Electrification is driving the fourth industrial revolution. Access to secure, sustainable, and affordable electricity is critical for data centres powering artificial intelligence models, digitalisation of industrial processes, and growth of the electric vehicle sector.

Additionally, ‘green’ electricity is fast becoming a premium product as the global drive to decarbonise supply chains reaches a turning point with the implementation of EU’s Carbon Border Adjustment Mechanism where imports will be taxed based on greenhouse gasses emitted to make them.

Jentayu Sustainables Berhad (JSB) believes that to access ‘green’ or low carbon electricity sources is a key source of comparative advantage for companies, industries and ultimately, nation states.

It is with this vision of the future that JSB, with the emergence of Datuk Haji Beroz Nikmal Mirdin and his wife as controlling shareholders in 2020, is shifting its core focus from trading of building materials to becoming a renewable energy powerhouse for a sustainable future. Today, at the 4th anniversary of the takeover by Datuk Beroz, JSB too is at an inflection point.

Firstly, JSB has achieved an approval with conditions from Securities Commission for the acquisition of a portfolio of brownfield hydropower and solar assets (Acquisition Assets).

The Acquisition Assets are expected to generate an annual revenue of approximately RM 70 million. The completion of this acquisition is merely the first phase of JSB’s transition, which will put the company on sound financial footing in preparation for future growth. Although the 40 MW may look small, it is in fact equivalent to approximately 200 MW of LSS4 equivalent solar from a revenue perspective.

Secondly, JSB has secured an initial letter of notification (ILON) from Energy Commission of Sabah for the development of a hydropower plant of up to 170 MW in Sipitang, Sabah (Project Oriole).

Project Oriole is expected to be the company’s second run-of-river hydropower scheme once it commences operations in 2028, generating revenues of approximately RM 270 million per year which is similarly equivalent to 900 MW of LSS4 vintaged solar.

Moving forward, JSB has ambitious growth plans of securing a total of 350 MW of generation capacity under PPA by 2026 via a diversified portfolio of hydropower and solar assets.

“This is the transformation we promised four years ago, and these significant milestones show we are focused on our promises. What we do is far more important than what we say, and the successful acquisitions complemented by the development of Project Oriole will be proof of the progress we envisioned long before taking over.” says Beroz, who serves as the Executive Chairman of JSB.

A key difference maker for JSB is the team’s focus and experience in developing run-of river hydropower plants.

Run-of-River hydropower plants differ significantly from dam hydropower plants because they generate electricity without the need to construct dams. While dam hydropower plants involve an impoundment facility, typically a reservoir or a flood basin, run-of-river plants divert a portion of water from the river, run it through turbines which power the generators, and then return the water to the river’s original course a little further downstream.

As run-of-river plants do not require any impoundment of water and utilises the river’s natural flow, the relative environmental impact is significantly lower compared to dam hydropower plants which cause displacement of people and destruction of habitats.

Additionally, relative to solar plants, run-of-river hydropower plants also produce 3.5 – 5.0 times the energy per MW of installed capacity as its design allows for generation throughout the day as long as water levels are sufficiently high. Conversely, solar plants can only operate during daylight hours, with the latest plants in Malaysia generally achieving an average of 3.5 – 4.0 sun hours daily. This translates to run-of-river hydropower plants being significantly more effective in decarbonizing the electricity industry.

Project Oriole is JSB’s upcoming flagship run-of-river hydropower project which will be constructed along Hulu Sungai Padas in Sipitang, Sabah. The project is designed to have a generation capacity of up to 170 MW and has been included in the Sabah Energy Road Map and Masterplan (RAMP) 2040. It is a domestic direct investment (DDI) of RM 2.8 billion and is expected to generate revenues of approximately RM 270 million per year.

The ILON is the latest in a series of key government approvals, paving the way for JSB to begin negotiations with EPCC contractors, strategic partners, and financiers for the design, development, and financing of Project Oriole.

Project Oriole is expected to add much needed generation capacity to Sabah’s electricity supply, improving SESB’s reserve margin once it comes online in 2028. In the meantime, the state will reap the economic benefits of the RM 2.8 billion domestic direct investment Project Oriole will bring into Sabah.

