Green Energy: Building a business with staying power

This article first appeared in Enterprise, The Edge Malaysia Weekly, on October 14, 2019 - October 20, 2019.

It is free energy. I tried to imagine what solar energy could do for us when deployed in a bigger way? That event reminded me about the future potential of solar energy. - Tham

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Tham Chee Aun was not the brightest student in school and had difficulty finding a job after spending an extra 1½ years in university. But none of this mattered when he hit on the right market trend, riding the renewable energy wave to create something of his own.

Now 37, he is founder and CEO of Ditrolic Solar Group, a solar project developer and clean energy supplier that achieved an annual revenue of more than RM40 million in the past two years. Next year, it aims to hit RM100 million.

The company has gone from being a one-man show in 2009 to having more than 50 employees today. It is the biggest solar project developer in Malaysia and has undertaken projects both at home and abroad, including Bangladesh, Singapore and the Philippines.

The installed capacity of its projects is about 130mw, which is enough to power 2,000 average households. Some 97mw of that is fully or jointly owned by Ditrolic.

This means the company has either forked out its own money or gone into joint ventures with other parties to fund, install and own the solar panels and systems on the rooftops of various buildings. Then, Ditrolic and its partners earn revenue by selling clean energy to building owners at a cheaper rate than traditional energy companies, which utilise thermal power plants.

Today, the company not only sells electricity to building owners in Malaysia but also to Changi Airport in Singapore and three shopping malls in the Philippines. It is in the midst of developing the largest solar farm in Bangladesh with a local partner. The project is expected to be completed by the middle of next year.

With these developments, Ditrolic has transformed into an energy provider and utility company from just a solar project developer. “The moment we made the decision to pivot our business model and become a clean energy provider, we were essentially entering the power sector and competing against the big boys such as Tenaga Nasional Bhd,” says Tham.

“You can say that it is a case of David versus Goliath. But once the sector opens up under the new government, we believe it will be big enough for us to grow our business. We are also a pioneer in the renewable energy sector and this gives us certain advantages.”

 

Not academically inclined

Sitting in his new office at the company’s headquarters in Eco Business Park 1 in Johor Baru, Tham tells Enterprise that he did not foresee that he would one day be at the helm of a RM100 million renewable energy company.

Growing up in a middle-class family in Johor Baru, Tham was not academically inclined. He was more of a hands-on kind of guy, good at solving electrical and mechanical problems. He discovered this aptitude rather unwillingly — while helping his electrician father during the school holidays.

“While my friends were out enjoying themselves, my father would wake me up at 7am so that I could go with him to work. He usually did not scold me at work, but he would if I did not wake up on time,” says Tham.

He would get himself ready quickly and set off with his father to one of the electrical rooms or factories in the city. Here, he would cut and connect electrical wires or pass tools to his father. It was not the most pleasant working environment.

“Just imagine a dusty room with old ceilings which people have not gone into for a long time or a factory with greasy machines. I would spend the whole day in these kinds of places with my dad and only return home in the evening or at night,” Tham recalls.

He may have hated it, but the experience made him very hands-on and motivated him to study computer and electrical engineering at Monash University in Kuala Lumpur. It was not an easy course, but he thought the practical knowledge and skills would help.

Tham did not anticipate that he would take 1½ years more than his peers to complete the course. It involved getting his head around some very complex theories — which were never his strong suit. Also, he was not very focused on the subject matter and spent a lot of time reading books on business, finance and politics.

Tham considers that period of his life as one of the most challenging. But he knew he could not give up and shifted his focus back to his studies and eventually graduated.

He was eager to secure a job that would allow him to make use of his hard-won knowledge and become a professional engineer. But here, too, he met setbacks.

Tham looked for a job in Singapore, but all of his potential employers turned him down. Finally, he secured a job at a small engineering consultancy in Johor Baru on the recommendation of a friend.

He counted himself lucky to have got the job. He imagined having meetings with corporate clients and offering technical solutions, which would seal his status as a professional engineer. But things did not go as planned.

A week into his new job, Tham was seconded to an electrical and mechanical contracting company to help handle a construction project in Muar, Johor. It was a large government project worth RM300 million and involved the construction of more than 70 buildings, mainly army camps.

