Circular to Shareholders in Relation to the Proposed Renounceable Rights Issue with Warrants

THISTHIS CIRCULAR CIRCULAR IS IS IMPORTANT IMPORTANT AND AND REQUIRES REQUIRES YOUR YOUR IMMEDIATE IMMEDIATE ATTENTION. ATTENTION. THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IfTHISTHISIf you you CIRCULAR CIRCULARare are in in any anyIS IS doubtIMPORTANT doubtIMPORTANT as as to to ANDthe ANDthe course REQUIREScourse REQUIRES of of action YOURaction YOUR toIMMEDIATE toIMMEDIATE be be taken, taken, ATTENTION.you ATTENTION.you should should consult consult your your Ifstockbroker,stockbroker, you are in bank anybank manager,doubt manager, as solicitor,to solicitor, the course accountant accountant of action or or other otherto be professional professional taken, you advisers advisersshould immediately.consult immediately. your IfIf you you are are in in any any doubt doubt as as to to the the course course of of action action to to be be taken, taken, you you should should consult consult your your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursastockbroker, stockbroker,Bursa Securities Securities bank banktakes takes manager, nomanager, no responsibility responsibility solicitor, solicitor, for for accountantthe accountantthe contents contents orof orof thisother thisother Circular, Circular, professional professional makes makes no advisersno advisersrepresentation representation immediately. immediately. as as to to its its

Bursaaccuracyaccuracy Securities or or completeness completeness takes no responsibilityand and expressly expressly for disclaims disclaimsthe contents any any liability ofliability this whatsoeverCircular, whatsoever makes for for anyno any representationloss loss howsoever howsoever as arising toarising its accuracyfromBursaBursafrom or Securities or inSecurities orin reliance reliancecompleteness takes takesupon upon no nothe responsibilitytheand responsibility whole whole expressly or or any anyfor disclaimsfor part the part the ofcontents of contentsthe anythe contents contentsliability of of this this of whatsoeverCircular, of Circular,this this Circular. Circular. makes makes for any no no representationloss representation howsoever as arisingas to to its its accuracyaccuracy or or completeness completeness and and expressly expressly disclaims disclaims any any liability liability whatsoever whatsoever for for any any loss loss howsoever howsoever arising arising from or in reliance upon the whole or any part of the contents of this Circular. fromfrom or or in in reliance reliance upon upon the the whole whole or or any any part part of of the the contents contents of of this this Circular. Circular. ThisThis Circular Circular has has been been reviewed reviewed and and approved approved by by M M & &A ASecurities Securities Sdn Sdn Bhd, Bhd, who who is isthe the Adviser Adviser to to Vsolar Vsolar ThisGroup Group Circular Berhad Berhad has (“ (“VsolarbeenVsolar reviewed” ”or or the the and “ Company“ Companyapproved”) by ”)fo Mfor rthe& theA ProposedSecurities Proposed SdnRights Rights Bhd, Issue Issuewho with iswith the Warrants AdviserWarrants to(defined (definedVsolar ThisThis Circular Circular has has been been reviewed reviewed and and approved approved by by M M & &A ASecurities Securities Sdn Sdn Bhd, Bhd, who who is isthe the Adviser Adviser to to Vsolar Vsolar Groupherein).herein). Berhad (“Vsolar” or the “Company”) for the Proposed Rights Issue with Warrants (defined herein).GroupGroup Berhad Berhad (“ (“VsolarVsolar” ”or or the the “ Company“Company”) ”)fo for rthe the Proposed Proposed Rights Rights Issue Issue with with Warrants Warrants (defined (defined herein).herein).

VSOLARVSOLAR GROUP GROUP BERHAD BERHAD (Registration(RegistrationVSOLARVSOLAR No. No. GROUP200301029575 GROUP 200301029575 BERHAD BERHAD (631995-T)) (631995-T)) (RegistrationVSOLAR(IncorporatedVSOLAR(Incorporated No. 200301029575 GROUP GROUP in in Malaysia) BERHAD Malaysia) BERHAD (631995-T)) (Registration(Registration No. No. 200301029575 200301029575 (631995-T)) (631995-T)) (Incorporated in Malaysia) (Incorporated(Incorporated in in Malaysia) Malaysia)

CIRCULARCIRCULAR TO TO SHAREHOLDERS SHAREHOLDERS

CIRCULAR TO SHAREHOLDERS CIRCULARCIRCULARININ RELATION RELATION TO TO SHAREHOLDERS SHAREHOLDERS TO TO THE THE

IN RELATION TO THE PROPOSED PROPOSED RENOUNCEABLE RENOUNCEABLE RIGHTS RIGHTSININ RELATIONISSUE RELATIONISSUE OF OF TO UP TO UPTHE THETO TO 1,317,950,973 1,317,950,973 NEW NEW ORDINARY ORDINARY

SHARESPROPOSEDSHARES IN IN RENOUNCEABLEVSOLAR VSOLAR (“RIGHTS (“RIGHTS RIGHTS SHARES”) SHARES”) ISSUE TOGETHER OFTOGETHER UP TO WITH WITH1,317,950,973 UP UP TO TO 878,633,982 878,633,982NEW ORDINARY FREE FREE PROPOSEDPROPOSED RENOUNCEABLE RENOUNCEABLE RIGHTS RIGHTS ISSUE ISSUE OF OF UP UP TO TO 1,317,950,973 1,317,950,973 NEW NEW ORDINARY ORDINARY DETACHABLESHARESDETACHABLE IN VSOLARWARRANTS WARRANTS (“RIGHTS (“ (“WARRANTSWARRANTS SHARES”)”)”) ON ONTOGETHER THE THE BASIS BASIS WITHOF OF 3 3 RIGHTS UPRIGHTS TO SHARES 878,633,982SHARES FOR FOR EVERY FREEEVERY DETACHABLESHARESEXISTINGSHARESEXISTING IN ORDINARYIN ORDINARY VSOLAR WARRANTSVSOLAR SHARE(“RIGHTS SHARE(“RIGHTS (“WARRANTS HELD HELD SHARES”) INSHARES”) IN VSOLAR ”)VSOLAR ON TOGETHER THE TOGETHER(“VSOLAR (“VSOLAR BASIS SHARE(S)”WITH OF SHARE(S)”WITH 3 RIGHTSUP UP ORTO ORTO SHARES“SHARE(S)”)878,633,982 “SHARE(S)”)878,633,982 FOR ONEVERY FREEON FREEAN AN DETACHABLEDETACHABLE WARRANTS WARRANTS (“ (“WARRANTSWARRANTS”)”) ON ON THE THE BASIS BASIS OF OF 3 3RIGHTS RIGHTS SHARES SHARES FOR FOR EVERY EVERY ENTITLEMENTEXISTINGENTITLEMENT ORDINARY DATE DATE TO SHARETO BE BE DETERMINED DETERMINED HELD IN VSOLAR TOGETHER TOGETHER (“VSOLAR WITH WITH SHARE(S)” 2 2FREE FREE WARRANTS WARRANTSOR “SHARE(S)”) FOR FOR EVERY EVERYON AN 3 3 RIGHTSENTITLEMENTEXISTINGRIGHTSEXISTING SHARES SHARESORDINARY ORDINARY DATE SUBSCRIBED SUBSCRIBED TO SHARE SHAREBE DETERMINED HELD HELD IN IN VSOLAR VSOLAR TOGETHER (“VSOLAR (“VSOLAR WITH SHARE(S)” SHARE(S)”2 FREE WARRANTS OR OR “SHARE(S)”) “SHARE(S)”) FOR EVERY ON ON AN AN3 ENTITLEMENTENTITLEMENT DATE DATE TO TO BE BE DETERMINED DETERMINED TOGETHER TOGETHER WITH WITH 2 2FREE FREE WARRANTS WARRANTS FOR FOR EVERY EVERY 3 3 RIGHTS SHARES SUBSCRIBED RIGHTSRIGHTS SHARES SHARES SUBSCRIBED SUBSCRIBED ANDAND

AND ANDAND NOTICENOTICE OF OF EXTRAORDINARY EXTRAORDINARY GENERAL GENERAL MEETING MEETING NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICENOTICE OF OF EXTRAORDINARY EXTRAORDINARYAdviserAdviser GENERAL GENERAL MEETING MEETING Adviser AdviserAdviser

MM & &A ASECURITIES SECURITIES SDN SDN BHD BHD (Registration (Registration No. No. 197301001503 197301001503 (15017 (15017-H)-H)) ) M & A SECURITIES(A(A SDNWholly-Owned Wholly-Owned BHD (Registration Subsidiary Subsidiary ofNo. of Insas Insas197301001503 Berhad) Berhad) (15017-H)) MM & &A ASECURITIES SECURITIES SDN SDN BHD BHD (Registration (Registration No. No. 197301001503 197301001503 (15017 (15017-H)-H)) ) (A(A Participating Participating(A Wholly-Owned Organisation Organisation Subsidiary of of Bursa Bursa Malaysia of Malaysia Insas SecuritiesBerhad) Securities Berhad) Berhad) (A Participating(A(A Wholly-Owned Wholly-Owned Organisation Subsidiary ofSubsidiary Bursa Malaysia of of Insas Insas SecuritiesBerhad) Berhad) Berhad) (A(A Participating Participating Organisation Organisation of of Bursa Bursa Malaysia Malaysia Securities Securities Berhad) Berhad) TheThe Notice Notice convening convening the the Extraordinary Extraordinary General General Meeting Meeting (“EGM”) (“EGM”) of of Vsolar Vsolar to to be be held held at at Theatrette Theatrette th th TheRoom,Room, Notice 4 4 Floor, conveningFloor, Menara Menara the Lien LienExtraordinary Hoe, Hoe, No. No. 8 General8Persiaran Persiaran Meeting Tropicana, Tropicana, (“EGM”) Tropicana Tropicana of Vsolar Golf Golf to& & Countrybe Country held Resort,at Resort, Theatrette 47410 47410 Room,PetalingThePetalingThe Notice Notice4 Jaya,th Jaya,Floor, convening conveningSelangor Selangor Menara theDarul theDarulLien Extraordinary ExtraordinaryEhsan Hoe, Ehsan No.on on Wednesday 8 Wednesday GeneralPersiaran General ,Meeting 25,MeetingTropicana, 25 March March (“EGM”) (“EGM”)2020 2020Tropicana at ofat 10of 10Vsolar .3 Vsolar.0Golf3 0a .m.a .m.to& to togetherCountrybe togetherbe held held withResort,at withat Theatrette theTheatrette the 47410Proxy Proxy Room,Room, 4 th4 thFloor, Floor, Menara Menara Lien Lien Hoe, Hoe, No. No. 8 8Persiaran Persiaran Tropicana, Tropicana, Tropicana Tropicana Golf Golf & &Country Country Resort, Resort, 47410 47410 PetalingFormForm are are Jaya, enclosed enclosed Selangor in in this thisDarul Circular. Circular. Ehsan on Wednesday, 25 March 2020 at 10.30 a.m. together with the Proxy PetalingPetaling Jaya, Jaya, Selangor Selangor Darul Darul Ehsan Ehsan on on Wednesday Wednesday, 25, 25 March March 2020 2020 at at 10 10.3.03 0a .m.a.m. together together with with the the Proxy Proxy Form are enclosed in this Circular. AForm AFormshareholder shareholder are are enclosed enclosed entitled entitled in in this tothis to attendCircular. attendCircular. and and vote vote at at the the EGM EGM is isentitled entitled to to appoint appoint a aproxy proxy to to attend attend and and vote vote on on

Ahis hisshareholder behalf. behalf. The The entitled Proxy Proxy Form to Form attend must must andbe be depositedvote deposited at the at atEGM the the Registeredis Registered entitled toOffice Officeappoint of of our aour proxyCompany Company to attend situated situated and at voteat No. No. on2 -2 - his1,A 1,A shareholderJalan behalf. shareholderJalan Sri SriThe Hartamas Hartamasentitled Proxyentitled Form 8,to 8, to Sriattend Sriattendmust Hartamas, Hartamas, andbe and depositedvote vote 50480 50480at at the theKuat KuEGM alathe EGMala Lumpur, Registered isLumpur, isentitled entitled Wilayah Wilayah toOffice to appoint appoint Persekutuanof Persekutuan our a a proxyCompany proxy to(KL) to (KL)attend situated attendon on or andor beforeand atbefore vote No.vote the on 2 theon- hishis behalf. behalf. The The Proxy Proxy Form Form must must be be deposited deposited at at the the Registered Registered Office Office of of our our Company Company situated situated at at No. No. 2 -2- 1,datedate Jalan and and Sri time time Hartamas indicated indicated 8, below Sribelow Hartamas, in in order order for50480 for it itto to Kube beala valid. valid. Lumpur, The The lodging Wilayahlodging of of Persekutuanthe the Proxy Proxy Form Form(KL) will onwill not ornot precludebefore preclude the a a dateshareholder1,shareholder1, Jalan Jalanand Sri time Sri Hartamasfrom Hartamasfromindicated attending attending 8, below8, Sri Sri andHartamas, and Hartamas,in voting order voting forin50480 in 50480person it person to Kube Kuatala valid.at alathe Lumpur,the Lumpur, EGMThe EGM lodgingshould Wilayahshould Wilayah theof the Persekutuanthe shareholderPersekutuan shareholder Proxy Form (KL)subsequentl (KL)subsequentl will on onnot or or precludebefore ybefore ywish wish the tothea to datedate and and time time indicated indicated below below in inorder order for for it itto to be be valid. valid. The The lodging lodging of of the the Proxy Proxy Form Form will will not not preclude preclude a a shareholderdodo so. so. from attending and voting in person at the EGM should the shareholder subsequently wish to shareholdershareholder from from attending attending and and voting voting in inperson person at at the the EGM EGM should should the the shareholder shareholder subsequentl subsequently ywish wish to to doLastLast so. date date and and time time for for lodging lodging the the : : MondayMonday, 23, 23 March March 2020 2020 at at 10. 10.303 0a.m. a.m. LastProxydoProxydo so. dateso. Form Form and time for lodging the : Monday, 23 March 2020 at 10.30 a.m. LastLast date date and and time time for for lodging lodging the the : : MondayMonday, 23, 23 March March 2020 2020 at at 10. 10.303 0a.m. a.m. ProxyDateDate and Form and time time of of EGM EGM : : WednesdayWednesday, 25, 25 March March 2020 2020 at at 10. 10.303 0a.m. a.m. DateProxyProxy and Form Form time of EGM : Wednesday , 25 March 2020 at 10.30 a.m. DateDate and and time time of of EGM EGM : : WednesdayWednesday, 25, 25 March March 2020 2020 at at 10. 10.303 0a.m. a.m. ThisThis Circular Circular is isdated dated 10 10 March March 2020 2020

This Circular is dated 10 March 2020 ThisThis Circular Circular is isdated dated 10 10 March March 2020 2020

DEFINITIONS

Except where the context otherwise requires, the following definitions shall apply throughout this Circular:

“ACE Market” : ACE Market of Bursa Securities

“Act” : Companies Act 2016

“Asiabio Capital” or the : Asiabio Capital Sdn Bhd (200801038768 (840116-P)), our major “Undertaking Shareholder” shareholder

“Board” : Board of Directors of Vsolar

“Bursa Securities” : Bursa Malaysia Securities Berhad (200301033577 (635998-W))

“Circular” : This circular to the shareholders dated 10 March 2020 in relation to the Proposed Rights Issue with Warrants

“Deed Poll” : The deed poll governing the Warrants, to be executed by our Company

“EGM” : Extraordinary general meeting

“Entitled Shareholder(s)” : Shareholder(s) of Vsolar whose names appear in the Record of Depositors of our Company as at the Entitlement Date

“Entitlement Date” : A date, to be determined and announced later by our Board, as at the close of business on which the shareholders of Vsolar must be registered in the Record of Depositors of our Company in order to be entitled to participate in the Proposed Rights Issue with Warrants

“EPS” : Earnings per Share

“ESOS” : Employees share option scheme

“ESOS Options” : Options granted or to be granted, as the case may be, from our ESOS

“FYE(s)” : Financial year(s) ended/ending, as the case may be

“GDP” : Gross domestic product

“JV Company” : Vsolar Engineering Sdn Bhd (201501021290 (1146618-M)), a 60%- owned subsidiary of Vsolar

“kWh” : Kilowatt hour(s)

“LAT” : Loss after taxation

“LPD” : 20 February 2020, being the latest practicable date prior to the printing of this Circular

“LR” : ACE Market Listing Requirements of Bursa Securities, as amended from time to time including any re-enactment thereof

“M&A Securities” or “Adviser” : M & A Securities Sdn Bhd (197301001503 (15017-H))

i i DEFINITIONS (CONT’D)