Project Oriole bears numerous similarities to the recently commissioned Telekosang Hydro, as both are run-of-river hydropower schemes with 2 powerhouses and based in Sabah. JSB’s ability to take on a project of this scale stems from the team’s previous success with Telekosang Hydro, having commissioned the 40 MW scheme in 2023. The design concept, technology, and engineering will be deeply similar to Telekosang Hydro – with the main difference being Oriole’s size at just over four times bigger.

In many ways, the story of JSB is deeply intertwined with the story of Telekosang Hydro - developed as part of SEDA's Feed-in-Tariff programme by Beroz's private company prior to the acquisition of a controlling stake in JSB.

The development of Telekosang Hydro began in 2016, when Beroz invested in a feasibility study based on identified potential hydropower plants in Sabah. Cognizant of the commercial considerations required to develop a hydropower plant, the Telekosang site was chosen due to its appropriateness for a small private company – but still happened to be the largest privately-owned run-of-river plant in Malaysia.

Surrounded by a strong and experienced team, Beroz successfully navigated the hurdles of the Covid-19 pandemic to achieve commercial operations of both plants in 2023. Every project that involved construction was badly hit by the Covid-19 pandemic, and Telekosang Hydro was no exception. The project faced debilitating delays as well as various other financial and construction issues which caused massive problems. However, key risk mitigation measures which were built into the project during the early stages of development ultimately helped get the project over the line.

One of the key risk mitigation strategies used for Telekosang Hydro was to employ a transparent, international open tender which involved world-class EPCC players. The companies were not required to invest in the project to ensure no commingling of roles and no cross support, which in turn would ensure true cost. In addition to the open tender, Telekosang Hydro was developed based on a lump sum turnkey contract with the nominated EPCC contractor, which includes a completion guarantee – in line with the FIDIC (International Federation of Consulting Engineers) Silver Book.

The prevention of any variation orders (VOs) via the lumpsum turnkey contract enables the developer to ringfence and transfer the construction risk to the contractor, given the tariff rate for generated energy is fixed even before construction starts.

“Telekosang Hydro, whose commercial operations date was originally scheduled for 2021, managed to weather the storms of Covid-19 and commission both plants in 2023 with no variation orders (VOs) and no extension of time (EoT). Had we not utilised a lumpsum turnkey contract, we would have had to bear the significant cost overruns due to the delays and subsequent inflation throughout the construction period. The effectiveness of these risk mitigation strategies cannot be understated – the proof is in the Telekosang Hydro pudding.” explains Beroz.

Today, Telekosang Hydro is fully operational and is an award-winning company, holding the world’s first Greenfield Mini-Hydro Green Sustainable and Responsible Investment (SRI) Sukuk.

One of the key figures in the development of Telekosang Hydro was Baevinraj Thiagarajah, a close friend and confidant to Beroz and the person who has been trusted as JSB’s latest CEO. Having worked closely together in every phase of Telekosang Hydro – from the review of the feasibility studies, financial modeling, negotiation with tenderers, to construction and commissioning – the duo have joined up again to develop the similar but significantly bigger Project Oriole.

Both Beroz and Baevin have significant experience in the power sector, having met at MyPower while supporting the renegotiation of Power Purchase Agreements (PPAs) for the first generation of Independent Power Producers (IPPs) and developing the Malaysia

Electricity Supply Industry (MESI) Transformation Roadmap. However, it was with Telekosang Hydro where they truly gained the experience and insight in constructing run of-river hydropower plants in Sabah, which will stand to benefit the development of Project Oriole.

The pair possess a complementary skillset which will brings out the best of both, having developed a professional relationship which stretches back as far as 10 years. While both Beroz and Baevin have extensive energy-related experience and technical nous, each has relatively different perspectives which weeds out the weaknesses and pitfalls in any idea.

“Baevin and I have a knack for picking up each other’s blind spots. He has been my sounding board and an extra pair of eyes to help confirm the technical details. We constantly challenge each other to be better. Today we are focused on building an effective team for JSB’s future” says Beroz.

