Company Briefs - 6 Jul 2007

Equation going into solar-film business

INVESTMENT holding company Equation Corp, formerly known as Heshe Holdings, is venturing into the solar-film business. The Sesdaq-listed company intends to buy into privately held Solar Morph, through which it will build Singapore's first thin-film solar panel manufacturing plant.

The plant, which will require an initial $120 million to build, will mark the next chapter of Equation's development of its environmental business - which began when it bought into electronic waste recycler Citiraya Industries, now known as Centillion Environment & Recycling, last year.

'We strongly believe in the great potential of solar energy,' says Equation executive chairman Eddie Chng. 'The future growth in the multi-billion dollar energy sector is tremendous and Singapore has the right infrastructure and resources, as well as the governmental commitment, to take the lead in solar energy supply in the region.'

Mr Chng estimates the solar-film industry will reach the US$250 billion mark by 2015.

Equation is looking to launch the 10,000 sq m plant, which will have a final annual capacity of 60 mega watts, in the fourth quarter of this year. The first phase, of a 20 mega watt manufacturing line, is to be completed by mid-2008 - with the full 60 mega watt annual capacity line expected to be ready by 2010.

The fully automated plant will use thin-film amorphous silicon technology in its manufacture of solar panels, a process that requires less material - and hence, reduced costs - for the production of solar cells.

Solar Morph, an exempt private company with no operating profits, intends to fund the plant with $60 million in equity and the remainder through debt financing. It has obtained $16 million in investments and commitments in its first round of fund-raising. Its chief investor is Tembusu Ventures - through its affiliated fund Tembusu Capital - an institutional investor whose previous investments have focused on high-tech start-ups.

Equation will invest an initial $15.5 million in Solar Morph, by taking up a 69.6 per cent stake in the local solar energy company. Mr Chng will then be the chairman of Solar Morph. Equation may invest further in Solar Morph in the future, raising total investment up to $50 million. It will also help to raise the remaining $90 million in debt financing which Solar Morph needs.

To partially fund its initial $15.5 million investment, Equation will issue three-year convertible bonds which will be convertible into Equation shares, at the conversion price of $0.355. Solar Morph hopes to eventually list on the Singapore Exchange, in which case the convertible bondholders may exchange their bonds for Solar Morph shares.

Solar Morph was founded by Jinsi Lee and Frank Phuan. The latter pioneered the installation of the first grid-connected solar system at the Singapore German European School.

Mr Chng, who used to be the CEO of computer peripheral and components trader Serial System, believes his background in the semiconductor industry allowed him to identify the opportunities present in solar energy sector.

'The life-cycles of the manufacturing process that the semiconductor industry and the solar film industry go through are similar,' he said. 'But unlike semiconductors, the solar industry does not require supply chain like design houses to feed our fabs. The solar panel business is a good export business, solar modules or panels made here will be able to leverage on Singapore's premium brand name to appeal to US and EU consumers.'

The plant is expected to employ 200 high-tech skilled operators and engineers - who will be sourced primarily from Singapore - when it's fully operational.

Qian Hu buys into UK aquarium lamp maker

ORNAMENTAL fish service provider Qian Hu has bought a stake in a UK manufacturer of aquarium lamps to propel its business growth in Europe.

Qian Hu said it is paying an initial 264,000 (S$810,000) for a 20 per cent stake in Arcadia Products PLC. There is a provision for an additional consideration, based on an agreed formula, if Arcadia posts a profit after tax (PAT) of at least 400,000 for the year ending June 30, 2008 (FY2008).

Consequently, the total payable sum will be raised to 1.2 times of Arcadia's PAT for the year if the profit target is met. Qian Hu said the same offer applies if the PAT target is met only in FY2009.

The investment will be funded with internal resources and borrowings.

'Through Arcadia, we plan to set up a marketing arm in London, and further enhance our export of aquarium and pet accessories to the European continent,' said Qian Hu group managing director Kenny Yap.

Arcadia sells its aquarium lighting products in the UK and also distributes them to 55 countries worldwide.