“Maximum Scenario” : Assuming all Entitled Shareholders fully subscribe for their respective entitlements under the Proposed Rights Issue with Warrants, and that a maximum of 28,486,228 ESOS Options are granted and exercised prior to the Entitlement Date

“MW” : Megawatt(s)

“Minimum Scenario” : Assuming only Asiabio Capital subscribes for Rights Shares of at least RM3,000,000 in value pursuant to the Undertaking under the Proposed Rights Issue with Warrants, RM5,200,000 in value of Rights Shares are fully underwritten, and that no ESOS Options are exercised prior to the Entitlement Date

“NA” : Net asset(s)

“Project” : Joint-venture development of up to 10MW of biomass energy generation plant between KRU Energy Asia Pte Ltd, Rangkaian Iltizam Sdn Bhd, Kenneth Lee Wai Tong and the JV Company

“Proposed Rights Issue with : Proposed renounceable rights issue of up to 1,317,950,973 Rights Warrants” Shares together with up to 878,633,982 free Warrants at an indicative issue price of RM0.03 per Rights Share on the basis of 3 Rights Shares for every existing Vsolar Share held together with 2 Warrants for every 3 Rights Shares subscribed

“RE” : Renewable energy

“REPPA” : Renewable Energy Power Purchase Agreement

“Record of Depositors” : A record of securities holders established and maintained by Bursa Malaysia Depository Sdn Bhd

“Redmarch” : Redmarch Sdn Bhd (200801022604 (823923-W)), the independent market research consultancy appointed for the Proposed Rights Issue with Warrants

“Rules” : Rules of the Malaysian Code on Take-overs and Mergers, 2016

“Rights Share(s)” : Up to 1,317,950,973 new Vsolar Share(s) to be issued pursuant to the Proposed Rights Issue with Warrants

“RM and sen” : Ringgit Malaysia and sen, respectively

“SEDA” : Sustainable Energy Development Authority Malaysia

“Undertaking” : Irrevocable written undertaking by Asiabio Capital to subscribe for at least RM3,000,000 in value of Rights Shares

“Vsolar” or the “Company” : Vsolar Group Berhad (200301029575 (631995-T))

“Vsolar Share(s)” or “Share(s)” : Ordinary share(s) in Vsolar

“Warrant(s)” : Up to 878,633,982 new detachable warrant(s) to be issued under the Proposed Rights Issue with Warrants

“5D-VWAMP” : 5-day volume weighted average market price

ii ii

DEFINITIONS (CONT’D)

For the purpose of this Circular, all references to a time of day shall be a reference to Malaysian time unless otherwise stated.

In this Circular, words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and vice versa. References to persons shall, where applicable, include corporations. Certain figures included in this Circular have been subject to rounding adjustments.

References to “we”, “us”, “our” and “ourselves” are to our Company save where the context otherwise requires, our subsidiaries and to “you” or “your” are to the shareholders of Vsolar.

All references to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any statutes, rules, regulations or enactments shall be construed as a reference to such statutes, rules, regulations or enactments as for the time being amended, re- enacted or modified.

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iii iii

TABLE OF CONTENTS

Page LETTER TO SHAREHOLDERS IN RELATION TO THE PROPOSED RIGHTS ISSUE WITH WARRANTS

1. INTRODUCTION 1

2. DETAILS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS 3

3. RATIONALE FOR THE PROPOSED RIGHTS ISSUE WITH WARRANTS 11

4. FINANCIAL EFFECTS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS 12

5. INDUSTRY OVERVIEW AND PROSPECTS 17

6. SHARE PRICE PERFORMANCE 22

7. APPROVALS REQUIRED 22

8. INTER-CONDITIONALITY 23

9. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS 23

10. DIRECTORS’ RECOMMENDATION 23

11. ESTIMATED TIME FRAME FOR COMPLETION 23

12. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION 23

13. EGM 24

14. FURTHER INFORMATION 24

APPENDICES

I INFORMATION ON THE PROJECT 25

II PRO FORMA STATEMENT OF FINANCIAL POSITION OF VSOLAR AND ITS 32 SUBSIDIARIES AS AT 30 JUNE 2019 TOGETHER WITH THE REPORTING ACCOUNTANTS’ LETTER THEREON

III INDEPENDENT MARKET ASSESSMENT OF THE MALAYSIAN BIOMASS MARKET 45 PREPARED BY REDMARCH

IV FURTHER INFORMATION 55

V ADDITIONAL INFORMATION 58

NOTICE OF EGM ENCLOSED

PROXY FORM ENCLOSED

iv VSOLAR GROUP BERHAD (Registration No. 200301029575 (631995-T)) (Incorporated in Malaysia)

Registered Office:

No. 2-1, Jalan Sri Hartamas 8 Sri Hartamas 50480 Kuala Lumpur Wilayah Persekutuan (KL)

10 March 2020

Directors: Leung Kok Keong (Executive Director) Abdul Menon Bin Arsad @ Abdul Manan Bin Arshad (Senior Independent Non-Executive Director) Ng Chee Kin (Independent Non-Executive Director)

To: The Shareholders of Vsolar Group Berhad

Dear Sir / Madam,

PROPOSED RIGHTS ISSUE WITH WARRANTS

1. INTRODUCTION

On 14 March 2018, the shareholders of the Company approved the Company’s rights issue exercise which entails the issuance of up to 1,221,372,489 new Vsolar Share together with up to 814,248,326 free warrants on the basis of 3 new Vsolar Shares for every existing ordinary share in Vsolar held together with 2 free detachable warrants for every 3 Shares subscribed (“Original Rights Issue”).

Subsequent to the approval on 14 March 2018, due to the grant and exercise of ESOS Options which were granted after the Original Rights Issue was approved by shareholders, and were not factored into the determination of the maximum number of rights share and warrants, the number of entitled Rights Shares exceeded the maximum number of Shares approved by shareholders under the Original Rights Issue. Hence, the Company is required under Rule 8.24 of LR to seek the approval of its shareholders for such material variation.

Premised on the above, on 6 December 2019, M&A Securities, on behalf of our Board, announced that the Company proposes to undertake the Proposed Rights Issue with Warrants.

On 9 January 2020, the listing application in relation to the Proposed Rights Issue with Warrants was submitted to Bursa Securities.

1 Subsequently, on 19 February 2020, Bursa Securities had vide its letter dated 19 February 2020 granted its approval-in-principle for the following:

(i) Admission of the Warrants to the Official List;

(ii) Listing of and quotation for:

(a) Up to 1,317,950,973 Rights Shares to be issued pursuant to the Proposed Rights Issue with Warrants;

(b) Up to 878,633,982 Warrants to be issued pursuant to the Proposed Rights Issue with Warrants; and

On 6 March 2020, M&A Securities announced that the Undertaking was revised from RM6,300,000 to RM3,000,000 to avoid implications of a mandatory take-over offer being triggered in the event that the issue price of the Rights Shares is fixed lower than RM0.05 per Share after taking into account the prevailing market conditions.

Bursa Securities’ approval-in-principle for the Proposed Rights Issue with Warrants is subject to the following conditions:

Conditions Status of Compliance

(i) Vsolar and M&A Securities must fully comply with the To be complied relevant provisions under the ACE Market Listing Requirements pertaining to the implementation of the Proposed Rights Issue with Warrant

(ii) Vsolar and M&A Securities to inform Bursa Securities To be complied upon the completion of the Proposed Rights Issue with Warrants

(iii) Vsolar to furnish Bursa Securities with a written To be complied confirmation of its compliance with the terms and conditions of Bursa Securities’ approval once the Proposed Rights Issue with Warrants is completed

(iv) Vsolar to furnish Bursa Securities on a quarterly basis a To be complied summary of the total number of shares listed pursuant to the exercise of Warrants as at the end of each quarter together with a detailed computation of listing fees payable

The purpose of this Circular is to provide you with details of the Proposed Rights Issue with Warrants, to set out our Board’s opinion and recommendation in relation to the Proposed Rights Issue with Warrants and to seek your approval for the resolutions pertaining to the Proposed Rights Issue with Warrants to be tabled at our forthcoming EGM, scheduled to be held at Theatrette Room, 4th Floor, Menara Lien Hoe, No. 8 Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 25 March 2020, 10.30 a.m. or any adjournment thereof. The Notice of EGM together with the Proxy Form are enclosed with this Circular.

YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSED RIGHTS ISSUE WITH WARRANTS TO BE TABLED AT THE FORTHCOMING EGM.

2 2. DETAILS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS

As at the LPD, Vsolar has:

(i) an issued share capital of RM50,758,819 (inclusive of share premium) comprising 410,830,763 Vsolar Shares; and

(ii) up to 28,486,228 ESOS Options available to be granted under our ESOS.

The Proposed Rights Issue with Warrants involves a renounceable rights issue of up to 1,317,950,973 Rights Shares together with up to 878,633,982 Warrants at an indicative issue price of RM0.03 per Rights Share on the basis of 3 Rights Shares for every existing Vsolar Share held together with 2 Warrants for every 3 Rights Shares subscribed. The Rights Shares will be offered to the Entitled Shareholders at an Entitlement Date to be determined by our Board after obtaining the approvals for the Proposed Rights Issue with Warrants from all relevant authorities and the shareholders of our Company.

The maximum number of Rights Shares and Warrants to be issued under the Proposed Rights Issue with Warrants is derived based on our Company’s issued share capital of Vsolar under the Maximum Scenario. Based on the Maximum Scenario, up to 1,317,950,973 Rights Shares will be made available for subscription and up to 878,633,982 Warrants will be issued. The actual number of Rights Shares and Warrants offered under the Proposed Rights Issue with Warrants will be determined on the Entitlement Date.

Nevertheless, the Proposed Rights Issue with Warrants will be implemented on a Minimum Scenario to raise minimum gross proceeds of at least RM8.2 million. The Minimum Scenario is based on the minimum required funding of RM8.2 million as set out in Section 2.5 of this Circular. For illustrative purposes, under the Minimum Scenario, 273,333,333 Rights Shares will be issued together with 182,222,222 Warrants. The indicative salient terms of the Warrants are set out in Section 2.6 below.

2.1 Entitlements to the Rights Shares and Warrants

The Rights Shares will be provisionally allotted to the Entitled Shareholders. Fractional entitlements to the Rights Shares and Warrants pursuant to the Proposed Rights Issue with Warrants, if any, will be disregarded and dealt with in such manner as our Board in its absolute discretion deems fit and in the best interest of our Company.

For the avoidance of doubt, the Warrants are attached to the Rights Shares without any cost to the Entitled Shareholders and renouncee(s). The Proposed Rights Issue with Warrants is renounceable in full or in part. The Warrants will be immediately detached from the Rights Shares upon issuance and will be separately traded. Accordingly, Entitled Shareholders can subscribe for and/or renounce their entitlements to the Rights Shares in full or in part. The renunciation of the Rights Shares by the Entitled Shareholders will accordingly entail the renunciation of the Warrants to be issued together with the Rights Shares. If the Entitled Shareholders decide to accept only part of their Rights Shares entitlements, they shall be entitled to the number of Warrants in proportion to the Rights Shares they have accepted.

The Rights Shares which are not taken up or validly taken up shall be made available for excess applications by the Entitled Shareholders and/or their renouncee(s). It is the intention of our Board to allocate the excess Rights Shares in a fair and equitable manner on a basis to be determined by our Board and announced later by our Company.

3 2.2 Basis of determining the issue price of the Rights Shares and exercise price of the Warrants

(i) Rights Shares

The issue price of the Rights Shares under the Proposed Rights Issue with Warrants will be determined by our Board at a later date after taking into consideration, amongst others, the following:

(i) the historical share price of Vsolar; and

(ii) the 5D-VWAMP of Vsolar Shares up to the price-fixing date.

In any event, the discount of the issue price of the Rights Shares shall not be more than 50% from the theoretical ex-all price of Vsolar Shares. For illustrative purposes, an indicative issue price of RM0.03 per Rights Shares would represent a discount of approximately 8.68% to the theoretical ex-all price of Vsolar Shares of approximately RM0.0329 per Share calculated based on the 5D-VWAMP of Vsolar Shares up to 5 December 2019 of RM0.0471 (being the market day preceding the date of the announcement of the Proposed Rights Issue with Warrants).

(ii) Warrants

The exercise price of the Warrants under the Proposed Rights Issue with Warrants will be determined by our Board at a later date, after taking into consideration, amongst others, the following:

(i) the 5D-VWAMP of Vsolar Shares up to the price-fixing date; and

(ii) the theoretical ex-all price of Vsolar Shares.

The Warrants are attached to the Rights Shares without any cost and will be issued in proportion to the Rights Shares subscribed by the Entitled Shareholders. In any event, the discount of the exercise price of the Warrants shall not be more than 50% from the theoretical ex-all price of Vsolar Shares.

2.3 Ranking of the Rights Shares and new Vsolar Shares from the exercise of Warrants

The Rights Shares and new Vsolar Shares from the exercise of Warrants shall upon allotment and issuance, rank equally in all respects with the then existing Vsolar Shares in issue, save and except that the these shares shall not be entitled to any dividend, rights, allotments and or other distributions, the entitlement date of which is prior to the date of allotment of these shares.

2.4 Undertaking and underwriting arrangement

Asiabio Capital, our major shareholder has provided its irrevocable undertaking on 6 March 2020 based on the terms of the Proposed Rights Issue with Warrants to subscribe for at least RM3.0 million in value of Rights Shares via its entitlement and excess application, if required. Additionally, the Board will endeavour to procure the necessary underwriting for the remaining RM5.2 million in value of Rights Shares to raise the minimum gross proceeds of at least RM8.2 million under the Minimum Scenario to meet the Minimum Scenario.

4 Asiabio Capital has confirmed that it has sufficient financial resources to take up Rights Shares based on its Undertaking and such confirmation has been verified by M&A Securities.

For illustrative purposes, based on an indicative issue price of RM0.03 per Rights Shares and assuming underwriting arrangements are in place to meet the Minimum Scenario, the Undertaking Shareholder’s shareholdings and its respective entitlements under the Proposed Rights Issue with Warrants are as follow:

Direct shareholding as at the LPD No. of free No. of Vsolar No. of entitled Warrants Name Shares % Rights Shares attached

Asiabio Capital 60,491,700 14.72 181,475,100 120,983,400

The number and percentage of Rights Shares to be subscribed pursuant to the Undertaking is set out below:

Rights Shares to be subscribed pursuant to the Undertakings (i)%of No. of free No. of Rights Rights Warrants (i)% of Name Shares Shares attached Warrants

Asiabio Capital 100,000,000 8.11 66,666,666 8.11

Note:

(i) Calculated based on the total of 1,232,492,289 Rights Shares together with 821,661,526 Warrants offered under the Minimum Scenario.

The Undertaking shall subsist and remain irrevocable until the completion of the Proposed Rights Issue with Warrants.

The Undertaking will not trigger any obligation under the Rules immediately upon the completion of the Proposed Rights Issue with Warrants. However, should Asiabio Capital or persons related to it exercise their Warrants, such that its shareholdings in Vsolar, whether on an individual or collective basis, increases above 33% or increases by more than 2.0% in any 6 months period (where the acquiring member already holds more than 33% but not more than 50% of the voting shares or voting rights of our Company), they will be obliged under the Rules to undertake a mandatory offer for all the remaining Vsolar Shares not already held by them. Nonetheless, Asiabio Capital confirms that it will observe and comply at all times with the provisions of the Rules and will seek the necessary exemptions from undertaking such mandatory offer, if required.

If the Minimum Scenario is not achieved despite the Undertaking and underwriting arrangements to be made, the Company will seek alternative funding methods which may include a combination of internally generated funds or bank borrowings, the proportion of which is to be determined depending on the circumstances of such an occurrence.

2.5 Utilisation of proceeds

Based on an indicative issue price of RM0.03 per Rights Shares, the Proposed Rights Issue with Warrants will raise gross proceeds of between RM8.20 million (under the Minimum Scenario) and RM39.54 million (under the Maximum Scenario).

5 The details of the utilisation of gross proceeds under the Minimum Scenario and Maximum Scenario are as follows:

Utilisation timeframe (from listing of Minimum Maximum Details of utilisation Rights Shares) Notes Scenario Scenario RM’000 RM’000 Capital expenditure for Between 12 to 36 (i) 6,670 36,648 development and construction months of biomass/biogas plants

Additional working capital for the Within 36 months (ii) 680 2,040 operations of the biomass/biogas plant

Estimated expenses for the Within 1 month (iii) 850 850 Proposed Rights Issue with Warrants Total 8,200 39,538

Notes:

(i) Capital expenditure for development and construction of biomass/biogas plants

We currently operate one 498 kWh solar photovoltaic RE plant located in Perak. As we have limited expertise on biomass RE, the Board decided to pursue a joint venture, relying on third parties for their expertise to develop and manage a biomass/biogas RE plant. In return, Vsolar shall be solely responsible, on a best effort basis, for obtaining the financing for the development and construction of and additional working capital required for the joint venture project. Details of the joint venture parties and the joint venture agreement are set out in Appendix I.