“The firm gave me an assistant engineer and some instructions on a piece of paper. And that was it. With only that, I had to go to the site where I was stationed for the next two years and deal with the main contractors, manage the subcontractors and talk to clients and government officers. I had to manage the site, supervise the work, submit electrical and mechanical designs and do the monthly claims for my company. I did everything myself,” says Tham.

Being the new kid on the block, he was subjected to some good-natured (and some not so good-natured) teasing. Once, a subcontractor called to tell him that a person had been electrocuted and died in a building that was to be demolished.

“He was quite a bully, calling me in the morning with such a story. He knew I was young and inexperienced, so he made up the story to scare me and put me off. I was really worried at the time,” says Tham.

But because of his upbringing, he was used to hard work. So, he simply rolled up his sleeves and dug in. As for the scare, he chalked it up to experience and moved on. “What I learnt is that not everything people tell you and not to blindly trust some people,” he says.

 

Getting into solar energy

Despite these challenges, Tham delivered good results. Later on, he would spot an opportunity to generate some side income by providing air-conditioning units to the buildings on the site. He worked on weekends as well, so he hardly had any time off.

Tham’s air-conditioning business was so lucrative that at one point, it provided him the equivalent of five years’ salary. So, it was only natural to resign from his day job to focus on his side hustle.

It was not a hard decision. “I did not have any loans. I did not have a house and was driving an old family car. I did not even have a credit card until I was 30 and even then, it was a supplementary card,” says Tham.

Unfortunately, the good times did not last. He had gone into the air-conditioning business full-time in 2008, unaware that it would be the year of the global financial crisis and the world economy would plunge into a recession.

As a result, government procurement slowed and Tham secured fewer contracts. “I started the company with RM20,000, which my dad provided by selling the family car. I had given my parents all the money I had earned from previous projects, which is why I needed the funds from him. As you can see, I am not so driven by money,” he says.

But when the money ran out, Tham was in a quandary. Should he go back to full-time employment?

It was during this time that he discovered a course on the grid-connected solar photovoltaic (PV) system, which had been introduced by the government in collaboration with the United Nations Development Programme.

The course was aimed at training local engineers to plan, design and implement solar energy projects. Those who participated in the course would be subsidised by the government, so Tham enrolled for it.

“It took me only two weeks to pass the course. That was in 2009. Then, I decided to branch out into the solar industry,” he says.

Armed with his new qualification, Tham would stride out to discover that there was almost no demand for solar panels or even renewable energy in Malaysia. “I thought there was a market for it and that was why the government had organised the course. In fact, nobody knew what it was and I could not do any business. I had a certificate, I wanted to do solar, but there was no market,” he says.

But Tham was nothing if not resilient. He chose not to give up because of an incident that occurred some years earlier. His father had come home with a small fan that had a motor attached to a solar cell. Tham was curious and put it under the sun to try it out. When the light hit the solar cell and the fan started to spin, he was amazed.

“It is free energy. This had a very big impact on me. I tried to imagine what solar energy could do for us when deployed in a bigger way? That event reminded me about the future potential of solar energy. So, I stuck with it,” he says.

 

Hard work and perseverance

Tham may have been convinced of the potential of solar energy, but he was in the minority. The rest of Malaysia was not paying any attention to it.

In fact, his first business deal in the industry came from Myanmar. He was approached by some friends who worked for a Japanese manufacturer of solar panels. The company was looking for someone who could help its clients plan, design and install its solar panels.

“My friends came to me because they knew I had the technical know-how. I accepted the job and took on a role similar to an in-house engineer,” says Tham.

When he received the order from Myanmar, he used his father’s credit card to buy two solar panels from the Japanese company. He brought the panels to his sister’s HDB flat in Singapore and started designing a system for the panels.

Later, his wife helped him carry the panels downstairs so that he could load them on a lorry he had borrowed. He then drove it to the port to be shipped overseas. The installation of these panels were done by a local partner in Myanmar. “That was quite a memorable event,” Tham smiles.

Through his connection with the Japanese company, his business took off. He then received small orders from the Philippines and Indonesia to keep him going. His first large order, worth US$300,000, came from India.

“I still did not have a warehouse or office at the time. So, I rented a storage space and worked around the clock for three to four weeks to assemble everything before shipping the panels to India. This was in 2010, when there wasn’t even a market in Malaysia yet,” says Tham.

