Power Asia: Building a solar future in Australia and beyond

Power Asia ASX P88 solar energy future Australia IPO initial public offering

Renewable energy is making a strong case to becoming a significant contributor to national power generation in Australia.

Several companies have ventured into renewables with battery energy storage systems (BESSs), solar farms and solar power plants now being planned across Australian states.

The renewables industry is growing again and Power Asia (ASX: P88) is coming to the ASX as validation that renewables can be just as commercially viable as traditional energy sources.

Power Asia has installed over 20,000 solar systems across the Australian domestic, commercial and industrial sector and intends to upscale its growing solar-powered momentum via larger installations, widened by both technical application and geographical reach.

Led by Executive Director Mr Alan Gao, Power Asia is issuing 45 million shares at a price of A$0.20 per share to raise A$9 million as part of its ASX listing to be completed this month. Power Asia shares are expected to commence trading on the ASX in the near future, depending on a success IPO process.

Its admitted business plan is to become a prominent renewable energy provider across Australia with additional overseas business functions that supplement strong commercial potential.

Solar power in Asia

Power Asia is an Australian renewable energy company, focusing on growing its client base by developing, constructing, integrating, financing and installing renewable power systems across the country.

In addition, Power Asia wants to leverage its expertise to make further inroads into commercialising solar energy further afield in Asian countries where its addressable client base and level of spare capacity is arguably higher in comparison to markets like Australia.

Power Asia also provides project management services to the renewable sector in general including infrastructure services in connection with energy and land development.

The company is accredited countrywide by the Clean Energy Council (CEC) of Australia, a legal requirement for the design and installation of solar systems in Australia.

Solar installation and Asian expansion

Power Asia aims to become a publicly listed company to access ample capital to pursue its commercial objectives, including the identification of further projects which can be developed and monetised.

More specifically, Power Asia wants to build up its Asian business unit which could potentially generate larger sales revenues in the long term compared to its Australian activities.

Listing on the ASX also allows Power Asia to establish a strong corporate governance environment, which the company says will enhance its chances of securing greater commercial opportunities and is intended to help Power Asia set a platform for its future growth in the sector.

Renewable haven on the ASX

As it stands, multiple ASX-listed companies are focusing on renewable energy as their prime revenue driver with names like Infigen (ASX: IFN), AGL Energy (ASX: AGL) and Greatcell Solar (ASX: GSL) currently leading the field from a revenue and market capitalisation perspectives.

Infigen is currently worth around $780 million by market capitalisation, generating around $170 million in revenue per year.

Smaller companies such as Greatcell Solar, Silex (ASX: SLX) and Redflow (ASX: RFX) are all marketing various products or technologies that are reinstating renewable energy as a viable investment niche.

Power Asia’s project portfolio

Power Asia is developing two flagship projects that are currently at various stages of completion.

Sabha Khola “A” Hydroelectric Project

The Sabha Khola “A” Hydroelectric Project is a 10-megawatt hydroelectric plant, located on the banks of the Sabha Khola river in Dhupu-Khadbari, Nepal.

Power Asia entered into a development agreement with Dip Sabha Hydropower Pvt Ltd last year and intends to commence construction of a hydroelectric facility in April 2018. The project will take approximately 3 years to construct, costing around A$26.5 million given current estimates.

Mackay – Paget Solar Project

Its other cornerstone project is the Mackay – Paget Solar Project in Queensland.

The project was identified by the State-owned Energy Queensland, given the level of industrial growth in the Mackay area, and the growing pressure on existing energy supplies. Mackay is likely to supplement Queensland’s daytime peak load capacity once fully built and brought online.

A technical feasibility report confirmed the site as both technically and commercially viable. With a development application recently approved by the Mackay Regional Council (MRC). Energy Queensland identified three 6.2MW AC connection points, and as the proposed site will support 20MWp (DC), the output can be comfortably accommodated via the 18.6MW of AC connection.

Civil construction preparatory work has already commenced with Power Asia now preparing its general application to the relevant local authorities.

Collaborative agreements and future partnership

Power Asia has entered into three “alliance agreements” — the first with Sinohydro Corporation, a wholly owned subsidiary of Power Construction Corporation of China, a Chinese state-owned enterprise (SOE). The second with a subsidiary of MaSteel, and a third with AnSteel, another Chinese SOE.

Following the signing of its set of alliance agreements with Sinohydro, MaSteel and AnSteel, Power Asia intends to identify specific energy and infrastructure projects that the Alliance Partner may elect to participate with Power Asia on a joint venture basis.

China handshake solar Power Asia IPO ASX

Should an alliance partner choose to participate in any given project identified by Power Asia, Power Asia intends to enter into applicable joint venture agreement for the acquisition and development of any given project.

The company claims it will undertake all pre-feasibility, project and construction and management services required for any joint venture agreement that is agreed in future.

Post IPO focus

Assuming a successful admission to the ASX, Power Asia intends to focus on exercising the option and commencing development of the Paget Project in Mackay, Queensland, as a priority.

Power Asia is also planning the commencement of operations under the Sabha Khola Agreement as development manager and is keen to identify further potential renewable energy projects in other regions.

Outside of Australia, Power Asia is focusing on developing its Power Asia Business and to expand its growing list of acquired businesses.

Future revenues, income and dividends

The company aims to generate its income from recurring business generated as a result of its partnerships with Linked Services Group and Standard Solar Australia.

Additional cashflow will be created from the development of its projects assets, from construction management services and by operating its renewable energy projects subsidiary, EnPro Ltd.

Power Asia’s short-to-medium term focus will be on generating growth of the Power Asia business and reinvesting profits towards the further growth of its core business.

The company’s solar installation business unit combined with its overseas-focused Asian businesses, means that Power Asia is expecting to see strong revenue flow in the near-medium term given its relative first-mover advantage.

According to the company, Power Asia may declare or distribute a dividend for the year ending June 2018, if financial conditions allow.

Filip has written in both Australia and abroad during his career, covering everything from the global economy, politics and geopolitical issues to commodities and small cap stocks on the ASX.