As at the LPD, Vsolar has 60% equity interest in the said joint venture via the JV Company. The Project is subject to the approval from SEDA, which has not been obtained at this juncture. The JV Company is expected to submit an application to SEDA in April 2020.

Pursuant to the terms of the joint venture, Vsolar is to procure the necessary financing for the development and construction of biomass RE plants. At this juncture, Vsolar proposes to finance its capital commitments in respect of the joint venture through a combination of the proceeds to be raised from the Proposed Rights Issue with Warrants, internally generated funds and/or bank borrowings where necessary, the proportions of which are yet to be determined.

Depending on the amount of proceeds to be raised from the Proposed Rights Issue with Warrants, the joint venture will have enough proceeds to develop between 1MW to 2MW of biomass/biogas energy plants. In this respect, the cost of development for the biomass/biogas plant is approximately RM23.3 million per MW, and requires a land area of about 310 acres.

6 The breakdown of the cost of development is as follows:

Description RM’000

Site construction: Offices, storage area, trailers, loaders, furniture and 2,270 perimeter security Combined heat and power (“CHP”) equipment 3,807 Tangkage and digesters 8,456 Fertilizer components 1,891 Farming components 1,004 Closing cost and insurance 523 Engineering and construction administration 1,394 Construction contingencies 967 Sorghum silage 2,650 Enzymes, cereal, nutrients, handing 385 Total 23,347

The plant’s capacity will also be determined by the number of CHP systems located on the facility, which are determined by a number of technical factors such as electrical and thermal load profiles, as well as the amount of feed stock required by the facility, which amounts to approximately 200,000 tons of feed stock per year for 10MW, being the maximum allowable capacity by SEDA.

The joint venture project is an end-to-end project, which means that the JV Company will plant its own feedstock (sorghum, a grass species cultivated for its grain, which is used for food for humans, animal feed and ethanol production) and will not source the feedstock from any third party. At this juncture, the JV Company intends to plant its own feedstock by leasing a plantation land in Pekan, Pahang. However, the exact location for the plantation land to be leased has yet to be identified and the rental rate has yet to be determined.

For the avoidance of doubt, the JV Company will develop a biomass/biogas plant of with a capacity of at least 1MW using the proceeds raised from the Rights Issue with Warrants under the Minimum Scenario. Thereafter, after commencing operations, we will continue to increase the plant’s capacity depending insofar as we are able to obtain the required funds. Additionally, the JV Company also intends to apply for financial support from the Green Technology Financing Scheme which is a loan guarantee program which guarantees up to 60% of the total project costs and up to RM300 million per facility.

We are in the midst of identifying a parcel of land of at least 310 acres located in Pekan, Pahang to be leased for the construction of the plant. A total of 5 operation staff are required. Additionally, about 20 engineers and farming consultants will be required to facilitate the project. These staff will be identified after the approval from SEDA is obtained for the project. Once the plant is operational, the engineers and consultants developing are expected to be designated to future projects. The JV Company intends to expand once the Project is successfully implemented.

7 (ii) Additional working capital for the operations of the biomass/biogas plants

The breakdown of the utilisation of additional working capital for the operations of the biomass/biogas plants for Vsolar is as follows:

Minimum Maximum Scenario Scenario Description RM’000 RM’000

Salaries for management, project & maintenance staff 339 1,017 Incidental costs - Professional consultancy for the biomass/biogas plants 40 120 - Materials for farming such as effective microorganism 175 525 used in digesters, packing materials, stockpiling and storage materials - Transportation and lodging costs being mainly rental 30 90 and transportation for personnel on site - Other project costs such as miscellaneous expenses for farming and plot testing which consists of custom clearance fees, travelling expenses and electrical engineering fees 96 288 Total 680 2,040

(iii) Expenses for the Proposed Rights Issue with Warrants

Description RM’000

Professional fees(1) 650 Fees to authorities 100 Printing, meeting expenses and advertising 80 Underwriting 20 Total 850

Note:

(1) Comprises the professional fees of the Adviser, Solicitors, Reporting Accountants, Independent Market Researcher, Share Registrar, and Company Secretary.

In the event the actual expenses are less than the allocated amount, the excess allocated amount shall be utilised as working capital for Vsolar. Any excess or shortfall of the actual proceeds raised will be adjusted towards or against the utilisation for the working capital requirement of the biomass/biogas plants.

The proceeds to be raised from the Proposed Rights Issue with Warrants will be utilised firstly in priority to defray the expenses related to the Proposed Rights Issue with Warrants, and secondly towards the capital expenditure for the development and construction of biomass plants, and lastly toward the working capital required for the operations of the said plants. Any further funding required beyond the amount of proceeds raised from the Proposed Rights Issue with Warrants is expected to be sourced from internally generated funds and/or bank borrowings.

8 Any proceeds arising from the exercise of the Warrants in the future shall be utilised for capital expenditure, investment opportunities and/or working capital of Vsolar. The exact details of the utilisation of such proceeds, including the breakdown of the utilisation have not been determined.

2.5.1 Proceeds from the exercise of Warrants

Based on the indicative exercise price of the Warrants of RM0.03 each, the exercise of the Warrants will raise up to RM5.5 million under the Minimum Scenario and RM26.4 million under the Maximum Scenario.

Any proceeds arising from the exercise of the Warrants in the future shall be utilised for the working capital of Vsolar which includes but is not limited to salaries, rental, materials, transportation and other related expenses, the breakdown of which has yet to be determined. The exact details of the utilisation of such proceeds, including the breakdown of the utilisation have not been determined.

2.6 Salient terms of the Warrants

Terms Details Number of Warrants : Up to 878,633,982 Warrants to subscribe for up to 878,633,982 new Vsolar Shares, to be issued at no consideration to the Entitled Shareholders pursuant to the Proposed Rights Issue with Warrants.

Detachability : The Warrants are immediately detachable upon allotment and issue of the Rights Shares. The Warrants will be traded separately.

Exercise Price : The basis of determining the revised exercise price of the Warrants is set out in Section 2.2(ii) above. The exercise price and the number of outstanding Warrants shall however be subject to the adjustments in accordance with the terms and provisions of the Deed Poll during the exercise period.

Exercise Period : The Warrants may be exercised any time during the tenure of the Warrants of 3 years including and commencing from the issue date of the Warrants until 5.00 p.m. on the expiry date. Warrants not exercised during the Exercise Period will thereafter become lapse and void.

Exercise Rights : Each Warrant entitles the registered holder to subscribe for 1 new Vsolar Share at the Exercise Price during the Exercise Period and shall be subject to adjustments in accordance with the Deed Poll.

Deed Poll : The Warrants will be constituted by a Deed Poll to be executed by Vsolar.

Board Lot : The Warrants are tradeable upon listing in board lots of 100 units carrying rights to subscribe for 100 new Vsolar Shares at any time during the Exercise Period or such other number of units as may be prescribed by Bursa Securities.

9 Terms Details Modification : Amendments to the Deed Poll must be effected by a supplemental Deed Poll, and to be executed by our Company and expressed to be supplemental; and a special resolution passed by the Warrant holders. However, our Company may, without the consent of the Warrant holders effect any modification to the Warrants or the Deed Poll, which in its opinion is not materially prejudicial to the interest of the Warrant holders; or to correct a manifest error or to comply with mandatory provisions of Malaysian law.

Ranking of new Vsolar : The new Vsolar Shares to be issued pursuant to the exercise of the Shares to be issued Warrants will, upon allotment and issuance, rank equally in all pursuant to the exercise respects with the then existing Vsolar Shares in issue save and of Warrants except that they shall not be entitled to any dividends, rights, allotments and/or distributions, the entitlement date of which is prior to the date of allotment of the new Vsolar Shares to be issued pursuant to the exercise of the Warrants.

Rights in the Event of : Where a resolution has been passed for a members’ voluntary Winding-Up, Liquidation, winding-up of our Company or where there is a compromise or Amalgamation or arrangement, whether or not for the purpose of or in connection Reconstruction with a scheme for the reconstruction of our Company or the amalgamation of our Company with one or more companies, then: (a) for the purpose of such a winding-up, compromise or arrangement (other than a consolidation, amalgamation or merger in which our Company is the continuing corporation) to which the Warrant holders, or some persons designated by them for such purposes by a Special Resolution, will be a party, the terms of such winding-up, compromise or arrangement will be binding on all the Warrant holders; and (b) in any other case, every Warrant holder will be entitled to elect to be treated as if he had immediately prior to the commencement of such winding-up, compromise or arrangement exercised the Exercise Rights represented by that Warrant to the extent specified in the exercise forms and be entitled to receive out of the assets of our Company which would be available in liquidation if he had on such date been the holder of the new Shares to which he would have become entitled pursuant to such exercise and the liquidator of our Company will give effect to such election accordingly.

Listing : The Warrants and new Vsolar Shares to be issued pursuant to the exercise of the Warrants will be listed on the ACE Market.

Adjustment in the : Subject to the provisions in the Deed Poll, the Exercise Price and the Exercise Price and/or number of Warrants held by each Warrant holder shall be adjusted the number of Warrants by our Board in consultation with the adviser and certification of the external auditors of Vsolar, in the event of alteration to the share capital of our Company.

10 Terms Details Rights of Warrants : The Warrant holders are not entitled to any dividends, rights, holders allotments and/or other distributions that may be declared, made or paid.

The Warrant holders are not entitled to any voting rights in any general meeting of our Company or to participate in any distribution and/or offer of securities in our Company until and unless such holders of the Warrants exercise their Warrants into new Vsolar Shares.

Further Issues : Subject to the provision in the Deed Poll, our Company is free to issue shares to shareholders either for cash or as a bonus distribution and further subscription of rights upon such terms and conditions as our Company sees fit but the Warrant holders will not have any participating rights in such issue unless the Warrant holder becomes a shareholder by exercising his/her Exercise Rights or otherwise resolved by our Company in a general meeting.

Governing Law : Laws of Malaysia.

3. RATIONALE FOR THE PROPOSED RIGHTS ISSUE WITH WARRANTS

After considering other methods of fundraising such as bank borrowings and private placements, as well as the capital structure of Vsolar, our Board is of the opinion that the Proposed Rights Issue with Warrants is more appropriate method of raising funds, after taking into account the following:

(i) The issuance of Rights Shares would enable our Group to secure funding of at least RM8.20 million under the Minimum Scenario and up to RM39.54 million without incurring interest costs compared to bank borrowings;

(ii) Compared to other equity offerings, the Proposed Rights Issue with Warrants will involve the issuance of new Vsolar Shares without diluting the Entitled Shareholders’ shareholdings, provided that all Entitled Shareholders subscribe in full for their respective entitlements;

(iii) The Proposed Rights Issue with Warrants will increase the number of Vsolar Shares in circulation which is may potentially enhance the liquidity and marketability of Vsolar Shares on the ACE Market of Bursa Securities;

(iv) The Warrants attached to the Rights Shares are expected to enhance the attractiveness of the Rights Shares. It provides the shareholders with the option to further participate in the equity of our Company at a pre-determined price and enable them to benefit from the future growth of our Company and any potential capital appreciation arising thereof;

(v) The Proposed Rights Issue with Warrants will strengthen our Company’s financial position with enhanced shareholders’ funds. These factors are expected to facilitate the continuous business expansion plans of our Company; and

(vi) The Warrants will also provide our Company with additional capital when they are exercised. The exercise of the Warrants will allow our Company to raise fresh proceeds without incurring additional financing cost and minimise any potential cash outflow in respect of interest servicing.

11 4. FINANCIAL EFFECTS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS

For illustrative purposes, the financial effects of the Proposed Rights Issue with Warrants set out in the following subsections assume that the issue price of the Rights Shares and the exercise price of the Warrants are both fixed at RM0.03.

4.1 Share capital

The effect of the Proposed Rights Issue with Warrants on the issued and paid-up share capital of Vsolar is set out below:

(2) Minimum Scenario Maximum Scenario No. of Vsolar No. of Vsolar Shares RM Shares RM Existing issued and paid-up share 410,830,763 50,758,819 410,830,763 50,758,819 capital Assuming the maximum number - - 28,486,228 (3) (4)1,424,312 of ESOS Options are fully granted and exercised 410,830,763 50,758,819 439,316,991 52,183,131 To be issued pursuant to the 273,333,333 8,200,000 1,317,950,973 39,538,529 Proposed Rights Issue with Warrants Estimated expenses for the Rights - (850,000) - (850,000) Issue with Warrants Provision for Warrants reserve - (1)(2,261,538) - (1)(11,904,163) Enlarged share capital after 684,164,096 55,847,281 1,757,267,964 78,967,497 Proposed Rights Issue with Warrants Assuming share capital arising from: - Exercise of Warrants 182,222,222 5,466,667 878,633,982 (3)26,359,019 - Reversal of Warrants reserve - (1)2,261,538 - (1)11,904,163 Enlarged share capital 866,386,318 63,575,486 2,635,901,946 117,230,679

Notes:

(1) Computed based on the issuance of 182,222,222 Warrants under the Minimum Scenario and 878,633,982 Warrants under the Maximum Scenario at a fair value of RM0.02 each, calculated using the Black-Scholes valuation model.

(2) Based on indicative issue price of RM0.03 per Rights Share and assuming 273,333,333 Rights Shares are issued.

(3) Assuming an exercise price of RM0.03 for the ESOS Options and Warrants.

(4) Assuming the grant and exercise of 28,486,228 ESOS Options at a fair value of RM0.02 each, calculated using the Black-Scholes valuation model.

12 4.2 Substantial shareholders’ shareholdings

The effect of the Proposed Rights Issue with Warrants on the shareholdings of the substantial shareholders of Vsolar is set out below:

Minimum Scenario

(I) (II) After the Proposed Rights Issue After (I) and assuming full As at LPD with Warrants exercise of Warrants Direct Indirect Direct Indirect Direct Indirect No. of No. of No. of No. of No. of No. of Shares Shares Shares Shares Shares Shares (’000) % (’000) % (’000) % (’000) % (’000) % (’000) %

Asiabio Capital 60,491 14.72 - - 160,492 23.46 - - 227,158 26.22 - - Fintech Global - - 60,491 14.72 - - 160,492 23.46 - - 227,158 26.22 Berhad (1)

Maximum Scenario

(I) (II) After the Proposed Rights Issue After (I) and assuming full exercise As at LPD with Warrants(2) of Warrants Direct Indirect Direct Indirect Direct Indirect No. of No. of No. of No. of No. of No. of Shares Shares Shares Shares Shares Shares (’000) % (’000) % (’000) % (’000) % (’000) % (’000) %

Asiabio Capital 60,491 14.72 - - 241,966 13.77 - - 362,950 13.77 - - Fintech Global - - 60,491 14.72 - - 241,966 13.77 - - 362,950 13.77 Berhad (1)

Notes:

(1) Deemed interested by virtue of its shareholdings in Asiabio Capital.

(2) Assuming grant and exercise 28,486,228 ESOS Options prior to the Entitlement Date.

13 13

4.3 NA and gearing

Based on the audited consolidated statement of financial position of Vsolar as at 30 June 2019, the pro forma effects of the Proposed Rights Issue with Warrants on the NA and gearing of Vsolar and its subsidiaries are set out below:

Minimum Scenario

(I) (II) (III) After (I) and the After (II) and Audited as at 30 Adjusted for Proposed Rights assuming full exercise June 2019 subsequent events Issue with Warrants of all Warrants RM’000 RM’000 RM’000 RM’000 Share capital 48,126 (1)50,759 (2)(3)55,847 (4)63,575 Warrant reserve - - (2)2,261 (4)- ESOS reserve 133 (1)- - -

Accumulated losses (33,188) (34,326) (34,326) (34,326) Shareholders’ funds/NA 15,071 16,432 23,782 29,249 Non-controlling interest (717) (717) (717) (717) Total equity 14,354 15,715 23,065 28,532

No. of Vsolar Shares (‘000) 386,068 410,831 684,164 866,386 NA per Vsolar Share (RM) 0.04 0.04 0.03 0.03 Interest bearing borrowings (RM’000) 112 112 112 112 Gearing 0.01 0.01 negligible negligible

Notes:

(1) Adjusted for the exercise of 24,763,000 ESOS Options at an exercise price of RM0.055 per option.

