 WAH SEONG CORPORATION BERHAD RENEWABLE ENERGY (“RE”) Discussion of strategies, operational capabilities to achieve the desired business objectives and results Despite a slow start at the beginning of 2019, the RE Group recorded solid earnings for both its agro-based business as well as its process packages business. For the agro-based business, the market began to pick up towards the second half of the year, with an improving market outlook. During the year, the Group supplied one of its largest capacity turbines for a 10MW power plant in Indonesia and also secured a contract to supply a 7MW power plant for a project in Africa to one of the largest palm oil players in the country. In 2019, RE established two new workshops and service centers in Indonesia located in Medan and Banjarbaru. The facilities are expected to allow for shorter delivery lead time to the biggest RE key market, Indonesia. The Joint Venture PMT Shinko Turbine manufactured close to 200 units of up to 2.0MW turbine in 2019. The Joint Venture has a strong pipeline of orders due to its competitive edge in terms of cost and delivery lead time. MANAGEMENT DISCUSSION AND ANALYSIS Nonetheless, the Group remains bullish on the long term outlook of the business. The demand for energy will grow significantly, driven by the developing world economies. The world GDP is expected to more than double in 2040, driven by China, India and other parts of Asia and this will drive the demand for oil and gas. The Group also believes that the switch to cleaner energy for electricity generation will see the growth of demand for natural gas. The Middle East is a key source of energy, especially with an expansion of gas production in Qatar, and the Group believes that it is positioned strategically in that market to capture opportunities. Last year, the market was robust with bidding and tendering activities. However, the results of the bids and tenders have experienced a delay, which would inevitably affect project execution. Nonetheless, the Group remains positive that few key awards would be made this year that would contribute positively to the segment post 2020. Amidst another challenging year in 2020, WASCO will continue to focus on cost and innovation to improve its product and service offerings while pushing for operational excellence. WASCO also looks at strengthening its balance sheet further by carrying out rationalisation initiatives, which would include the disposal of non-core assets. The Joint Venture PMT Saito also progressed very well during the year with increased sales related to spare parts manufacturing, in line with the Group’s vision of growing its recurring income stream to cushion the fluctuation of project-based earnings. The JV is also expected to introduce a new higher capacity decanter model to the market that would be launched in 2020, as part of its new product offering to this region. Earlier this year, the Group also successfully delivered LPG Bullet Mounted Tank P29 INA to Petronas Chemicals, and had a successful year for its process equipment business delivering various packages to EPCC clients from its Waterfront Teluk Panglima Garang fabrication facility. The expansion of this fabrication facility in 2019 with the addition of 10,000m 2 area has enabled RE to grow its process packages business. During the year, the Group recorded a 60% growth in its orders for process packages coming from the export market. During the year, the Group secured orders to supply process equipment packages from Honeywell UOP for the Calcasieu Pass LNG Export Project; and JGC Fluor for the LNG Canada Project.