According to the International Energy Agency (IEA), natural gas demand is expected to continue to rise as it is viewed as a cleaner alternative to coal and oil. Additionally, with renewable energy accounting for nearly 90% of the total power capacity growth worldwide, the IEA predicts that this shift presents significant growth opportunities. WASCO’s expertise in gas development projects makes it well-suited to take advantage of the growing demand for clean energy solutions such as hydrogen. The IEA forecasts that hydrogen is expected to play a crucial role in the low carbon transition, with the global hydrogen demand projected to grow 3-fold by 2030. WASCO’s experience in hydrogen energy in Australia provides a strong foundation expansion into other regions where hydrogen is expected to gain prominence. Furthermore, with many oil and gas companies investing in renewable energy projects, WASCO’s diversification into this area through its Engineering business unit and WASCO Australia provides the Group with significant growth opportunities. This diversification not only helps to expand this segment’s business portfolio but also ensures that the company remains relevant and well-positioned in the low carbon and clean energy transition agenda championed by many of its customers. RENEWABLE ENERGY (‘RE’) Discussion of strategies, operational capabilities to achieve the desired business objectives and results In 2022, both units within the RE segment, Industrial Engineering (“IE”) unit and Agro-based Industry (“AI”) unit, achieved a record revenue of RM482.37 million and secured the highest contract value of RM610.8 million. The IE business unit has been awarded various types of specialized process equipment using exotic steel materials, such as Inconel 625, high-pressure 250 bar(g) CrMo vessels for hydrogen service, and heavy wall 175mm thick cladded vessels. These acquisitions have expanded its capabilities and allowed it to offer a broader range of products to its customers. Additionally, AI has recently launched a new model of multistage steam turbine, the RB 8, with a capacity of up to 3.5MW per unit. The market response to the RB 8 has been positive, and several units have been sold within a short period of time. In 2022, the IE business unit strengthened its position as a premium provider of process equipment and steam solutions by delivering the world’s largest oleochemical splitter column to an end user in Indonesia and securing the largest gas-fired boiler for a sugar refinery in Malaysia. The AI business unit’s investment in the latest technology and machinery has not only improved productivity but also mitigated the risk of manpower shortages. The AI business unit is in the midst of setting up the sales office in Jakarta and a new branch in Jambi in FY2023, to cater for customers in Southern Sumatera. This is to complement, its upgraded Banjarbaru warehouse and expanded Medan workshop carried out during the year, to provide enhanced services with a quicker response time to customers in Kalimantan and Sumatera. The creation of a new oil palm plantation in Sulawesi, Indonesia has presented a new market opportunity for the AI business unit to sell its equipment and deepen its market penetration in the country. The RE division continues to push ahead with its ESG objectives. As part of its net zero-carbon emission goal by 2030, the Group has finalized its plans to install an additional 340kWp Rooftop Solar system at its Teluk Panglima Garang yard by the second quarter of 2023, in addition to the current 400kW installed at its Shah Alam facility. Discussion on Key Financial and Operational Indicators for the segment During the year under review, the RE segment saw a significant increase in revenue, from RM281.96 million to RM482.37 million, as well as a better segment profit of RM55.16 million compared to RM28.23 million in the previous year. These improvements were due in part to a greater number of projects carried out by the IE unit, increased equipment sales, and higher profit margins from after-sales services provided by the AI business unit. As a result, the segment’s EBITDA for the group was recorded at RM63.71 million, indicating a positive contribution to the overall financial performance. The order book for the RE segment showed a 43% growth, increasing from RM292.46 million at the start to RM419.14 million, at the end of the period. This suggest a healthy backlog for its products and services in 2023. MANAGEMENT DISCUSSION AND ANALYSIS Annual Report 2022 Wah Seong Corporation Berhad 41
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