(2) A reserve of RM2,261,538 is provided for the issuance of 182,222,222 Warrants based on a fair value of RM0.02 each, calculated using the Black- Scholes valuation model.

(3) After deducting estimated expenses in relation to the Proposed Rights Issue with Warrants of RM850,000.

(4) Assuming the exercise of all 182,222,222 Warrants at the exercise price of RM0.03 each.

Maximum Scenario

(I) (II) (III) (IV)

After (I) and adjusted for full After (II) and the After (III) and Audited as at 30 Adjusted for exercise of ESOS Proposed Rights assuming full

June 2019 subsequent events Options Issue with Warrants exercise of Warrants RM’000 RM’000 RM’000 RM’000 Share capital 48,126 (1)50,759 (4)52,183 (2)(3)78,968 (5)117,231 Warrant reserve - - - (2)11,904 (5)- ESOS reserve 133 (1)- - - -

Accumulated losses (33,188) (34,326) (34,896) (34,896) (34,896) Shareholders’ funds/NA 15,071 16,432 17,287 55,976 82,335 Non-controlling interest (717) (717) (717) (717) (717) Total equity 14,354 15,715 16,570 55,259 81,618

No. of Vsolar Shares (‘000) 386,068 410,831 439,317 1,757,268 2,635,902 NA per Vsolar Share (RM) 0.04 0.04 0.04 0.03 0.03 Interest bearing borrowings (RM’000) 112 112 112 112 112 Gearing 0.01 0.01 0.01 negligible negligible

Notes:

(1) Adjusted for the exercise of 24,763,000 ESOS Options at an exercise price of RM0.055 per option.

(2) A reserve of RM11,904,163 is provided for the issuance of 878,633,982 Warrants at a fair value of RM0.02 each, calculated using the Black-Scholes valuation model.

(3) After deducting estimated expenses in relation to the Proposed Rights Issue with Warrants of RM850,000.

(4) Assuming the grant and exercise of 28,486,228 ESOS Options at an exercise price of RM0.03 each and at a fair value of RM0.02 each, calculated using the Black-Scholes valuation model.

(5) Assuming the exercise of all 878,633,982 Warrants at the exercise price of RM0.03 each.

15 4.4 Earnings and EPS

The Proposed Rights Issue with Warrants is not expected to have any material effect on Vsolar’s consolidated earnings for the FYE 30 June 2019. The Proposed Rights Issue with Warrants is expected to contribute to the future earnings of Vsolar and its subsidiaries due to the availability of additional funds for capital expenditure for the development of biomass/biogas RE plant and working capital as well as the expected earnings to be generated from the new biomass/biogas plants to be constructed using the proceeds from the Proposed Rights Issue with Warrants.

However, EPS may be proportionately diluted as a result of the increase in the number of our Shares after the Proposed Rights Issue with Warrants. For illustrative purposes, based on our latest audited consolidated financial statements for the FYE 30 June 2019, the pro forma effects of the Proposed Rights Issue on the earnings and EPS of our Group as follows:

Audited FYE 30 June After the Proposed Rights Issue 2019 with Warrants Minimum Maximum Scenario Scenario RM’000 RM’000 RM’000 LAT attributable to owners of (1,539) (1,539) (1,539) VSolar Weighted average no. of shares (2) 380,935 654,268 1,704,044 in issue (’000) No. of ESOS Options (’000) 5,158 - - No. of Warrants (’000) - 182,222 878,634 Basic loss per share (“LPS”) (0.40) (0.24) (0.09) (sen) Diluted LPS (sen)(1) (0.40) (0.18) (0.06)

Notes:

(1) Assuming the exercise of all Warrants.

(2) The weighted average number of shares for the audited FYE 30 June 2019 is weighted based on the number of outstanding VSolar Shares multiplied by the percentage of the reporting period for which that number of Shares applies to, throughout the financial year.

4.5 Convertible securities

As at LPD, Vsolar does not have outstanding convertible securities issued.

16 5. INDUSTRY OVERVIEW AND PROSPECTS

5.1 Overview and prospects of the Malaysian Economy

GDP registered a higher growth of 4.4% in the 3rd quarter ("3Q") of 2019 (2nd quarter ("2Q") 2019: 4.9%), primarily attributed to lower growth in key sectors and a decline in the mining and construction activities. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.9% (2Q 2019: 1.0%).

Domestic demand expanded by 3.5% in 3Q 2019 (2Q 2019: 4.6%), with private sector expenditure remaining the key contributor to growth. Private consumption expanded by 7.0% (2Q 2019: 7.8%), as household spending normalised towards its long-term trend.

Public consumption increased by 1.0% in 3Q 2019 (2Q 2019: 0.3%). While emolument growth remained positive, expenditure on supplies and services continued to decline, albeit at a slower pace. Growth in gross fixed capital formation registered a contraction of 3.7% (2Q 2019: -0.6%), on account of slower growth in private sector capital expenditure and a larger contraction in public sector investment.

Private investment expanded marginally by 0.3% (2Q 2019: 1.8%), weighted down by lower capital spending across major economic sectors.

Public investment registered a contraction of 14.1% (2Q 2019: -9.0%), reflecting lower capital spending by both Federal Government and public corporations.

The services sector expanded by 5.9% in 3Q 2019 (2Q 2019: 6.1%). Most key subsectors moderated.

Growth in the manufacturing sector registered a marginal improvement at 3.6% (2Q 2019: 4.3%) due to the slower growth in the E&E and consumer-related industries.

Headline inflation, as measured by the annual percentage change in the Consumer Price Index, increased to 1.3% in 3Q2019 (2Q 2019: 0.7%). The higher flation outcome mainly reflected the lapse in the impact from the GST zerorisation between June and August 2018. This was despite the lapse in the impact of the SST implementation in September, which contributed lower headline inflation that month (September 2019: 1.1%; August 2019: 1.5%; July: 1.4%).

The Malaysian economy continued to expand in the third quarter, bringing the overall performance of the first three quarters to 4.6%. The pace of growth is expected to be sustained for the remainder of the year and going into 2020. Household spending will remain the key driver of growth, supported by continued employment and income growth. Private investment growth is projected to remain modest, supported partly by realisation of approved projects. Public investment will be a smaller drag to growth, following planned higher capital spending mainly in the transportation segment. On the external front, support from net exports will likely moderate, as imports are expected to grow faster than exports, in line with the projected improvement in the investment activity.

The annual average headline inflation is expected to be low in 2019. For the remainder of the year, headline inflation will reflect the downward contribution from the lapse in the SST impact and domestic fuel prices as fuel price ceilings remain in place until the end of 2019. Moving into 2020, headline inflation is projected to average higher but remain modest. This reflects the lapse in the impact of consumption tax policy changes, the lifting of the fuel price ceilings amid the relatively subdued outlook on global oil prices, and policy measures in place to contain food prices. The trajectory of headline inflation will, however, be dependent on global oil and commodity price developments. Underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and the absence of strong demand pressures. (Source: Economic and Financial Developments in the Malaysian Economy in 2Q 2019, Bank 17 Negara Malaysia)

17 5.2 Overview and outlook of the Malaysian RE industry and biomass market

The following are key extracts of the independent market assessment of the Malaysian biomass market prepared by Redmarch, which is set out under Appendix III of this Circular.

RE industry in Malaysia

Currently, Peninsular Malaysia has a total operational RE capacity of 490 megawatts (MW), mostly fueled by solar photovoltaic (“Solar PV”) (337MW), and followed by biogas (51MW), biomass (32MW) and mini hydro (24MW).

Table 1: Renewable Capacity Mix in Peninsular Malaysia (MW) as of June 2018

Types of Renewable Operational RE Awarded RE Total Energy Projects Solid waste 9 30 39 Mini hydro 24 287 311 Biomass 32 64 96 Biogas 51 74 125 Solar PV 337 5 342 Large Scale Solar (LSS) 38 1,058 1,096 Total 490 1,519 2,009 (Source: Towards A Sustainable Future Energy Outlook (Energy Comission))

Solar PV is the most popular source of RE in terms of current capacity due to the easily accessible sunlight throughout the year in Malaysia. Solar PV is also highly supported by government through introduction of the FiT, Net Energy Metering (“NEM”) and Large Scale Solar (“LSS”) programmes. As part of Malaysia’s roadmap for RE development, the FiT system was introduced in 2011. FiT obliges Distribution Licensees (e.g. Tenaga Nasional Bhd) to buy from individuals or companies that hold a feed-in approval certificate making them eligible to sell RE at FiT rates. The Distribution Licensees will pay for RE supplied to the electricity grid for a specific duration (e.g. 16 or 21 years) at FiT rates. By guaranteeing access to the grid and setting a favorable price per unit of RE, the FiT mechanism would ensure that RE becomes a viable and sound long-term investment for companies and also for individuals.

Table 2: FiT Rates and Effective Period

Renewable Energy FiT Rate (RM per Annual Type kWh) Effective Period Digression Rate

Biomass 0.27 – 0.45 16 0.5 – 1.8% Biogas 0.28 – 0.31 16 0.5 – 1.8% Solar PV 0.49 – 0.92 21 8 – 20% Mini-hydro 0.23 – 0.24 21 0 (Source: SEDA)

To complement the FiT mechanism, NEM is implemented in 2016 to promote and boost the development of RE. NEM of up to 500MW will allow consumers to self-generate most of their electricity requirement before exporting and selling any excess energy to the Distribution Licensees. Starting from 2016, a 100MW quota per year will be available for bidding through three sections; Domestic, Commercial and Industrial which makes up 10%, 45% and 45% respectively of the total capacity.

18 (Source:(Source: Economic Economic and and Financial Financial Developments Developments in in the the Malaysian Malaysian Economy Economy in in 2Q 2Q 2019, 2019, Bank Bank NegaraNegara Malaysia) Malaysia)

5.25.2 OverviewOverview and and outlook outlook of of the the Malaysian Malaysian RE RE industry industry and and biomass biomass market market

TheThe following following are are key key extracts extracts of of the the independent independent market market assessment assessment of of the the Malaysian Malaysian biomassbiomass market market prepared prepared by by Redmarch, Redmarch, which which is is set set out out under under Appendix Appendix III III of of this this Circular. Circular.

RERE industry industry in in Malaysia Malaysia

Currently,Currently, Peninsular Peninsular Malaysia Malaysia has has a atotal total operational operational RE RE capacity capacity of of 490 490 megawatts megawatts (MW), (MW), mostlymostly fueled fueled by by solar solar photovoltaic photovoltaic (“ (“SolarSolar PV PV”)”) (337 (337MWMW),), and and followed followed by by biogas biogas (51MW), (51MW), biomassbiomass ( 32(32MWMW) )and and mini mini hydro hydro (24MW). (24MW).

TableTable 1: 1: Renewable Renewable Capacity Capacity Mix Mix in in Peninsular Peninsular Malaysia Malaysia (MW) (MW) as as of of June June 2018 2018

TypesTypes ofof RenewableRenewable OperationalOperational RE RE AwardedAwarded RE RE TotalTotal EnergyEnergy ProjectsProjects SolidSolid waste waste 9 9 3030 3939 MiniMini hydro hydro 2424 287287 311311 BiomassBiomass 3232 6464 9696 BiogasBiogas 5151 7474 125125 SolarSolar PV PV 337337 5 5 342342 LargeLarge Scale Scale Solar Solar (LSS) (LSS) 3838 1,0581,058 1,0961,096 TotalTotal 490490 1,5191,519 2,0092,009 (Source:(Source: Towards Towards A ASustainable Sustainable Future Future Energy Energy Outlook Outlook (Energy (Energy Comission)) Comission))

SolarSolar PV PV is is the the most most popular popular source source of of RE RE in in terms terms of of current current capacity capacity due due to to the the easily easily accessibleaccessible sunlight sunlight throughout throughout the the year year in in Malaysia. Malaysia. Solar Solar PV PV is is also also highly highly supported supported by by governmentgovernment through through introduction introduction of of the the FiT, FiT, Net Net Energy Energy Metering Metering (“ (“NEMNEM”)”) and and Large Large Scale Scale SolarSolar (“ (“LSSLSS”)”) programmes. programmes. As As part part of of Malaysia’s Malaysia’s roadmap roadmap for for RE RE development, development, the the FiT FiT systemsystem was was introduced introduced in in 2011. 2011. FiT FiT obliges obliges Distribution Distribution Licensees Licensees (e.g. (e.g. Tenaga Tenaga Nasional Nasional Bhd) Bhd) toto buy buy from from individuals individuals or or companies companies that that hold hold a afeed-in feed-in approval approval certificate certificate making making them them eligibleeligible to to sell sell RE RE at at FiT FiT rates. rates. The The Distribution Distribution Licensees Licensees will will pay pay for for RE RE supplied supplied to to the the electricityelectricity grid grid for for a aspecific specific duration duration (e.g. (e.g. 16 16 or or 21 21 years) years) at at FiT FiT rates. rates. By By guaranteeing guaranteeing accessaccess to to the the grid grid and and setting setting a afavorable favorable price price per per unit unit of of RE, RE, the the FiT FiT mechanism mechanism would would ensureensure that that RE RE becomes becomes a aviable viable and and sound sound long-term long-term investment investment for for companies companies and and also also for for individuals.individuals.

TableTable 2: 2: FiT FiT Rates Rates and and Effective Effective Period Period

RenewableRenewable Energy Energy FiTFiT Rate Rate (RM (RM per per AnnualAnnual TypeType kWh)kWh) EffectiveEffective Period Period DigressionDigression Rate Rate

BiomassBiomass 0.270.27 – –0.45 0.45 1616 0.50.5 – –1.8% 1.8% BiogasBiogas 0.280.28 – –0.31 0.31 1616 0.50.5 – –1.8% 1.8% SolarSolar PV PV 0.490.49 – –0.92 0.92 2121 8 8– –20% 20% MiniMini-hydro-hydro 0.230.23 – –0.24 0.24 2121 0 0 (Source:(Source: SEDA) SEDA)

ToTo complement complement the the FiT FiT mechanism, mechanism, NEM NEM is is implemented implemented in in 2016 2016 to to promote promote and and boost boost the the developmentdevelopment of of RE. RE. NEM NEM of of up up to to 500MW 500MW will will allow allow consumers consumers to to self-generate self-generate most most of of their their electricityelectricity requirement requirement before before exporting exporting and and selling selling any any excess excess energy energy to to the the Distribution Distribution Licensees.Licensees. Starting Starting from from 2016, 2016, a a100MW 100MW quota quota per per year year will will be be available available for for bidding bidding through through threethree sections; sections; Domestic, Domestic, Commercial Commercial and and Industrial Industrial which which makes makes up up 10%, 10%, 45% 45% and and 45% 45% respectivelyrespectively of of the the total total capacity. capacity.

1818

18 ThereThere are areinitiatives initiatives to harvestto harvest energy energy from from the thesun sunwith with installation installation of 200MWof 200MW per peryear year underunder the theLSS LSSprogramme programme integrating integrating solar solar energy energy into intothe thegrid gridsystem system with with a share a share of of 0.14%0.14% during during the thefirst firstyear year in 2017 in 2017 and andincreasing increasing up toup 0.5% to 0.5% by 2020.by 2020. A total A total of 1,000MW of 1,000MW projectsprojects have have been been introduced introduced during during 2017-2018. 2017-2018. 800MW 800MW from from the thetotal total capacity capacity will willbe be awardedawarded by competitive by competitive bidding bidding and andit will it willenter enter the thesystem system by stages by stages from from 2017 2017 to 2020. to 2020.

On Onthe theother other hand, hand, several several biomass biomass based based power power plant plant projects projects have have experiences experiences several several problemsproblems in developmentin development in termsin terms of securingof securing fuel fuelsupply supply and andtechnical technical matters. matters. Hence, Hence, EnergyEnergy Commission Commission (Suruhanjaya (Suruhanjaya Tenaga) Tenaga) has hascancelled cancelled three three biomass biomass licenses licenses due dueto theto the unfeasibleunfeasible conditions. conditions.

TableTable 3: Peninsular 3: Peninsular RE ProjectsRE Projects 2017 2017 (MW) (MW)

BiomassBiomass BiogasBiogas SolarSolar PV PV MiniMini Hydro Hydro PerlisPerlis - - - - 16.5316.53 - - PenangPenang - - - - 16.3516.35 - - PerakPerak 12.9312.93 8.518.51 17.5017.50 14.2314.23 SelangorSelangor 14 14 11.8411.84 71.4471.44 14.2314.23 KualaKuala Lumpur Lumpur - - - - 2.742.74 - - NegeriNegeri 19.519.5 6.666.66 42.0942.09 - - SembilanSembilan MelakaMelaka - - - - 17.1117.11 - - JohorJohor 11 11 19.619.6 17.7717.77 - - PahangPahang 13.513.5 14.1514.15 24.6924.69 26.8326.83 TerengganuTerengganu - - - - 10.3110.31 - - KelantanKelantan - - - - 7.477.47 14.814.8 KedahKedah - - 2.4 2.4 15.0715.07 - -

(Source:(Source: Energy Energy Commission) Commission)

TableTable 3 shows 3 shows that that every every state state in Peninsular in Peninsular Malaysia Malaysia are aregenerating generating solar solar power, power, while while the the otherother types types of RE of suchRE such as biomass, as biomass, biogas biogas and andmini mini hydro hydro are areonly only being being utilized utilized in a inhandful a handful of states.of states.

