KUALA LUMPUR: Photovoltaic products manufacturer Tek Seng Holdings Bhd said Taiwan-listed Solartech Energy Corp (SEC) will buy 3.17 million shares or a 20.92% stake in its 86.1%-owned unit, TS Solartech Sdn Bhd, for RM13.17 million.

In a statement yesterday, Tek Seng said SEC would subscribe to the shares via a subscription agreement within five market days.

Apart from purchasing the shares, SEC is investing RM87.7 million in TS Solartech via an issuance of 87,701 redeemable non-cumulative preference shares at an issue price of RM1,000 each.

It said this would be done by way of supplying two units of solar cells turnkey line with a manufacturing capacity of producing solar cells that can collectively generate 140 megawatts (MW) of electricity per annum.

“This would increase TS Solartech’s production lines to meet demand and orders, and help achieve  better economies of scale operations,” it said.

To recap, SEC proposed an investment of RM100 million in TS Solartech in September. The Taiwanese firm inked a memorandum of understanding (MoU) with TS Solartech on Sept 11 for a “strategic alliance between the parties”.

Tek Seng, which is primarily involved in the manufacturing and trading of PVC sheeting but ventured into solar photovoltaic cell manufacturing business back in 2012 through TS Solartech Sdn Bhd, was one of TheEdge Research’s Stocks with Momentum on Oct 21.

TheEdge Research noted that the solar division is gaining more prominence with a rise in demand for solar energy, and this is likely to be the reason for increased interest in Tek Seng.

According to Tek Seng’s statement, the investment from SEC will allow TS Solartech to provide experience and input and further develop TS Solartech’s solar business.

Tek Seng executive chairman Loh Kok Beng said this partnership with SEC will provide an immediate cash injection and expansion of turnkey facilities of RM87.7 million, which will  minimise the impact on its cash flow and gearing.

Tek Seng closed the day 1.82% higher at 84 sen, giving it a market capitalisation of RM201.6 million.

This article first appeared in The Edge Financial Daily, on November 14, 2014.