But gradually, business started trickling in. Some local companies became interested in the concept of green buildings, which included the use of solar energy.

Telekom Malaysia Bhd was one of his earliest clients in the country. It wanted to install solar panels on its base transceiver station — a piece of equipment that facilitated wireless communication — located on an island near Pulau Tioman.

“We had to drive from Johor Baru to Mersing every morning and take a 45-minute boat ride to the island. Once there, we had to climb a steep hill for another 45 minutes. The local fishermen helped us carry the equipment,” says Tham.

It was not until 2011 that he started to shift his focus back to Malaysia, following the enactment of the Renewable Energy Act and the introduction of the feed-in-tariff (FiT) programme, which allowed home and building owners to generate electricity using solar panels and sell it to Tenaga at a premium.

 

Pivoting to electricity sales

From 2011 to 2014, Tham installed and developed solar panels for a growing number of residential properties and commercial buildings in the country. His business was expanding, but it was not without challenges as awareness of the FiT programme remained low.

He had to be innovative to get around this. So, he formed joint ventures with building owners and co-invested with them.

“Nobody believed us about the FiT programme. They asked if it was a con job. If they were to invest several hundred thousand or RM1 million in solar panels, would they get paid? They were really hard to convince. So, I decided to co-invest with them instead. I put some skin in the game,” says Tham.

He started to get more business in Malaysia and co-owned some of the solar projects. As people became familiar with the FiT programme, his business picked up. His company developed and installed panels for about 150 solar energy projects a year during the three-year period.

At its peak in 2013, the company had about 10% market share of the solar energy business in the country. “We were profitable and doing quite well. Our headcount had also grown to 15 people from three previously,” says Tham.

Once the demand was there, many companies sprang up to offer solar panel development and installation. There were more than 100 companies doing this in 2013 and the number doubled the following year. However, many quit when the government announced in 2014 that the FiT programme may be discontinued.

“The government said it was running out of funds and the industry was left in suspense. We had been doing well but all of a sudden, the good times were over. I was quite worried. We had grown and had overheads. We needed to do something so that our business could survive and grow,” says Tham.

In 2015, he decided to go to Singapore and, once again, use it as a base to expand his business regionally. He knew the company could not rely on the Malaysian market and he would need to find another way to generate a stable income stream.

Tham formed partnerships with companies in various countries to develop solar energy projects and more importantly, started to own these projects and sell clean energy to building owners. The company was no longer satisfied with just helping clients to develop and install these projects.

“There was a change in the business model. We pivoted to electricity sales, selling clean energy to building owners at a cheaper rate than what the traditional utilities were charging them,” he says.

Tham says the company is allowed to sell clean energy directly to building owners in many countries as long as the sales are done within the compound of the building, rather than going through the electricity grid, which could be owned by other private companies.

Today, about 10% of the company’s revenue come from electricity sales. “Based on our order book, about 20% of our revenue will come from electricity sales by next year. And by 2021, we are targeting 50%,” he says.

 

Huge potential ahead

Tham points out that the market has huge potential as the Ministry of Energy, Science, Technology, Environment and Climate Change, headed by Yeo Bee Yin, aims to increase the renewable energy portion of the total energy generation mix to 20% by 2025 from only 2% in 2016.

The ministry is also looking to transform the country’s power industry with the implementation of Malaysia Electricity Supply Industry (MESI) 2.0. According to news reports, this is aimed at increasing efficiency in the industry, futureproofing its structure, implementing regulations and key processes, democratising and decentralising the industry as well as empowering consumers.

“If the industry is liberalised and consumers are given the choice of buying electricity from different suppliers, our company will be well positioned to benefit,” says Tham.

The power industry is capital intensive, so how can Ditrolic compete with the likes of Tenaga? Tham says the company will continue to provide quality services to its clients and stay close to the ground to understand their needs. “Once we know the market well, we will be in a position to acquire customers,” he adds.

All this boils down to perseverance, which is the one thing Tham has in spades. “On hindsight, all the setbacks I have experienced were good things because they allowed me to look at things differently. By understanding that you cannot always have things your way, you would do things more carefully. You persevere and overcome the challenges in front of you,” he says.