UnderUnder the theEleventh Eleventh Malaysia Malaysia Plan, Plan, renewable renewable energy energy is identified is identified as anas alternativean alternative energy energy sourcessources to support to support the thecontinuous continuous increasing increasing energy energy demand. demand. Besides Besides promoting promoting the theexisting existing renewablerenewable energy energy sources sources such such as hydro,as hydro, solar, solar, biomass biomass and andbiogas, biogas, major major focus focus will willbe be givengiven in exploring in exploring new new renewable renewable energy energy sources sources in thein theEleventh Eleventh Plan, Plan, including including exploring exploring wind,wind, geothermal geothermal and andocean ocean energy energy sources sources to further to further diversify diversify the thegeneration generation mix. mix.

BiomassBiomass market market in Malaysia in Malaysia

MalaysiaMalaysia generates generates about about 7.9% 7.9% of GDPof GDP from from the theagriculture agriculture sector sector in 2018.in 2018. Within Within this this sector,sector, palm palm oil isoil the is thelargest largest contributor contributor and andmakes makes up anup estimatedan estimated 47% 47% of agricultureof agriculture activity.activity. This This places places Malaysia Malaysia as theas thesecond second largest largest palm palm oil produceroil producer in thein theworld world after after Indonesia,Indonesia, with with production production of 20,500,000 of 20,500,000 tons tons in 2018. in 2018. The Thepalm palm oil sectoroil sector correspondingly correspondingly generatesgenerates the thelargest largest amount amount of biomass of biomass feedstock feedstock in Malaysia. in Malaysia. An estimatedAn estimated 83 million83 million dry dry tonstons was was generated generated in 2012 in 2012 and andthis thisis expected is expected to increase to increase to about to about 100 100million million dry drytons tons by by 2020,2020, primarily primarily driven driven by increase by increase in yield. in yield.

Primarily,Primarily, the themain main source source of biomass of biomass feedstock feedstock comes comes from from by-products by-products of palm of palm oil that oil that can can be convertedbe converted into intobioenergy, bioenergy, such such as theas theoil palmoil palm fronds fronds (“OPF (“OPF”), oil”), palmoil palm trunks trunks (“OPT (“OPT”), ”), emptyempty fruit fruit brunches brunches (“EFB (“EFB”), palm”), palm kernel kernel shells shells (“PKS (“PKS”), mesocarp”), mesocarp fibre fibre (“MF (“”)MF and”) andthe the palmpalm oil milloil milleffluent effluent (“POME (“POME”). In”). theIn theplantations, plantations, OPFs OPFs are areregularly regularly cut cutduring during harvesting harvesting of freshof fresh fruit fruit bunches bunches (“FFBs (“FFBs”) and”) andpruning pruning of theof thepalm palm trees, trees, therefore therefore it isit availableis available throughoutthroughout the theyear. year. In theIn themills mills the theremoval removal of the of thepalm palm fruits fruits from from the thefruit fruit brunches brunches will will leaveleave the theEFBs EFBs behind, behind, while while MF andMF andPKS PKSare arerecovered recovered during during the theextraction extraction of crude of crude palm palm

19 19

19 oil (“CPO”) and palm kernel oil (“PKO”) respectively. In addition, the palm oil mill effluent (“POME”) accumulates as a liquid biomass at the mills from the sterilization and milling process of FFBs.

The figures below show the projected upstream volume of biomass waste for 2020; 85-111 million tons for solid waste and 70-110 million tons for liquid waste. Moving forward, the forecasted biomass volume growth will be influenced by a combination of plantation expansion and fresh fruit bunches yield improvement. Fresh fruit bunches yield improvement in turn is possible with continuous enhancement in plantation management, crop material and replanting of mature plantations.

Potential Upstream Volume for Solid Waste Biomass (dry weight in million tons)

(Source: National Biomass Strategy 2020)

Potential Upstream Volume for Liquid Waste Biomass (wet weight in million tons)

(Source: National Biomass Strategy 2020)

20 Future Outlook and Opportunities

Electricity consumption has increased 3.6% CAGR from 123,162 gigawatt hours (“GWh”) in 2013 to an estimated 146,608GWh in 2017. Over the next few years, electricity consumption is projected to expand by 3-4% each year in line with economic growth to reach 178,371GWh in 2022. Electricity consumption per capita has increased from 3,367kWh in 2008 to 4,576kWh in 2017. Increased usage of electrical and electronic products is expected to further drive per capita consumption and overall electricity demand. Electricity production is expected to grow in tandem with consumption growth at 3-4% CAGR over the next five years.

While non-renewable energy sources still contribute the bulk of electricity generation, the government elevated the role of renewable energy under the 10th Malaysia Plan where it targeted that renewable energy shall account for 5.5% of Malaysia’s total electricity generation mix by 2015, up from 1.8% under the 9th Malaysia Plan . The Malaysian National Renewable Energy Policy and Action Plan (NREPAP) was approved by the Malaysian Cabinet in 2010. The NREPAP sets long term goals and commitment for renewable energy and charts the path of enhancing the utilization of indigenous renewable energy resources. The Renewable Energy Act 2011 was ratified by Parliament in 2011. The Act provides for the establishment and implementation of a Feed-in Tariff (FiT) mechanism to catalyze the development and promote investments in renewable energy.

The Ministry of Economic Affairs have also shared that the upcoming 12th Malaysia Plan (2020 to 2025), will be premised on the shared prosperity initiative and will cover three development dimensions – economic empowerment, environmental sustainability and social re-engineering. For the first time ever, the government will place equal weight on the environment and the economic dimension. The government has also set the target to achieve 20% electricity generation from RE sources by 2025. The government is looking to facilitate RM33 billion investment in RE accordingly to achieve the target. Having relied on fossil fuels for the bulk of its energy, Malaysia has implemented these policies to capitalize on the country’s renewable resources especially palm oil biomass and solar.

From 2012 to 2018, total installed capacity for renewable energy in Peninsular Malaysia increased rapidly at rate of 30% CAGR from 101MW to 490MW while electricity generation from renewable energy increased at a rate of 34% CAGR from 142,458MW to 837,582MW. Total installed capacity is expected to rise further to reach 2,080MW by 2020, representing a CAGR of 52% during this five-year period.

5.3 Prospects of our Group

Our financial performance for the FYE 30 June 2019 was contributed mainly by the trading of ICT products. However, gross profit margins for this segment has been low due to stiff competition and fluctuations in foreign currency exchange rates which resulted in a weakened RM. It has been the intention of the Board to further increase our Group’s RE capacity and further invest into the RE business as it tends to earn relatively better gross margins.

Premised on the outlook of the RE industry above, the management of Vsolar believes that biomass RE is a rapidly growing RE source in the Malaysia. The management therefore takes a favourable view of the biomass RE joint venture in the long term, based on the increasing demand for RE.

The Proposed Rights Issue with Warrants will fund the joint venture as set out in Section 4, which is in line with our aims to enhance our intention to further venture into the RE business, and to reduce the reliance on our existing core business of trading in ICT products by providing a stable long term source of income. Our management believes that the investment into the development of biomass RE plants is a more reliable and stable source of long term income compared to our other business segments, and will therefore be beneficial to Vsolar’s future prospects.

(Source: Management of Vsolar)

21 6. SHARE PRICE PERFORMANCE 21 The monthly highest and lowest prices of Vsolar Shares as traded on Bursa Securities for the past 12 months are as follows:

Low High (RM) (RM)

2019 March 0.185 0.255 April 0.140 0.210 May 0.155 0.175 June 0.160 0.195 July 0.170 0.245 August 0.125 0.195 September 0.060 0.140 October 0.050 0.090 November 0.050 0.065 December 0.040 0.055

2020 January 0.035 0.050 February 0.030 0.045

The last transacted price of Vsolar Shares on 5 December 2019, being the market day immediately preceding the announcement of the Proposed Rights Issue with Warrants is RM0.05 per share.

The last transacted price of Vsolar Shares as at the LPD was RM0.04 per Share.

(Source: M&A Securities)

7. APPROVALS REQUIRED

The Proposed Rights Issue with Warrants is conditional upon the following being obtained:

(i) approval of Bursa Securities for the listing of and quotation for the following:

(a) the Rights Shares and Warrants to be issued under the Proposed Rights Issue with Warrants; and

(b) new Vsolar Shares to be issued pursuant to the exercise of the Warrants.

on the ACE Market of Bursa Securities which was obtained on 19 February 2020;

(ii) approval of the shareholders of Vsolar for the Proposed Rights Issue with Warrants at the forthcoming EGM; and

(iii) approval, waiver and/or consent of any other relevant authorities and/or persons, if required.

22 (Source: Management of Vsolar)

6. SHARE PRICE PERFORMANCE

The monthly highest and lowest prices of Vsolar Shares as traded on Bursa Securities for the past 12 months are as follows:

Low High (RM) (RM)

2019 March 0.185 0.255 April 0.140 0.210 May 0.155 0.175 June 0.160 0.195 July 0.170 0.245 August 0.125 0.195 September 0.060 0.140 October 0.050 0.090 November 0.050 0.065 December 0.040 0.055

2020 January 0.035 0.050 February 0.030 0.045

The last transacted price of Vsolar Shares on 5 December 2019, being the market day immediately preceding the announcement of the Proposed Rights Issue with Warrants is RM0.05 per share.

The last transacted price of Vsolar Shares as at the LPD was RM0.04 per Share.

(Source: M&A Securities)

7. APPROVALS REQUIRED

The Proposed Rights Issue with Warrants is conditional upon the following being obtained:

(i) approval of Bursa Securities for the listing of and quotation for the following:

(a) the Rights Shares and Warrants to be issued under the Proposed Rights Issue with Warrants; and

(b) new Vsolar Shares to be issued pursuant to the exercise of the Warrants.

on the ACE Market of Bursa Securities which was obtained on 19 February 2020;

(ii) approval of the shareholders of Vsolar for the Proposed Rights Issue with Warrants at the forthcoming EGM; and

(iii) approval, waiver and/or consent of any other relevant authorities and/or persons, if required.

22 8. INTER-CONDITIONALITY

The Proposed Rights Issue with Warrants is not conditional upon any other corporate proposals, if any.

9. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

Save for Asiabio Capital’s Undertaking to subscribe for Rights Shares of at least RM3.0 million in value of Rights Shares, none of the directors and major shareholders of our Company as well as persons connected with them have any interest, direct and/or indirect, in the Proposed Rights Issue with Warrants other than their respective entitlements under the Proposed Rights Issue with Warrants for which all shareholders of Vsolar are entitled to including the right to apply for excess Rights Shares.

10. DIRECTORS’ RECOMMENDATION

After having considered all aspects of the Proposed Rights Issue with Warrants, including its rationale and the prospects of our Group’s RE business our Board is of the opinion that the Proposed Rights Issue with Warrants are in the best interest of Vsolar, and accordingly recommends that the shareholders vote in favour of the resolutions pertaining to the Proposed Rights Issue with Warrants to be tabled at the forthcoming EGM.

11. ESTIMATED TIME FRAME FOR COMPLETION

The tentative timetable in relation to the Proposed Rights Issue with Warrants is as follows:

Date Events 25 March 2020 EGM to approve the Proposed Rights Issue with Warrants

Mid April 2020 Announcement of the Entitlement Date

End April 2020 - Public release of the Abridged Prospectus - Commencement of the trading of the rights

Early May 2020 Cessation of the trading of the rights

Mid May 2020 - Listing of and quotation for the Rights Shares and Warrants on Bursa Securities

- Completion on the Proposed Rights Issue with Warrants

Barring any unforeseen circumstances and subject to receipt of all relevant approvals, the Proposed Rights Issue with Warrants is expected to be completed in the first half of 2020.

12. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION

Save for the Proposed Rights Issue with Warrants, there is no other proposal announced but pending implementation.

23 13. EGM

An EGM, the notice of which is enclosed together with this Circular, will be held at Theatrette Room, 4th Floor, Menara Lien Hoe, No. 8 Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 25 March 2020, 10.30 a.m. or any adjournment hereof, for the purpose of considering and, if thought fit, passing the resolutions so as to give effect to the Proposed Rights Issue with Warrants.

If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Proxy Form in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the Registered Office of our Company at No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, 50480 Kuala Lumpur not later than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof, or in the case of a poll, not less than twenty-four (24) hours before the time appointed for taking of the poll. The lodging of the Proxy Form will not, however, preclude you from attending the EGM and voting in person should you subsequently wish to do so.

14. FURTHER INFORMATION

Please refer to the attached appendices for further information.

Yours faithfully, for and on behalf of our Board of Directors of VSOLAR GROUP BERHAD

LEUNG KOK KEONG EXECUTIVE DIRECTOR

APPENDIX I

INFORMATION ON THE PROJECT

Our Company had on 9 August 2017 announced that it had entered into an investment and shareholders’ agreement dated 8 August 2017 with KRU Energy Asia Pte Ltd (“KRU”), Rangkaian Iltizam Sdn Bhd (“RI”), Kenneth Lee Wai Tong (“KL”) and VSolar Engineering Sdn Bhd (the JV Company) for a joint venture to develop up to 10MW of biomass energy generation plant (“Project”) (“Agreement”).

The profiles of KRU, RI and KL are as follows:

KRU Energy Asia Pte Ltd

KRU, a company incorporated in Singapore, is principally involved in the development of RE facilities. KRU is responsible for providing the biomass RE expertise and supply all the major equipment and engineering required for the Project. KRU is not participating directly in the JV Company, but indirectly through its subsidiary, RI.

Rangkaian Iltizam Sdn Bhd

RI, a company incorporated in Malaysia under the Companies Act, 1965, is a subsidiary of KRU and is the entity nominated by KRU from within the KRU group of companies to participate in the Project. RI is principally involved in the business of RE, organic fertiliser and clean water production. Pursuant to the Agreement, RI will be solely responsible for all operational and development aspects of the Project.

Kenneth Lee Wai Tong

KL, a 61 year old Malaysian with residential address at No. 5 Jalan SS2/66, 47300 Petaling Jaya, Selangor, Malaysia is a retired lawyer. He has over 34 years’ experience in areas of business development, operations management, corporate planning, corporate finance, listings and initial public offerings, corporate restructuring, mergers and acquisitions in various industries. He is also experienced in providing litigation support to advocates and solicitors. He is responsible as the liaison between KRU, RI and Vsolar and was instrumental in the negotiations between the parties of the Agreement. He also assists as a liaison between the JV Company with banks and other potential investors for the project, if needed.

Salient terms of the Agreement.

1. Business of the JV Company

1.1. The JV Company shall be in the business of:

1.1.1. building, owning and operating the Project;

1.1.2. such other businesses as the shareholders may approve from time to time; and

1.1.3. generally, to perform all acts, matters and things as may be consistent with, necessary for and incidental to the attainment of any and all of the foregoing objects.

1.2. The Business of the JV Company shall be conducted in the best interests of the JV Company on sound commercial profit-making principles so as to generate the maximum achievable profits available for distribution and each of the Shareholders covenant and undertake to use all reasonable endeavors to promote the business of the JV Company.

2. Other commercial terms

2.1. Office space for the JV Company

Vsolar shall lease to the JV Company up to 1,000 square feet of office space (the “Office Lease”) at the following address:

12th Floor, Menara Lien Hoe No. 8 Persiaran Tropicana Tropicana Golf & Country Resort 47410 Petaling Jaya, Selangor, Malaysia

2.2. The Office Lease shall commence on 17 July 2017(1) with the rental of RM3,500.00 per month, and shall subsist for the duration of this Agreement.

Note (1): For avoidance of doubt, the JV Company has yet to commence business. However, the Office Lease has already commenced since 17 July 2017 as the JV Company’s employees require a workspace to do preliminary work such as conduct site surveys, site sourcing, financial modelling, engineering liaison with SEDA, farming site survey and administration of the applications to SEDA.

2.3. The rental charges under the Office Lease shall be calculated at the rate of RM3.50 (Malaysian Ringgit Three Dollars and Fifty Sen) per square foot per month. For the avoidance of doubt, the rent accrued in any given month under the Office Lease shall be calculated based on the actual amount of office space used by the JV Company in that month.

