This article first appeared in The Edge Financial Daily, on June 27, 2016.

KUALA LUMPUR: The renewable energy sector is booming and many firms are flocking to the business.

ACE Market-listed VSolar Group Bhd, which has spent RM9.2 million to establish its maiden 1mw solar power plant in Perak after obtaining its feed-in-tariff approval from the authorities, previously said it expected the venture to return the company to the black in its financial year ended Dec 31, 2015 (FY15).

But it has missed the date, as the plant has yet to commence commercial operation, due to technical difficulties that will likely only be ironed out by month-end, which means another financial year — its FY15 now ends on June 30, 2016 and will comprise 18 months as it has recently changed its financial year end — in the red.

VSolar executive director Leung Kok Keong said the solar farm in Simpang Pulai, Perak, was supposed to be up and running by the mid of last year, but the commencement was delayed after it was found that the plant had problems integrating with the grid, and that its power generating efficiency fell short of expectations.

“The panels were not running at the efficiency level required. Some of the panels were not collecting sufficient energy as per their design. We also found some cabling issues,” Leung told The Edge Financial Daily in an interview recently.

“We have been repairing [the cables] and running several tests of the solar panels over the past nine months. I am cautiously optimistic that the final testing process can be completed by the end of this month.” He expects the plant to start yielding returns from FY17 onwards.

On whether there is a penalty imposed on the delay in providing the renewable energy (RE) to Tenaga Nasional Bhd (TNB), Leung said there is none. He also gave assurance that the power purchase agreement (PPA) is still valid.

“Both TNB and the authorities are patient with us. They understand we have invested quite heavily in the project,” he said.

In 2013, VSolar’s unit Solar Interactive Sdn Bhd inked a 21-year RE PPA with TNB to sell the electricity generated by the plant at a fixed tariff rate of RM1.3812 per kW hour.

VSolar has estimated how much the plant can contribute to its earnings but declined to divulge the figures at this juncture, citing special incentives that have yet to be finalised.

“We should be able to regain our investment in the eighth year,” he shared.

Meanwhile, VSolar has tied up with Universiti Teknologi Malaysia (UTM) to research, develop and commercialise solar and photovoltaic technologies, to expand its reach in the solar energy business.

Under a memorandum of understanding, the group is looking at building new solar plants with installed capacity of up to 10mw on land owned by UTM and/or other suitable sites identified and provided for by the university, over the next three years. Leung estimated that each of the farms will cost up to RM10 million.

“We will finance the project through the rights issue that has been approved by shareholders but [which] has yet to be implemented. The rights issue should enable us to raise up to RM115 million in capital,” he said.

“As to how many mw [each solar farm] will have, it is still pending a decision by the Energy Commission and the Sustainable Energy Development Authority Malaysia,” he added.

“This project will benefit both the private and public sectors, as we will finance and provide technology to the project and UTM will provide us with land and manpower,” he added.

Financially, the bulk of VSolar’s income now continues to come from its servers and publishing segments, which recorded a revenue of near RM2.3 million for the 15 months ended March 31, 2016.

“These are legacy businesses from the past. We will still maintain them now, but the solar business will be our focus,” said Leung, adding the publishing segment, which publish and sell lifestyle magazine Jasmine, will move into digital advertisement soon instead of relying on shrinking print advertisement.

Vsolar shares closed 0.5 sen or 10.53% lower at 8.5 sen last Friday, valuing it at RM27.32 million.