Lim Say Chin, Acromec's managing director, said: "This LOI is an important first step in our drive into the renewable-energy business.

Singapore

A SUBSIDIARY of engineering-services provider Acromec is diversifying into the renewable-energy sector, having inked a letter of intent (LOI) with egg producer Chew's Agriculture to operate a waste-to-energy power plant that will use chicken manure as feedstock. (see amendment note)

Acropower, an 80:20 joint venture between Acromec and Malaysian alternative energy company Green Energy Resources, will build, own and operate (BOO) the plant, while Chew's Agriculture, will supply the manure.

Under the LOI, Chew's Agriculture will purchase electricity from Acropower to power a new farm for a 15-year period, at no more than a 10 per cent discount to the prevailing Energy Market Authority electricity tariff rate. Chew's Agriculture has committed to purchasing at least 0.5 megawatt hour (MWh), "with scalability, should the new farm ramp up its egg production beyond the level of production of its existing farm", said Acromec in a filing to the Singapore Exchange.

The plant, which is slated to start operations by March 1, 2020, will be built on the upcoming farm as Chew's Agriculture relocates to Neo Tiew Road, off Lim Chu Kang.

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Lim Say Chin, Acromec's managing director, said: "This LOI is an important first step in our drive into the renewable-energy business. It has expanded the horizon of our value chain for our controlled-environments engineering business, and will differentiate us from our competitors."

As it is planning to grow its renewable-energy business in the coming financial year, a separate team has been assigned - together with its partner Green Energy Resources - to see the project through.

Since the deal marks a departure from Acromec's core businesses, it will convene an extraordinary general meeting to seek its shareholders' approval for its diversification plans. The Catalist-listed group presently designs and constructs facilities requiring controlled environments, such as laboratories and medical facilities.

In an interview with The Business Times, Mr Lim highlighted that the company's strategy to diversify into renewable energy will help deliver sustainable revenue and recurring income streams. It has approached banks and financial institutions for funds for the project.

The-joint venture company is expected to receive at least S$1.5 million a year in revenue from the sale of electricity to Chew's Agriculture.

Once the project is up and running, Acromec is keen to try and replicate the business model with other companies in Singapore, as well as take it beyond Singapore's borders to markets such as Malaysia, Vietnam and Thailand.

For the financial year ended Sept 30, Acromec reported a net loss of S$2.62 million, narrowing from a loss of S$4.59 million a year ago. Revenue dipped three per cent year on year to S$42.31 million.

Acromec isn't the only Singapore-based company venturing into the renewable-energy space. Environmental solutions provider ecoWise Holdings has two biomass power plants, one each at Sungei Kadut and at Gardens by the Bay. These use horticultural and wood waste as biomass fuel, which is used to generated electrical power and heat energy.

An attempt by ecoWise to operate a biomass plant in China to turn farm waste into steam and electricity for factories in the Shandong province stalled after the facility was unable to achieve the targets set out under the engineering, procurement and construction contract.

Shares in Acromec were halted at around noon on Tuesday pending the announcement.

Amendment note: An earlier version of this story stated that Chew's Agriculture is a wholly owned subsidiary of Chew's Group. Acromec has clarified that Chew's Agriculture is no longer a subsidiary of Chew's Group.