2.4. The rental charges under the Office Lease shall not be immediately payable and shall instead accrue as a shareholder’s loan from Vsolar to the JV Company (“Shareholder Loan”). The JV Company shall at its sole discretion decide when to repay the Shareholder Loan, provided that the full amount of the Shareholder Loan shall become immediately due and repayable upon the termination of this Agreement.

3. Microbes from Artisan Semesta Sdn Bhd (“Artisan Semesta”)

3.1. The parties agree to test the unique microbe technologies and products of Artisan Semesta for suitability for use in the Business.

3.2. Should the tests of the microbe technologies and products of Artisan Semesta show positive results, RI shall consider using the said microbe technologies and products in its facilities in Malaysia.

4. Capital of the JV Company

Share Capital – Subscription for ordinary shares in the share capital of the JV Company (“JV Share(s)”) by RI and KL

4.1. In reliance upon the representations and warranties given by Vsolar and the JV Company only as set out in Clause 4.2 below, and conditional upon the fulfilment of the condition precedent set out in Clause 4.3 below:

(i) RI shall subscribe for 3,500 ordinary shares at an issue price of RM1 each in the JV Company; and

(ii) KL shall subscribe for 500 ordinary shares at an issue price of RM1 per JV Share, for a total subscription amount of RM500.

4.2. Each of Vsolar and the JV Company represents and warrants to each of KRU, RI and KL that each of the following representations and warranties is true and accurate in all respects and is not misleading in any respect:

(i) As of the date of the Agreement, the JV Company had a total issued capital of RM2, with Vsolar, being the sole shareholder holding 2 ordinary shares;

(ii) As of the date of the Agreement, the JV Company has never had, and currently does not have, any shareholder(s) other than Vsolar(1).

Note (1): Subsequently, Vsolar, RI and KL had on 15 December 2017 subscribed for 5,998, 3500 and 500 Ordinary Shares respectively. Hence, the JV Company is now owned by Vsolar, RI and KL;

(iii) Immediately prior to the execution of the Agreement, the JV Company has never been a party to, and is not a party to, any contracts, agreements and/or arrangements of any nature whatsoever; and

(iv) As of the date of the Agreement, the JV Company has no accrued or potential liabilities or other exposures of any nature whatsoever.

4.3. The obligations of RI and KL to subscribe for Ordinary Shares pursuant to Clause 4.1 above are conditional upon Vsolar first subscribing for 5,998 Ordinary Shares at an issue price of RM1 each(1)(2), such that the JV Company has total share capital of RM6,000.

Note (1): This condition was met following Vsolar’s subscription of 5,998 Ordinary Shares on 15 December 2017 via its internally generated funds.

Note (2): Following Vsolar’s subscription of 5,998 Ordinary Shares on 15 December 2017, RI and KL have subscribed for 3,500 and 500 Ordinary Shares on the same day.

4.4. After the completion of the issuances of Ordinary Shares pursuant to Clauses 4.1 and 4.3 above, the total issued Ordinary Share capital of the JV Company and the shareholdings of the respective shareholders shall be as follows:

No. of Share capital ordinary Shareholder (RM) shares % Vsolar 6,000 6,000 60.0 RI 3,500 3,500 35.0 KL 500 500 5.0 Total 10,000 10,000 100.0

5. Working Capital – Subscription for Redeemable Preference Shares (“RPS”) by Vsolar

5.1. Within 30 business days after the completion of the issuance of Ordinary Shares to RI and KL pursuant to Clause 4.1 above, Vsolar shall subscribe for 683,000 RPS at an issue price of RM1 each (“RPS Issue Price”).

Note: The RPS are not secured. We intend to subscribe for the RPS using existing proceeds raised from the exercise of ESOS Options. As at the LPD, Vsolar has subscribed for a total of 449,823 RPS for RM449,823, which is approximately equivalent to the amount spent by the JV Company as start up costs for the Project. The proceeds raised from the issuance of the RPS are earmarked for the initial working capital of the JV Company, which shall be deployed strictly according to the start up budget for the Project (please refer to Clause 8.2 below for further details). The RPS is to be subscribed in multiple tranches based on the

progressive claims made by the JV Company as and when start up costs for the Project has been incurred.

The salient terms of the RPS are as follows:

(i) Entitlement to cumulative preferential dividend

The preference shareholders are entitled to receive a cumulative preferential cash dividend (“Preferential Dividend(s)”) payable in RM. Preferential Dividends are cumulative and shall accrue from day to day at the fixed rate of 5% per annum.

(ii) Preferential Dividends at Board’s discretion

The board of directors of the JV Company shall have the sole discretion regarding the declaration or payment of any Preferential Dividend(s). No Preferential Dividend or any part thereof shall become due or payable on any dividend date unless the board of directors of the JV Company has declared or resolved to distribute such Preferential Dividend with respect to that dividend date. At this juncture, the Preferential Dividends are expected to be paid annually.

(iii) Optional redemption

The RPS are perpetual securities with no fixed final date of redemption. The JV Company shall have the option to redeem at any time, in whole or in part, the RPS in cash at 100% of the RPS issue price together with any accrued but unpaid Preferential Dividend(s) (whether or not declared), in whole or in part, at any time for the time it is being issued and outstanding. The RPS may only be redeemed out of the distributable profits of the JV Company.

(iv) Dividend stopper

The JV Company shall not declare or pay any dividends or other distributions in respect of the shareholders until such arrears of accumulated Preferential Dividends have been paid in full and the RPS have been redeemed in full.

(v) Rights upon liquidation

In the event of the commencement of any dissolution, winding up or otherwise liquidation of the JV Company before full redemption of the RPS, the RPS shall rank senior to the shareholders. On such dissolution or winding up, each RPS shall be entitled to receive in cash payment of the full Issue Price amount.

(vi) Rights to participate in surplus profits and/or assets

Save as disclosed in (v) above, the RPS shall not confer any right and claim as regards participation in the surplus profits and/or assets of the JV Company.

(vii) Voting rights

The RPS holders shall not be entitled to attend and vote at general meetings of the JV Company save and except as provided for in the Act.

(viii) Non-convertible

The RPS are non-convertible securities.

(ix) In the event the RPS are not redeemed upon the termination of the Agreement, RI agrees to procure the transfer of 10% of RI’s share capital to Vsolar at a nominal consideration of RM1.

6. Construction Capital

6.1. Upon the issuance of certificate from SEDA, the Energy Commission or other approval from a relevant authority permitting the JV Company to sell electricity (whether to TNB or otherwise), Vsolar shall, on a best effort basis, provide and/or procure the provision to the JV Company of all financing required for the construction of and working capital for the Project.

Note: This financing is in addition to the subscription of the RPS by Vsolar under Clause 5 above, which is intended to be used for the initial working capital of the JV Company. At this juncture, the Board expects that Vsolar will provide such financing using the proceeds from the Proposed Rights Issue with Warrants. In the event the proceeds from the Rights Issue with Warrants is insufficient for such financing, the shortfall shall be covered via bank borrowings to be obtained.

6.2. All financing provided and/or procured by Vsolar pursuant to Clause 6.1 above shall be in the form of debt owed by the JV Company only.

6.3. For the avoidance of doubt, the obligation provided for under Clause 6.1 above shall not arise unless and until the SEDA certificate and/or certificate by the Energy Commission for the Project has been issued.

Note: The terms of the financing such as the interest rate, security, terms of repayment, and tenure of the financing have yet to be finalised. At this juncture, the Board expects that Vsolar will provide such financing in the form of a shareholder’s loan. In terms of security, Vsolar is entitled to purchase RI’s shareholdings in the JV Company for RM1 in the event the Project is not successfully commissioned within 2 years from the date of the Agreement, as provided under Clause 7.2.2 below. The plant’s capacity may be progressively increased after operations up to 10MW.

7. Certain Options Granted by Vsolar and RI

7.1. Call option granted by Vsolar to KRU

7.1.1. Subject to Clause 7.1.2 below, Vsolar hereby irrevocably and exclusively grants to KRU a call option(1) with no expiration date to purchase from Vsolar such number of shares in the JV Company constituting up to 30% of equity interest in the JV Company at a valuation to be calculated using the formula set out below:

(a) 150% of the NA value of the JV Company; or (b) 500% the PAT of the JV Company,

whichever is higher, in each case calculated based upon the latest audited financial statements of the JV Company. An announcement will be made and shareholders’ prior approval will be sought, if required.

Note (1): The call option was granted on the same day as the date of the Agreement.

7.1.2. The call option provided for under Clause 7.1.1 above may only be exercised by KRU upon the fulfillment of the following conditions precedent:

(i) all Preferential Dividends accrued in relation to the RPS have been paid in full by the JV Company;

(ii) the RPS have been redeemed in full by the JV Company;

(iii) the Shareholder Loan has been repaid in full by the JV Company;

(iv) all other debts owed to Vsolar and/or any Shareholder by the JV Company have been repaid in full; and

(v) the Project has been successfully commissioned.

7.2. Call option granted by RI to Vsolar

7.2.1. Subject to Clause 7.2.2 below, RI hereby irrevocably and exclusively grants to Vsolar a call option(1) with no expiration date to purchase from RI all the Shares held by RI in the JV Company at a nominal consideration of RM1.

Note (1): The call option was granted on the same day as the date of the Agreement.

7.2.2. The call option provided for under Clause 7.2.1 above may only be exercised by Vsolar in the event that:

(i) the Project is not successfully commissioned within 2 years from the date of this Agreement; or

(ii) the Project is not successfully commissioned before the termination of this Agreement, provided that this Clause 7.2.2 shall cease to have effect from the moment that Vsolar no longer holds any RPS for any reason whatsoever.

Note: Although the Project has yet to be commissioned within 2 years from the Agreement, Vsolar has elected not to exercise the call option as RI has made progress, having completed the development of its RE facility, which is to be used as a reference for the development of the Project.

8. Management of the JV Company

8.1. Operations and Project Development

Project implementation and engagement of all staffs, employees, agents and consultants is to be determined and managed by RI for the purposes of facilitating the business of JV Company.

8.2. Financial Management

The financial management and accounting functions of the JV Company (including but not limited to all payments and receipts) shall be determined and/or managed solely by Vsolar, provided that all payments and expenditures provided for in the start up budget(1) for the Project shall be approved by Vsolar. In particular, all of the JV Company’s bank accounts and banking facilities (including all issuance of cheques) are to be operated by representatives of Vsolar only.

Note (1): The start up budget for the Project, which was appended as an appendix to the Agreement, was prepared by RI and KRU and agreed by Vsolar. Based on the said budget,

the total start up cost of the Project is estimated to be RM683,600, which is approximately the nominal value of the RPS to be subscribed by Vsolar.

9. Composition of the board of directors of the JV Company (“JV Board”)

9.1. Constitution of the JV Board

9.1.1. The JV Board shall at all times consist of 3 Directors.

9.1.2. Whilst Vsolar holds the majority of Shares in the JV Company, the JV Board shall comprise of:

(i) 2 persons nominated by Vsolar; and

(ii) 1 person nominated by KRU.

9.1.3. Once Vsolar no longer holds the majority of Shares in the JV Company (whether as a result of the exercise of the Call Option provided for under Clause 7.1 or otherwise), the JV Board shall comprise of:

(i) 2 persons nominated by KRU; and

(ii) 1 person nominated by Vsolar.

10. Decision Making in JV Company

Subject always to the Companies Act 2016, all decision making in JV Company, whether by the JV Board or the shareholders shall be by the way of majority save for the reserved matters in the Agreement.

11. Special Covenants

11.1. Settlements of Accruals

All the accruals including rental payable for the office space provided by Vsolar is to be settled in full by JV Company before any distribution of dividends by JV Company.

11.2. Engineering, Procurement and Construction

The engineering, procurement and construction of the plant is to be undertaken by the JV Company who will serve as the main contractor to build and construct the biomass RE plant. However, KRU shall supply to JV Company all major equipment and engineering.

12. Others Terms & Conditions

In consideration for Vsolar subscribing to the RPS, RI undertakes to procure the transfer of up to 10% of the share capital of RI to Vsolar at a nominal consideration of RM1.00 in the event that the RPS is not redeemable before the expiry or termination of the Agreement.

13. Duration

The Agreement shall take effect from the date hereof and shall remain in full force and effect between the parties so long as the Shareholders continue to hold shares in the JV Company.

31 APPENDIX II

PRO FORMA STATEMENT OF FINANCIAL POSITON OF VSOLAR AND ITS SUBSIDIARIES AS AT 30 JUNE 2019 TOGETHER WITH THE REPORTING ACCOUNTANTS’ LETTER THEREON ()~~&W()~~ Cfi,.UHUH:V ACC()UNTANTS ---MALAYSIA--- (,i.(" 02-'ll UNIT C-20·5, Block C, 20th Floor, /;\egan Avenue II. 12. Jalan Yap Kwan Seng, 50450 Kual

Date: 0 6 MAl~ ZOZO The Board of Directors VSOLAR GROUP BERHAD 13-3, 13th Floor, Menara Lien Hoe 8, Persiaran Tropicana Tropicana Golf & Country Resort 47410 Petaling Jaya, Selangor

Dear Sirs, VSOLAR GROUP BERHAD ("Vsolar" OR "Company") REPORT ON THE COMPILATION OF PROFORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019 We have completed our assurance engagement to report on the compilation ofPmforma ConsoHdated Stateme!tts of Financial Position of VsoJar and its subsidiaries (the "Group") as at 30 June 2019 for which the Directors are solely responsible. The Proforma Consolidated Statements of Financial Position consist of the Proforma Consolidated Statements of Financial Position as at 30 June 20 19 together with the accompanying notes thereon (which we have stamped for the purpose. of identification), as set out in the accompanying statements. The applicable criteria on the basis of which the Directors have compiled the Proforma Consolidated Statements of Financial Position are described in the notes to the Proforma Consolidated Statements of Financial Position {"Applicable Criteria"). The Proforma Consolidated Statements of Financial Position have been compiled by the Directors to illustrate the impact the proposed renounceable rights issue of up to 1,317,950,973 new ordinary shares in Vsolar {"Rights Shares.,) together with up to 878,633,982 free detachable warrants ("Warrants-B") at an indicative issue price of RM0.03 per Rights Share on the basis of three (3) Rights Shares for every existing ordinary share 1n Vsolar ("Vsolar Share(s)") held, together with two (2) Warrants-B for every three (3) Rights Shares subscribed for, at an entitlement date to be determined later ('1Proposed Rights Issue with Wan-ants"). As part of this process, information about the Group's financial position has been extracted by the Directors from the audited financial statements of the Group for the financial year ended 30 June 2019, which has been published. Directors' Responsibility on tile Proforma Consolidltted Statements ofFimmdal Position The Directors are responsible for compiling the Proforma Consolidated Statements of Financial Position on the basis of the Applicable Criteria as described in the notes thereto. Reporting Accotmtants' Indepemle11ce and Quality Control We are independent in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ("By-Laws") and the International Ethics Standards Board for Accountants • Code of Ethics for Professional Accountants ("IESBA Code"), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code

32 Branch Ortlce in 1\ota l~lnabalu. 32 The firm applies International Standard on Quality C01ttrol·l ("ISQC 1 "), Quality Control for Firms that Pe1jorm Audits and Reviews ofFi11ancial Statements, and Other Assurance and Related Services Engagements and, accordingly maintains a comprehensive system of quality .control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and statutory requirements.

Reporli11g Accmmtant's Responsibilities

Our responsibility is to express an opinion, whether the Proforma Consolidated Statements of Financial Position have been compiled, in all material aspects, by the Directors on the basis of the Applicable Criteria as described in the notes thereto.

We conducted our engagement in accordance with Intemational Standard on Assurance Engagements, (ISAE) 3420 - Assurance E11gagements to Report on the Compilation of Proforma Financial Information h1cluded in a Prospectus, issued by the Intemational Auditing and Assurance Standards Board and adopted by Malaysian Institute of Accountants. This standard requires that we comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled, in all material aspects, the Proforma Consolidated Statements of Financial Position on the basis ofthe Applicable Criteria as described in the notes thereto.

For the purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Proforma Consolidated Statements ofFinancial Position, nor have we, in the course of this engagement, performed an audit or review of the financial infotmation used in compiling the Proforma Consolidated Statements of Financial Position.

The purpose of Proforma Consolidated Statements of Financial Position included in the Abridged Prospectus of Vsolar is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occun-ed or the transaction had been unde1taken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2019 would have been as presented.