Guided by the vision of Beroz and Baevin, JSB’s future goals include supporting the further development of Sabah’s electricity supply industry as well as exploring both new geographies and technologies. Internally, JSB’s 3-year goals set in 2023 include a RM 1 billion market capitalisation, RM 50 million profit before tax, and 350 MW in secured generation capacity.

Sabah has some of the largest rivers in Malaysia, and studies have estimated that hydropower alone can generate 1,000 MW of electricity – which is about the entirety of Sabah’s current generation capacity. Harnessing this game-changing hydropower potential can help solve all three aspects of Sabah’s energy trilemma.

Despite its deep roots in Sabah, JSB’s goals extend beyond the state. A slew of projects being considered to meet its 350 MW goal, ranging from the numerous solar opportunities to newly identified hydropower sites across Malaysia. However, Beroz and Baevin have always stressed pragmatism and thoroughness in prioritising pipeline projects.

“We take a very disciplined approach when it comes to our projects, bearing in mind our responsibility to our shareholders, our board, our employees, and financial stakeholders. We are focused on projects that we have some element of advantage and those that meet our minimum hurdle rate. All potential projects are rigorously assessed for techno commercial feasibility and approvals follow our governance processes.” says Baevin.

In addition to growing generation capacity, JSB is constantly looking to optimise its existing operations and create value with numerous initiatives designed to grow the bottom line. As an energy asset developer and operator in a highly regulated industry, JSB looks at alternative ways to create additional value for the company.

The company has identified pockets of incremental value across the supply chain which can be realised through vertical integration. The company is actively working to procure the necessary skills and expertise to complement its core business as an energy concessionaire. Although the complementary modules may not individually meet the company’s minimum hurdle rate, the synergies with the core business will grow the cumulative quantum of incremental profits and make a sizeable contribution to JSB’s goals.

Upstream, JSB has experience as an Engineering, Procurement, Construction, and Commissioning (EPCC) contractor having participated in the construction of a 100 MWac bifacial solar plant. The company is also currently transforming the legacy building materials trading business to be more RE-centric and support the construction of renewable energy plants. As the trading business has near 50 years of experience in supporting construction projects, the synergies with development of hydropower projects are significant given almost 80% of the associated construction costs involve civil works.

Downstream, JSB is exploring the possibility of managing its own Operations and Maintenance (O&M) for its renewable energy assets. It can benefit from economies of scale as JSB grows its portfolio of projects and sites. The company has also developed a unit which specialises in the trading of Renewable Energy Certificates (RECs) for both its own as well as third-party assets.

“As the renewable energy industry develops, we are seeing more and more companies integrate across the value chain to boost returns and extract synergies. We see comparable industry peer price-earnings multiples at figures north of 30 times. For JSB, we are aggressively seeking to unlock this value by exceeding expectations from our proposed acquisition of Telekosang Hydro, development of Project Oriole and delivery of our growth pipeline.” explains Baevin.

JSB’s trajectory has caught the attention of major international players.

In 2023, JSB signed a Memorandum of Understanding with Japan’s Sumitomo Corporation, one of the largest worldwide trading companies.

Tangible value and synergies can be derived from working with a 400-year-old company like Sumitomo, stemming from the opportunity to learn from and emulate Sumitomo’s deep dedication to discipline and meticulousness when it comes to engineering, operations, and maintenance. Both Sumitomo’s and JSB’s keenness to foster long-term relationships remains the bedrock of its collaboration and is central tenet to the development Project Oriole as well as on potential future renewable energy projects.

As key pieces fall into place for JSB this year, both Beroz and Baevin acknowledge the end of the transition is imminent and the next phase of growth is only just beginning.

“I’m excited to work with Baevin again to see how far we can take JSB. I’ve been really inspired by the work that I see the entire team putting in to really make it the renewable energy powerhouse I know it can be. Baevin is exactly the right person to lead our next phase of growth. Investing RM 2.8 billion into Project Oriole is a massive undertaking, and we’re honoured to be taking on this challenge. I’ve seen world class players at work overseas, and I’m absolutely convinced we are equally capable in every respect. It is our job to prove it.” adds Beroz.