KUALA LUMPUR (Dec 6): Vsolar Group Bhd plans to raise up to RM65.9 million via a renounceable rights issue with free warrants to meet its capital expenditure (capex) for development and construction of biomass plants.

The exercise entails the issuance of up to 1.32 billion rights shares together with up to 878.64 million warrants at an indicative issue price of 5 sen per rights share. The cash call will be on the basis of three rights shares for every one existing Vsolar share held, together with two free warrants for every three rights shares subscribed, at an entitlement date to be determined later.

Vsolar currently has an issued share capital of RM40.22 million comprising 410.83 million shares.

In a bourse filing today, Vsolar said based on the indicative issue price of 5 sen per rights share, the company expects to raise between RM8.2 million and RM65.9 million. The exercise price of the warrants will be determined by the board of directors.

Vsolar said its major shareholder Asiabio Capital Sdn Bhd has provided an irrevocable written undertaking to subscribe for RM6.3 million in value of the rights shares.

The company currently operates one 498 kWh solar photovoltaic renewable energy (RE) plant in Perak.

"As the company has limited expertise on biomass RE, the board decided to pursue a joint venture (JV), relying on third parties for their expertise to develop and manage a biomass RE plant.

"In return, Vsolar will be solely responsible for obtaining the financing for the development and construction of and additional working capital required for the JV project," said Vsolar.

Under the JV, Vsolar has a 60% stake via Vsolar Engineering Sdn Bhd. The JV project is subject to the approval from Sustainable Energy Development Authority, which has not been obtained at this juncture and will be applied for upon securing the necessary funds.

"Depending on the amount of proceeds to be raised from the rights issue with warrants, the JV will have enough proceeds to develop between 1-megawatt (MW) and 3MW of biomass energy plants. In this respect, the cost of development for the biomass plant is RM23.3 million per MW and requires a land area of about 310 acres," said Vsolar.

M&A Securities Sdn Bhd has been appointed as adviser for the proposed exercise, which is expected to be completed in the first half of 2020.

Vsolar shares closed unchanged at 4.5 sen today, bringing a market capitalisation of RM18.49 million.