A reasonable assurance engagement to report on whether the Proforma Consolidated Statements of Financial Position have been compiled, in all material respects, on the basis ofthe Applicable Criteria involves performing procedures to assess whether the Applicable Criteria used by the Directors in the compilation of the Proforma Consolidated Statements of Financial Position provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:-

(i) The related proforma adjustments give appropriate effect to those criteria; and

(ii) The Proforma Consolidated Statements of Financial Position reflect the proper application of those adjustments to the unadjusted financial infotmation.

The procedures selected depend on our judgement, having regard to our understanding of the nature of the Group, the event or transaction in respect of which the Proforma Consolidated Statements of Financial Position have been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Proforma Consolidated Statements of Financial Position.

We believe that the evidence weJ1ave obtained is sufficient and appropriate to provide a basis for our opinion.

33 OpitliOil

In our opinion,

(i) the Proforma Consolidated Statements of Financial Position as at 30 June 2019 which were prepared for illustrative purpose only have been properly compiled on the basis set out in the accompanying notes to the Proforma Consolidated Statements of Financial Position using financial statements prepared by the Directors in accordance with the Malaysian Financial Reporting Standards in Malaysia and in a manner consistent with both the format of the financial statements and the accounting policies adopted by .the Group in the preparation of its audited consolidated financial statements for the fmancial year ended 30 June 2019; and

(H) the adjustments made to the information used in the preparation of the Proforma Consolidated Statements of Financial Position are appropriate for the purposes ofpreparing the Proforma Consolidated Statements of Financial Position.

We understand that this letter will be used solely for the purposes of circular to members of Vsolar in connection with the Proposed Rights Issue with Warrants. As such, this letter should not be used for any purpose without our prior written consent. Neither the firm nor any member or employee of the firm undertakes responsibility arising in any way whatsoever to any party in respect of this letter contrary to the aforesaid purpose.

Yours faithfully,

ONG&WONG Firm No: AF 0241 Chartered Accountants

ONG~ KOON LIANG Approved Number: 2909/02/2021 (J) Chartered Accountant

34 solar''J VSOLAR GROUP BERHAD (Company No. 200301029575 (631995-T)) (Incorporated in Malaysia)

Proforma Consolidated Statements of Financial Position as at 30 June 2019 in relation to the proposed renounceable rights issue of up to 1,~17,Q50,973 new ordinary shares in Vsolar ("Rights Shares") togethet .with up to 878,633,982 free detachable warrants ('~Warrants-B~') on the basis of three (3) Rights Shares for every existing ordinary share held in Vsobtr ("Vsolar Share(s)'' or "Share(s), together with two (2) free Warrants-B for every three (3) Rights Shares subscribed on an entitlement date to be determined later ("Proposed Rights Issue with \Vartants'')

35 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019 MINIMUM SCENARIO Audited Adjusted Consolidated Consolidated Pro Forma I Pro Forma II Statement of Statement of After Proposed After Financial Position Financial Position Rights Issue Pro Forma I and as at after subsequent With Warrants Full Exercise of 30Junc2019 event Warrants-B RM RM RM RM ASSETS NON-CURRENT ASSETS Property, plant and equipment 11,030,151 11,030,151 11,030,151 ll,030,151 Capital work-in-progress 11.030,151 11.030.151 11,030.151 11.030,151 CURRENT ASSETS Inventories 100,000 100,000 100,000 100,000 Trade receivables 1,744,252 1,744,252 1,744,252 1,744,252 Other receivables, deposits and prepayments 1,296,514 1,296,514 1,296,514 1,296,514 Cash and bank balances 2,059.409 3.42ll374 10,771.374 16,238,041 5,200.175 6:562.140 13,912.140 19.378,807 TOTAL ASSETS 16,230,326 17,592,291 24.942,291 30,408.958

EQUITY AND LIABILITIES Equity attributable to owners ofthe company

Share capital 48,125,614 50,758,819 55,847.~81 63,575,486 ESOS reserve 133,089 Warrant reserve - - 2,261,538 Accumulated losses (33.188,2232 {34,326.374) (34.326.374) (34.326.3741 15,070,480 16,432,445 23,782,445 29,249,112

Non-controlling interests !717.232~ (717.232~ pl7.232) {717,232l IONG & WONG (AF 0241) Chartered Accountnnts TOTAL EQUITY 14,353,248 15,715,213 23,065,213 28.531,880 For Identification Purpnscs Only .

36 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019 MINIMUM SCENARIO (CONT'D)

Audited Adjusted Consolidated Consolidated Pro Forma I Pro Forma II Statement of Statement of After Proposed After Financial.Position Financial Position Rights Issue Pro Forma I and as at after subsequent With Warrants Full Exercise of 30June2019 event Warrauts-B RM RM RM RM NON-CURRENT LIABILITIES Deferred tax liabilities 25.E!_ 25.871 25,871 25,871 25,871 25,871 25.871 25.871 CURRENT LIABILITIES Trade payables 525,202 525,202 525,202 525,202 Other payables and accruals 1,190,881 1,190,881 1,190,881 1,190,881 Amountowing to directors 5,109 5,109 5,109 5,109 Bank overdraft 2,637 2,637 2,637 2,637 Hire purchase creditor 109.411 109,41 I 109,411 109,411 Current tax liabilities 17,967 17,967 17.967 17,967 1,851,207 1,851,207 1,851,207 1,851,207 TOTAL LIABILITIES 1,877,078 1,877,078 1,877.078 1.877,078 TOTAL EQUITY AND LIABILITIES 16,230.326 17,592,291 24,942,291 30,408,958

Number of Shares 386,067,763 410,830,763 684,164,096 866,3 86,318 Number ofWarrants-B 182,222,222 Net assets per Share (RM) 0.04 0.04 0.03 0.03 Total borrowings 112,048 112,048 112,048 112,048 Gearing (times) 0.01 0.01 0.00 0.00

ONG & WONG (AF 0241) Chartered Accountnnts For Identification Purpnscs Only ·J 2

37 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019 MAXIMUM SCENARIO Audited Adjusted Consolidated Consolidated Pro Forma 1 Pro Forma II Pro Forma III State.ment of Statement of After Proposed After Proposed After Financial Position Financial Position Full Exercise of Rights Issue Pro Forma I and as at after subsequent ESOS Options With Warrants Full Exercise of 30 June 2019 event Warrants-B RM RM RM RM RM ASSETS NON-CURRENT ASSETS Property, plant and equipment 11,030,151 11,030,151 11,030,151 11,030,151 11,030,151 Capital work-in-progress 11,030.151 11,030,151 11,030,151 11.030.151 11.030,151 CURRENT ASSETS Inventories 100,000 100,000 100,000 100,000 100,000 Trade receivables 1,744,252 1,744,252 1,744,252 1,744,252 1,744,252 Other receivables, deposits and prepayments 1,296,514 1,296,514 1,296,514 1,296,514 1,296,514 Cash and bank balances 2,059.409 3.421,374 4,275,961 42,964.490 69.323,509 5.200.175 6,562.140 7,416,727 46,105,256 72.464,275 TOTAL ASSETS 16,230,326 17,592,291 18.446,878 57,135,407 83.494.426

EQUITY AND LIABILITIES Equity attributable to owners of the company Share capital 48,125,614 50,758,819 , 52,183,131 78,967,497 117,230,679 ESOS reserve 133,089 Warrant reserve - - - 11,904,163 Accumulated losses (33,188.223) (34.326.374) (34,896,099) (34,896.099) (34.896,099) . lONO & WONO (AF 0241) 15,070,480 16,432,445 17,287,032 55,975,561 82,334,580 Chartered Accountnnts (717,2322 For Identification Purpnscs Only. Non-controlling interests {717.232) (717,232) ~717.2322 ~717.2322 TOTAL EQUITY 14,353,248 15,715.213 16,569,800 55.258,329 81,617,348 3

38 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2019 MAXIMUM SCENARIO (CONT'D)

Audited Adjusted Consolidated Consolidated Pro Forma I ProForma I Pro Forma 11 Statement of Statement of After Proposed After Proposed After Financial Position Financial Position Full Exercise of Rights Issue Pro Forma I and as at after subsequent ESOS Options With Warrants Full Exercise of 30 June2019 event Warrants-B RM RM RM RM RM NON·CURRENT LIABILITIES Deferred tax liabilities 25.871 25,871 25,871 25,871 25,871 25,871 25,871 25.871 25,871 25,871 CURRENT LIABILITIES Trade payables 525,202 525,202 525,202 525,202 525,202 Other payables and accruals 1,190,881 1,190,881 1,190,881 1,190,881 1,190,881 Amount owing to directors 5,109 5,109 5,109 5,109 5,109 Bank overdraft 2,637 2,637 2,637 2,637 2,637 Hire purchase creditor 109,411 109,411 109,411 109.411 109,411 Current tax liabilities 17,967 17,967 17,967 17,967 17.967 1,851,207 1.851,207 1.851.207 1.851.207 1,851.207 TOTAL LIABILITIES 1,877,078 1,877,078 1,877.078 1.877.078 1,877.078 TOTAL EQUITY AND LIABILITIES 16,230,326 17.592.291 18.446.878 57,135.407 83.494.426

Number of Shares 386,067,763 410,830, 76~ 439,316,991 1,757,267,964 2,635,901,946 Nwnber ofWarrants·B 878,633,982 Net assets per Share (RM) 0.04 0.04 0.04 0.03 0.03 Total borrowings I 12,048 112,048 112,048 112,048 112,048 Gearing (times) 0.01 0.01 0.01 0.00 0.00

ONG & WONG (AF 0241) Chartered Accountnnts For Identification Purpnscs Only ·I 4

39 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30JUNE2019

1. BASIS OF PREPARATION

The Pro Forma Consolidated Statements of Financial Position have been prepared in accordance with the Malaysian Financial Reporting Standards in Malaysia and based on the audited Consolidated Statements of Financial Position of Vsolar and its subsidiaries ("Group .. ) as at 30 June 2019. The Pro Forma Consolidated Statements of Financial Position have been prepared solely for illustrative purposes, to show the effects of the proposed renounceable rights issue of up to 1,317,950,973 new ordinary shares in Vsolar ("Rights Shares") together with up to 878,633,982 free detachable warrants ("Warrants-B") on the basis of three (3) Rights Shares for every existing ordinary share held in Vsolar ("Vsolar Share(s)" or "Share(sr) together with two (2) Warrants-B for every three (3) Rights Shares subsctibed at an entitlement date to be determined later ("Entitlement Date") ("Proposed Rights Issue with Warrants").

The Pro Forma Consolidated Statements of Financial Position have been prepared based on the accounting policies and bases consistent with those normally adopted by Vsolar in the preparation of its audited fmancial statements.

The Pro Forma Consolidated Statements of Financial Position are presented in Ringgit Malaysia ("RM").

The Pro Forma Consolidated Statements of Financial Position, because of its nature, may not be reflective of the Group's actual financial position. Furthermore, such information does not purport to predict the future financial position of the Group.

1.1 The details of the Minimum and Maximum Scenarios are set out below:

(i) Minimum Scenario

Minimum Scenario representing the scenario on the following assumptions:-

(a) Issuance of 273,333,333 Rights Shares together with 182,222,222 Warrants-B pursuant to the Proposed Rights Issue with Warrants.

{b) Full exercise of 182,222,222 Warrants-B based on the illustrative exercise price of RM0.03 into 182,222,222 new Vsolar Shares.

(ii) Maximum Scenario

Maximum Scenario representing the scenario on the following assumptions:-

(a) Issuance of 1,317,950,973 Rights Shares together with 878,633,982 Warrants-B pursuant to the Proposed Rights Issue with Warrants.

(b) Full exercise of 878,633,982 Warrants-B based on the illustrative exercise price ofRM0.03 into 878,633,982 new Vsolar Shares.

ONG & WONG (AF 0241} Chartered Accountnnts For Identification Purpnscs Only . 5 40 VSOLAR GROUP BERHAD ("VSOLAR") PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30JUNE2019

1.2 Fair value ofWarrants-B

The Directors of Vsolar have derived a fair value of RM0.02 for each of the Warrants-B. The fair value of the Warrants-B is derived at using the Black-Scholes option pricing model. The assumptions used to arrive at this fair value are as follows:

Exercise price RM0.03 Time to expire 3 years Underlying price RM0.03 Volatility rate 100.304% Risk free rate 2.702%

2. ADJUSTMENTS TO CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

The adjustments incorporate the effects of:-

(i) 5,158,500 ESOS options that lapsed on 18 October 2019.

(ii) Full exercise of 24,763,000 ESOS options on 18 October 2019 based on the exercise price ofRM0.055 per ESOS option into 24,763,000 new Vsolar Shares.

The Subsequent Events have the following financial impact on the Pro Forma Consolidated Statements of Financial Position of the Group:-

Increase/ (Decrease) Effect on Effect on Total Total Assets Equity RM RM

Cash and bank balances 1,361,965 Share capital 2,633,205 Accumulated losses (1,138,151) ESOS reserve (133,089)

1,361,965 1,361,965

ONG & WONG (AF 0241} Chartered Accountnnts For Identification Purpnscs Only . 6

41 VSOLAR GROUP BERHAD ("VSOLAR,') PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE2019

3. MINIMUM SCENARIO

3.1 PRO FORMA I

Pro Forma I incorporates the effects of the Subsequent Events and Proposed Rights Issue with Warrants.

The following is the utilisation of proceeds from the Proposed Rights Issue with Warrants:

Capital expenditure for development ofbiomass/biogas renewable energy plant 7,350,000 Estimated expenses for the Proposed Rights Issue with Warrants 850,000

8,200,000

The ptoceeds arising from the Proposed Rights Issue with Warrants have been eannarked for capital expenditure of the biomass/biogas plant of RM7.35 million. The estimated expenses in relation to the Proposed Rights Issue with Warrants of RM0.85 million will be debited to the share capital and warrant reserve accounts respectively.

The Proposed Rights Issue with Warrants has the following financial impact on the Pro Forma Consolidated Statements of Financial Position:-

Increase Effect on Effect on Total Assets Total Equity RM RM

Cash and bank balances 7,350,000 Share capital 5,088,462 Warrant reserve 2,261,538

7,350,000 7,350,000

ONG & WONG (AF 0241} Chartered Accountnnts For Identification Purpnscs Only . 7

42 VSOLAR GROUP BERHAD ("VSOLAR'') PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30JUNE2019

3.2 PRO FORMA II

Pro Forma II incorporates the effects of Pro Forma I and assuming the full exercise of Warrants-B.

The full exercise of Warrants-B has the following financial impact:-

Increase/ (Decrease) Effecton Effecton Total Assets Total Equity RM ffi\.1

Cash and bank balances 5,466,667 Share capital 7,728,205 Warrant reserve (2,261,538)

5,466,667 5,466,667

4. MAXIMUM SCENARIO

4.1 PROFORMA!

Pro Forma I incorporates the effects of Subsequent Events and Proposed Full Exercise of ESOS Options.

The Proposed Full Exercise of ESOS Options has the following financial impact on the Pro Forma Consolidated Statements of Financial Position:- lncrease/(Decrease) Effecton Effecton Total Assets Total Equity RM RM

Cash and bank balances 854,587 Share capital 1.424,312 Accumulated losses (569,725)

854,587 854,587

ONG & WONG (AF 0241} Chartered Accountnnts For Identification Purpnscs Only . 8

43 VSOLAR GROUP BERHAD ("VSOLAR") . PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 30JUNE2019

4.2 PRO FORMA II

Pro Forma II incorporates the effects of Pro Forma I and Proposed Rights Issue with Warrants.

The following is the utilisation of proceeds from the Proposed Rights Issue with Warrants:

RM Capital expenditure for development ofbiomasslbiogas renewable energy plant · 38,688,529 Estimated expenses for the Proposed Rights Issue with Warrants

39,538,529

The proceeds arising from the Proposed Rights Issue with Warrants have been earmarked for capital expenditure ofthe biomass/biogas plant ofRM39.54 million. The estimated ex~nses in relation to the Proposed Rights Issue with Warrants of RM0.85 million will be debited to the share capital and warrant reserve accounts respectively.

The Proposed Rights Issue with Warrants has the following financial impact on the· Pro Forma Consolidated Statements of Financial Position:- Increase Effect on Effect on Total Assets Total Equity RM RM

Cash and bank balances 38,688,529 Share capital 26,784,366 Warrant reserve 11,904,163

38,688,529 38,688,529

4.3 PRO FORMA III Pro Forma Ill incorporates the effects of Pro Forma II and assuming the full exercise of Warrants-B. The full exercise of Warrants-B has the following financial impact: Increase/OJecrease) Effect Oil Effect Oil Total Assets Total Equity RM RM

Cash and bank balances 26,359,019 Share capital 38,263,182 Warrant reserve (11,904,163)

26,359,019 26,359,019

ONG & WONG (AF 0241} Chartered Accountants 9 For Identification Purpnscs Only .

