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Saturday, 19 January 2019

Sunseap – Singapore's rising sun

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  • Sunseap – Singapore's rising sun

The solar industry is witnessing tremendous growth as climate change pushes governments to promote renewable energy sources, and Singapore-based Sunseap is making a name for itself. It has become one of the region’s leading solar energy providers. By Minerva Lau.

Solar energy remains the most promising source of renewable energy in Singapore and the adoption of solar photovoltaic (PV) systems in the city state has accelerated in the last three years. Grid-connected installed capacity of solar PV systems sharply increased from 25.5 MWac in 2014 to 46.0 MWac in 2015, and subsequently to 99.9 MWac by the end of Q1 2017, according to Singapore’s Energy Market Authority (EMA).

The majority of solar PV capacity was accounted for by non-residential private sector installations, with 45.9% of total installed capacity or 45.9 MWac, and town councils and grass-roots units with 44.7% or 44.7 MWac.

The government has been promoting the use of solar energy, and with the limited availability of land, it is leading the initiative through tenders for rooftop solar panel installations. The previously little-known manufacturer has now become the country’s biggest renewable energy provider.

Background

Sunseap’s roots can be traced back to 1979, long before many countries in Asia officially recognised climate change. It was founded by its two directors, who are friends – Lawrence Wu, an investment banker, and Frank Phuan, whose family business was as a contract manufacturer for solar panels.

The manufacturing business continued, exporting primarily to Europe, where there was a vibrant renewables market fuelled by feed-in tariff programmes. In the 1990s and 2000s, Chinese manufacturers joined the market and became significant competition, which changed the manufacturing landscape for the solar industry.

“The reduction in solar capital expenditures, coupled with increasing electricity tariffs, prompted myself and Frank to develop our current downstream business models to provide solar as a service,” Lawrence Wu told PFI.

“We realised the conundrum potential clients face with owning a solar system. As much as they want to adopt clean energy, the cost of owning and operating a solar system can set them back financially. This realisation prompted the idea of us as a technology developer and service provider to take on the funding and operation for our clients as technical experts in a build-own-operate model, and pass on the benefits of using the solar energy generated as a service instead,” he added.

Their clients were thus able to offset their carbon footprint, utilise solar energy at a competitive price and at the same time, reduce their electricity bills. The company had also developed a business model in offsite clean energy supply and started going overseas.

The company had been “pretty Singapore-centric” during the 2014–15 period but it started spreading its wings outside of the country in 2016. It has set up offices in Malaysia, Thailand, India, Australia and Cambodia, and will soon in the Philippines and Indonesia.

In an interview with Singapore’s The Straits Times in 2016, Frank Phuan, the other founder, said that the company had been pretty Singapore-centric during the last two years.

“The last couple of years, we’ve been pretty Singapore-centric, building up solar energy as a common alternative energy Singapore can have. But this year, we spread our wings outside of Singapore,” said Phuan.

Spreading the wings

The journey leading to where Sunseap is now has not been without obstacles. Being based in Singapore, the company faced land issues that put a limit to how much more it could install solar systems, and thus limited its growth.

“In order to extend our reach, we have to look beyond Singapore. We are targeting to develop an additional 500MWp of solar projects on the international scale, spanning areas including Thailand, the Philippines and Vietnam over the next two to three years, with a long-term target of 1 GigaWatt-peak for our total production capacity,” Wu said.

Phuan made a similar remark in the earlier interview. “All this happened only after we reached the inflection point of achieving grid parity projects in Singapore, and we’re eager to showcase that elsewhere. Then we’ll be truly living up to our name – not many people know that Sunseap stands for South-East Asia Pacific,” Phuan said. Now, Sunseap, already Singapore’s biggest renewable energy provider, has offices in Malaysia, Thailand, the Philippines, Vietnam, Cambodia, India and China.

It sets up its presence in other countries through joint ventures. In early 2016, via its subsidiary Sunseap International in a joint venture in India, the company won a 140MW tender in Rajasthan. The award was part of a 420MWp solar farm development in Bhadla Solar Park. It has a 25-year power purchase agreement with state-owned National Thermal Power Corporation (NTPC).

It had a pilot phase in Thailand that is 50MW–100MW in capacity and recently, Banpu, Thailand’s biggest coal miner, invested S$75m (US$55.6m) in the Singapore-based PV group. It plans to use the funds to develop PV projects throughout Asia. The two companies plan to leverage on each other’s networks and domain expertise to grow in the alternative energy market in Asia, Sunseap said.

Bangkok-listed Banpu has moved beyond its core business into downstream PV project development this year. It has set up a subsidiary called Banpu Infinergy to focus on solar-related services and plans to build 300MW of solar capacity in the next five years.

“The joint venture structure we take for our overseas projects allow us to aggregate a bigger portfolio of solar projects, and we are able to offer the clients solar as a service, the same way we do for our projects in Singapore. One area we are focusing on is the rural areas in developing countries, where the lack of infrastructure is holding these areas back from urban development,” said Wu.

The rural areas can greatly benefit from solar systems, which take shorter periods of time to put in place, compared with a number of years for traditional power plants.

Wu added that the company is currently developing rural hybrid solutions that pairs solar, an intermittent source, with energy storage and existing conventional supply of electricity to ensure a stable supply of power to these areas.