Yesterday, Mr Yap said he sees a rising demand for aquarium and pet accessories from its distribution network in Singapore, Malaysia, Thailand and China. There are also increasing orders for aquarium and pet accessories from its suppliers and customers from various parts of the world.

Therefore, Qian Hu plans to expand the distribution network for pet accessories by leveraging on its house brands.

'All this provides the perfect platform for our products to be exported and distributed in Europe,' Mr Yap added.

The company aims to grow the sales contribution from fish accessories to about 45 per cent eventually - up from 35 per cent in the last fiscal year.

Also, it is hoped that the stake will enhance Qian Hu's R&D capabilities in developing and improving aquarium and pet accessories. By next year, Mr Yap also expects Arcadia to outsource its entire production of aquarium products to Qian Hu - up from the current 50 per cent.

Yesterday, Mr Yap also singled out China, Russia and Eastern Europe as the key growth drivers for its business in the medium term.

Qian Hu had said earlier that it would capitalise on its fastest growing market, China, by raising its distribution points in that country from about 60 to 100 by year-end. Furthermore, Qian Hu expects the global ornamental fish market to grow by more than 5 per cent annually over the next 20 years.

The company does not expect the investment to have a material impact on its earnings per share and net tangible assets per share for the current financial year.

For the quarter ended March 31, 2007, Qian Hu reported an 81.4 per cent jump in net profit to $947,000 on a 21.2 per cent rise in sales to $21.98 million.

Its share price closed at 57 cents yesterday.

Darco wins $11.1m worth of contracts

DARCO Water Technologies Ltd, a waste water treatment company, has clinched $11.1 million worth of industrial contracts, bringing its total FY2007 order book to $34 million.

Darco - which has a stock market value of $64.6 million - said it had secured six new environmental engineering projects from the industrial sector. Most of the contracts were from Seagate Technology International, which handed out about $9.07 million worth of orders.

'The management believes this is the beginning of a new era of growth for Darco, driven by strong demand for our environmental engineering capabilities,' said chief executive officer K M Thye.

Darco received a $1.05 million contract for an air management system for Seagate's facilities in Woodlands, and a contract worth about $8.02 million for an industrial waste water treatment system for Seagate's facilities in Johor, Malaysia.

The contracts are expected to have a positive material impact on Darco's revenue for the financial year ending Dec 31, 2007, said the company.

Darco, which was listed in 2002, competes with other Singapore-listed waste water treatment firms such as Asia Environment Holdings, Sinomem Technologies and Sino-Environment Technology Group. These four firms were top picks listed in a recent Credit Suisse report for their exposure to the Chinese market.

ecoWise applies for carbon credits

ECOWISE Holdings hopes to obtain carbon credits for emission reductions of 12,800 tonnes a year, by using waste steam for drying and heating. The Sesdaq-listed environmental solutions firm is one of the first to apply for carbon credits with a Singapore-based project.

At a stakeholder's meeting yesterday - part of the application process - ecoWise said it hopes to have the project running within the next six to 12 months.

The Kyoto Protocol's Clean Development Mechanism (CDM) allows companies in developing countries to gain carbon credits through pollution-reducing projects.

The credits, or Certified Emissions Reductions (CERs), can then be sold to industrialised countries.

ecoWise's biomass cogeneration plant generates 15,000 kg of steam and one megawatt of electricity an hour. Some of the energy is used to power operations, but much is wasted.

ecoWise's project will use excess steam to dry spent grain waste and provide ISO tank heating services.

These processes usually require diesel dryers and boilers. By using waste steam instead, the emissions that would have resulted from diesel use have been avoided.

The project will reduce carbon dioxide emissions by 12,800 tonnes a year, estimates ecoWise. If obtained, the CERs will raise the project's internal rate of return to 19 per cent from 12 per cent, assuming a CER price of 10 euros a tonne.

Terence Siew, head of the National Environment Agency's climate change unit, said that ecoWise is the first company here to reach this stage of application, although other companies have shown interest.

'This is still a new area, but we believe that once you have a few successes, more and more companies will be interested in coming into CDM,' said Mr Siew.

And further interest may be raised this November when Singapore hosts Carbon Forum Asia 2007, a trade fair organised by the International Emissions Trading Association and Koelnmesse.