A major investment was made in Cambodia this year. Sunseap, through its subsidiary Sunseap Asset, has successfully raised a US$9.2m project finance facility for its 10MW plant in Cambodia, the country’s first large-scale solar project. It received support from the Asian Development Bank, which provided US$3.25m, Canadian Climate Fund with US$3.25m and US$2.7m from Bred Bank of France. The Cambodia project further propelled it to explore other markets.

Most recently, Sunseap has signed a memorandum of understanding (MoU) with Linyang Energy. They plan to install up to 100MW of rooftop and floating solar PV systems by the end of 2018, and 500MW by 2020. The two companies intend to invest a total of US$500m in the partnership.

Funding

Seeking funds for its projects was tough for Sunseap during the early days, especially as the industry was still in its nascent stage. That has now changed as the financial sector has become more welcoming and supportive of clean energy projects.

“We had to educate and work closely with financial institutions to help them understand how our business models work. The process took us a few years, but with our efforts we were able to secure more debt financing options to fund our initial projects,” Wu said.

Sunseap has also received investments from companies such as Banpu as well as from Shell Technology Ventures, Shell’s corporate venturing arm, with an intent for Sunseap and Shell to collaborate on solar projects in the Asia-Pacific region, including Singapore.

“We are excited about Shell Technology Ventures’ investment in Sunseap Group and Shell’s potential collaborations with the company on solar projects in the Asia-Pacific region. We are impressed by Sunseap’s ability to deliver innovative and affordable renewable energy solutions to meet customers’ needs, including through its strong distributed solar generation asset base in Singapore,” said Marc van Gerven, vice-president of solar at Shell New Energies in a statement issued at that time.

Earlier this year, it secured US$10.7m of funding from United Overseas Bank (UOB) for commercial solar projects in Singapore. The funds will be used for the development of a 9.5MWp PV system at Jurong Port that will constitute the world’s largest solar system installed at a port. It will also be used to develop a 2.4MWp commercial solar system at Panasonic, just one of the corporations that the company has been providing solar systems to.

Indeed, the company has secured backing from major industrial players, investment offices as well as well-established global and regional financial institutions. On the equity side, major investors include Banpu Group, Shell, and TRIREC, which has injected S$27m (US$20.15m), and others. On the debt financing side, it has received support from financial institutions such as Goldman Sachs, DBS Bank, and Asian Development Bank, and others. The company has so far raised more than S$126m in equity at a total post-money valuation of about S$300m.

Government’s role

The Singapore government plays an important role and is taking a proactive approach towards achieving the nation’s target to have 350MWp by 2020 and 2GWp by 2025.

In 2015, Singapore’s Housing & Development Board (HDB) and Economic Development Board (EDB) led the SolarNova programme, a series of aggregated solar tenders that aim to help Singapore achieve its renewable energy targets. Sunseap won that first SolarNova tender.

“Our typical solar contract has a 20 to 25-year tenure, which means we’ll have to work closely with local governments throughout this period. The Singapore government in this aspect acts as a figurehead that aggregates multiple rooftops and make available such facilities for solar installations,” the director said.

In terms of incentives, the government has taken the stance that energy will not be subsidised and electricity prices have to be market-driven. Sunseap, however, does not rely on incentives to make its business models work, regardless of whether it is a government tender or commercial negotiations with a building owner.

Its projects have typically been on a grid-parity basis and it has been able to make the “incentive-free” business models work by ensuring that its solar systems are maintained at a cost-competitive level.

Moving forward

“Moving forward, we are looking into areas such as energy efficiency, energy storage solutions, and demand side management to provide a complete holistic solution for our clients,” Wu stated.

Due to the scarcity of land in Singapore, the company is looking at other areas such as rooftops and water bodies to seek ways to develop more solar systems.

It has a floating PV project at Tengeh Reservoir, which aims to determine the feasibility of deploying solar systems on water bodies in the city state. Wu said that due to their nature, floating PVs have the potential to generate more solar energy, as water cools down the surface of the solar panels, increasing the yield of solar energy.

But it finds it very challenging to install solar systems on rooftops across Singapore, as most of them are small systems. Sunseap has won the bid to install solar systems on government and government-built residential buildings.

Wu explained that the SolarNova tender (launched by the government) that Sunseap won involves an aggregated portfolio that consists of hundreds of public housing estates and government buildings. Each housing estate requires its own connection point. In addition, the roof spaces on these buildings are small and the tight spaces make it more difficult to install solar systems.

“However, the experience gained with these challenging projects helps us when we are developing projects of a larger scale, such as utility-sized solar farms and large aggregated rooftop projects on varying types of rooftops,” Wu remarked.

The company has begun to explore new ways to maximise the deployment of solar systems in Singapore, including floating PVs on unused water bodies in Singapore – such as reservoirs. It is also studying ways to utilise vacant land on a temporary basis that allows for relocation when required.

Wu noted that the percentage of renewable energy in Singapore can be increased with the aid of batteries, by storing excess solar energy generated during the day for usage at night when solar panels are not generating energy. He said that the Energy Research Institute at Nanyang Technology University (NTU) has also launched a test-bed project at Pulau Semakau demonstrating how different renewable energy technologies can be used in tandem.

The company is also targeting an IPO on the Singapore Stock Exchange (SGX), at the earliest in 2018, with a target equity value of S$500m before listing.

The exact timing has not been determined yet but the company will consider how public investors will view the listing of a renewable energy company. In the lead-up to the IPO, the directors will continue to evaluate the benefits of both private and public funding and explore potential further funding from the private markets. The preparation process has started with the appointments of senior executives in the business circles as independent directors.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com.

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