44 APPENDIX III

INDEPENDENT MARKET ASSESSMENT OF THE MALAYSIAN BIOMASS MARKET PREPARED BY REDMARCH

Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana 47820 Petaling Jaya, Selangor, Malaysia T: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM

Mr. Edward Leung Vsolar Group Berhad 12.2 12th Floor, Menara Lien Hoe No 8 Persiaran Tropicana Tropicana Golf & Country Resorts 47410 Petaling Jaya Selangor

Date: 20 February 2020

Dear Sir,

INDEPENDENT MARKET RESEARCH REPORT ON THE BIOMASS MARKET IN MALAYSIA

The following report in Appendix I is an independent assessment of the Malaysian Biomass Market prepared by Redmarch Sdn Bhd for inclusion in its circular to shareholders of Vsolar Berhad in relation to its proposed rights issue.

Redmarch Sdn Bhd has prepared this report in an independent and objective manner and has taken reasonable consideration and care to ensure the accuracy of the report. It is our opinion that the report represents a true and fair assessment of the industry within the limitations of, among others, secondary market research.

Our assessment is for the overall industry and may not necessarily reflect the individual performance of any company. We do not take any responsibility for the decisions or actions of readers of this document. This report should not be taken as a recommendation to buy or not to buy the shares of any company.

Yours sincerely,

Chooi Ching Fu Director

45 Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No.Make 2, Jalan informed PJU 8/8A Damansara decisions Perdana Make informed decisions 47820Make Petaling informed Jaya, Selangor, decisions Malaysia Redmarch Sdn Bhd (823923-W) Redmarch Sdn Bhd (823923-W) CRedmarchT:- 22+603-18 4065Empire Sdn 0085 Bhd Damansara |(823923 F: +603 -W) 4065 0105 CMake-22-18 Empire informed Damansara decisions No.CREDMARCH.COM -22 2,-18 Jalan Empire PJU Damansara8/8A Damansara Perdana RedmarchNo. 2, Jalan Sdn PJU Bhd 8/8A (823923 Damansara-W) Perdana 47820No. 2, JalanPetaling PJU Jaya,8/8A Selangor,Damansara Malaysia Perdana C47820-22-18 Petaling Empire Jaya,Damansara Selangor, Malaysia T:47820 +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 No.T: +603 2, Jalan 4065 PJU 0085 8/8A | DamansaraF: +603 4065 Perdana 0105 REDMARCH.COMT: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM APPENDIX I 47820REDMARCH.COM Petaling Jaya, Selangor, Malaysia T: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM APPENDIX I IndependentAPPENDIX I Market Research Report on the Biomass Market inAPPENDIX Malaysia I Independent Market Research Report on the Biomass Market Independent Market Research Report on the Biomass Market in Malaysia inIndependentEnergy Malaysia Sources in MarketMalaysia Research Report on the Biomass Market Malaysia has vast diversity in energy sources which comprises of both non-renewable and renewable insources Malaysia. Energy Sources in Malaysia Energy  NonSources-renewable in Malaysia energy sources are resources that are finite and does not regenerate at a Malaysia has vast diversity in energy sources which comprises of both non-renewable and renewable EnergyMalaysia sufficientSourceshas vast diversity inrate Malaysia for in sustainableenergy sources economic which comprises extraction. of bothThese non-renewable are typically andcarbon-based renewable sources. Malaysiasources. resourceshas vast diversity such as oil,in energy gas and sources coal. Most which energy comprises resources of both currently non-renewable in use around and renewable the world  Non-renewable energy sources are resources that are finite and does not regenerate at a sources . Nonare non-renewable.-renewable energy sources are resources that are finite and does not regenerate at a sufficient rate for sustainable economic extraction. These are typically carbon-based  NonRenewablesufficient-renewable rate energy forenergy sourcessustainable sources comprise areeconomic resourcesresources extraction. that canare befiniteThese naturally and are does replenishedtypically not regenerate carbon-based on a human at a resources such as oil, gas and coal. Most energy resources currently in use around the world timescale,sufficientresources suchratesuch as foras oil, sustainablesunlight, gas and coal.wind, economic Most rain, energy tides,extraction. resources waves, These geothermalcurrently are intypically useheat, around andcarbon-based thebiological world are non-renewable. materialsresourcesare non-renewable.. suchWhile as renewable oil, gas and energy coal. Mostcontributes energy a resources minor share currently of global in use energy around consumption the world  Renewable energy sources comprise resources that can be naturally replenished on a human  currently,areRenewable non-renewable. its energy share sourcesof global comprise energy consumption resources that is canincreasing be naturally as renewable replenished energy on a systems human timescale, such as sunlight, wind, rain, tides, waves, geothermal heat, and biological  aretimescale,Renewable rapidly becoming suchenergy as sources sunlight,more efficientcomprise wind, and resourcesrain, cheaper. tides, that waves, can be geothermalnaturally replenished heat, and on biological a human materials. While renewable energy contributes a minor share of global energy consumption timescale,materials. Whilesuch renewableas sunlight, energy wind, contributes rain, tides, a minorwaves, share geothermal of global heat,energy and consumption biological currently, its share of global energy consumption is increasing as renewable energy systems Figure 1: currently,materialsMalaysia. EnergyitsWhile share renewableProduction of global energy energyby Fuel contributesconsumption Type in 2017 a minor is increasing share ofas globalrenewable energy energy consumption systems are rapidly becoming more efficient and cheaper. currently,are rapidly its becoming share of more global efficient energy andconsumption cheaper. is increasing as renewable energy systems

are rapidly becoming more efficient and cheaper. Figure 1: Malaysia Energy Production by Fuel Type in 2017 Figure 1: Malaysia Energy Production by Fuel Type in 2017 Figure 1: Malaysia Energy Production by Fuel Type in 2017

Source: Malayia Energy Balance 2017

Currently, energy supply in Malaysia is largely contributed by three major non-renewable sources, Source: Malayia Energy Balance 2017 Source: namely Malay naturalia Energy gas Balance, crude 2017 oil and coal. Traditionally, Malaysia has relied on these fossil fuels due to theSource:Currently, significant Malay energyia Energy reserves supply Balance of 2017in crudeMalaysia oil isand largely natural contributed gas available by three within major its shoreline.non-renewable In 2017, sources, non- Currently, energy supply in Malaysia is largely contributed by three major non-renewable sources, renewablenamely natural energy gas sources, crude oilcontributed and coal. overTraditionally, 94% of total Malaysia energy has production relied on thesein Malaysia. fossil fuelsIn contrast, due to namely natural gas, crude oil and coal. Traditionally, Malaysia has relied on these fossil fuels due to therenewableCurrently, significant energyenergy reserves supplysources ofin such crudeMalaysia as solar,oil isand hydro,largely natural biomasscontributed gas available and biogasby three within contributed major its shoreline.non-renewable only 6 %In of 2017, Malaysia’s sources, non- the significant reserves of crude oil and natural gas available within its shoreline. In 2017, non- renewableenergynamely supply.natural energy Hydropowergas sources, crude oilcontributed is and the coal main. overTraditionally, renewable 94% of totalenergy Malaysia energy source has production reliedfollowed on theseinby Malaysia. biomass/biogas fossil fuelsIn contrast, due and to renewable energy sources contributed over 94% of total energy production in Malaysia. In contrast, renewablethesolar. significant energy reserves sources of such crude as solar,oil and hydro, natural biomass gas available and biogas within contributed its shoreline. only 6 %In of 2017, Malaysia’s non- renewable energy sources such as solar, hydro, biomass and biogas contributed only 6% of Malaysia’s energyrenewable supply. energy Hydropower sources contributed is the main over renewable 94% of totalenergy energy source production followed inby Malaysia. biomass/biogas In contrast, and energy supply. Hydropower is the main renewable energy source followed by biomass/biogas and solar.renewableIn recent years, energy Malaysia sources suchhas beenas solar, shifting hydro, its biomass focus toand renewable biogas contributed energy to only avoid 6% ofbeing Malaysia’s overly solar. energydependent supply. on fossil Hydropower fuel. Greater is the usage main of renewable renewable energy energy sourcewill also followed help mitigate by biomass/biogas spikes in crude and oil

Insolar.prices recent or foreignyears, exchangeMalaysia rates.has been The shiftingMalaysian its governmentfocus to renewable has committed energy itself to avoid to combat being climate overly In recent years, Malaysia has been shifting its focus to renewable energy to avoid being overly changedependent and on to fossilreduce fuel. carbon Greater emission usage ofthrough renewable greater energy usage will of also renewable help mitigate energy spikes sources in crudeand has oil dependent on fossil fuel. Greater usage of renewable energy will also help mitigate spikes in crude oil Insubmittedprices recent or foreign years,the Intended exchangeMalaysia Nationally rates.has been The Determined shiftingMalaysian its governmentContributionfocus to renewable has (INDC) committed reportenergy itself toto theavoid to combatUnited being Nationsclimate overly prices or foreign exchange rates. The Malaysian government has committed itself to combat climate dependentFrameworkschange and on toConvention fossilreduce fuel. carbon onGreater Climate emission usage Change ofthrough renewable (UNFCCC) greater energy in usageNovember will of also renewable 2015. help mitigateThe energy INDC spikes reportsources in stipulates crudeand has oil change and to reduce carbon emission through greater usage of renewable energy sources and has pricesthatsubmitted Malaysia or foreign the intends Intended exchange to reduceNationally rates. itsThe greenhouseDetermined Malaysian governmentgasContribution emissions has (INDC)intensity committed report of Gross itselfto the Domesticto combatUnited Products Nationsclimate submitted the Intended Nationally Determined Contribution (INDC) report to the United Nations change(GDP)Frameworks by and 45% toConvention byreduce 2030 carbon relative on Climate emission to the Change emissionsthrough (UNFCCC) greater intensity in usageNovember of GDP of renewable in 2015. 2005. The This energy INDC involves reportsources 35% stipulates and on has an Frameworks Convention on Climate Change (UNFCCC) in November 2015. The INDC report stipulates submittedunconditionalthat Malaysia the basisintends Intended and to a reduceNationallyfurther 10%its greenhouseDetermined conditional gas Contributionupon emissions receipt of(INDC)intensity climate report offinance, Gross to the technologyDomestic United Products transferNations that Malaysia intends to reduce its greenhouse1 gas emissions intensity of Gross Domestic Products Frameworksand(GDP) capacity by 45% Conventionbuilding by 2030 from relative on developed Climate to the Change countriesemissions (UNFCCC). intensityThe shiftin November oftowards GDP in renewable2015. 2005. The This INDCenergy involves report will 35% playstipulates ona key an (GDP) by 45% by 2030 relative to the emissions intensity of GDP in 2005. This involves 35% on an thatroleunconditional inMalaysia the government’s basisintends and to a effort reducefurther to its10%meet greenhouse conditional this goal. gas upon emissions receipt ofintensity climate offinance, Gross technologyDomestic Products transfer unconditional basis and a further 10% conditional1 upon receipt of climate finance, technology transfer (GDP)and capacity by 45% building by 2030 from relative developed to the countriesemissions1. intensityThe shift oftowards GDP in renewable 2005. This energy involves will 35% play ona key an and capacity building from developed countries1. The shift towards renewable energy will play a key unconditionalrole in the government’s basis and a effort further to 10%meet conditional this goal. upon receipt of climate finance, technology transfer role in the government’s effort to meet this goal.1 and capacity building from developed countries . The shift towards renewable energy will play a key role in the government’s effort to meet this goal. 1 United Nations Framework Convention on Climate Change

1 46 1 1 United Nations Framework Convention on Climate Change United Nations Framework Convention on Climate Change 1 United Nations Framework Convention on Climate Change Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana 47820 Petaling Jaya, Selangor, Malaysia MakeT: +603 4065 informed 0085 | F: +603 decisions 4065 0105 REDMARCH.COM Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana Renewable Energy Industry 47820 Petaling Jaya, Selangor, Malaysia Currently, Peninsular Malaysia has a total operational renewable energy capacityT: +603 4065of 490 0085 megawatts | F: +603 4065 0105 (MW), mostly fueled by solar PV (337MW), and followed by biogas (51 MW),REDMARCH.COM biomass (32MW) and mini hydro (24MW). Renewable Energy Industry TableCurrently, 1: Renewable Peninsular Capacity Malaysia Mix has in a Peninsular total operational Malaysia renewable (MW) as ofenergy June capacity2018 of 490 megawatts Types(MW), ofmostly Renewable fueled Energy by solar PV (337OperationalMW), and RE followed Awardedby biogas RE (51 Projects MW), biomass (Total32MW) and miniSolid hydro waste (24MW). 9 30 39 Mini hydro 24 287 311 TableBiomass 1: Renewable Capacity Mix in Peninsular32 Malaysia (MW) as of64 June 2018 96 BiogasTypes of Renewable Energy Operational51 RE Awarded 74RE Projects Total125 SolarSolid wastePV 3379 305 34239 LMiniarge hydro Scale Solar (LSS) 3824 1,058287 1,096311 TotalBiomass 43290 1,51964 2,00996 BiogasSource: Towards A Sustainable Future Energy Outlook51 (Energy Comission) 74 125 Solar PV 337 5 342 L arge Scale Solar (LSS) 38 1,058 1,096 TotalSolar PV is the most popular source of renewable490 energy in terms of1,519 current capacity due 2,009to the easily Source:accessible Towards sunlight A Sustainable throughout Future Energy the year Outlook in Malaysia.(Energy Comission) Solar PV is also highly supported by government through introduction of FiT, NEM and LSS programme. As part of Malaysia’s roadmap for renewable energy development, the Feed-in-Tariff (FiT) system was introduced in 2011. FiT obliges Distribution LicenseesSolar PV is (e.g.the most Tenaga popular Nasional source Bhd) of renewable to buy from energy individuals in terms ofor currentcompanies capacity that due hold to athe feed-in easily approvalaccessible certificate sunlight throughout making them the yeareligible in Malaysia. to sell renewable Solar PV is energy also highly at FiT supported rates. The by governmentDistribution Licenseesthrough introduction will pay for ofrenewable FiT, NEM energy and LSS supplied programme. to the Aselectricity part of Malaysia’sgrid for a specific roadmap duration for renewable (e.g. 16 orenergy 21 years) development, at FiT rates. the ByFeed- guaranteeingin-Tariff (FiT) access system to the was grid introduced and setting in 2011. a favorable FiT obliges price Distribution per unit of Licenseesrenewable (e.g.energy, Tenaga the FiTNasional mechanism Bhd) wouldto buy ensurefrom individualsthat renewable or companies energy becomes that hold a viablea feed-in and approvalsound long-term certificate investment making forthem companies eligible andto sell also renewable for individuals energy2. at FiT rates. The Distribution Licensees will pay for renewable energy supplied to the electricity grid for a specific duration (e.g. 16 orTable 21 years)2: FiT Rates at FiT and rates. Effective By guaranteeing Period access to the grid and setting a favorable price per unit of renewableRenewable energy, Energy the Type FiT mechanismFiT Rate (RM would per ensurekWh) thatEffective renewable Period energy Annual becomes Digression a viable Rate and 2 soundBiomass long-term investment for companies0.27-0.45 and also for individuals16 years. 0.5-1.8% Biogas 0.28-0.31 16 years 0.5-1.8% TableSolar 2: PV FiT Rates and Effective Period0.49 -0.92 21 years 8-20% MiniRenewable-hydro Energy Type FiT Rate0.23 (RM-0.24 per kWh) Effective21 years Period Annual Digression0 Rate Source:Biomass SEDA 0.27-0.45 16 years 0.5-1.8% Biogas 0.28-0.31 16 years 0.5-1.8% ToSolar complement PV the FiT mechanism, Net0.49 Energy-0.92 Metering (NEM)21 years is implemented in 20168-20% to promote andMini boost-hydro the development of renewable0.23- 0.24energy. NEM of up 21to years500 MW will allow consumers0 to self- generateSource: SEDA most of their electricity requirement before exporting and selling any excess energy to the Distribution Licensees. Starting from 2016, a 100 MW quota per year will be available for bidding Tothrough complement three sections; the FiT mechanism,Domestic, Commercial Net Energy Meteringand Industrial (NEM) which is implemented makes up 10%,in 2016 45% to andpromote 45% andrespectively boost the of development the total capacity of renewable3. energy. NEM of up to 500 MW will allow consumers to self- generate most of their electricity requirement before exporting and selling any excess energy to the DistributionThere are initiatives Licensees. to harvestStarting energyfrom 2016, from athe 100 sun MW with quota installation per year of will200 beMW available per year for under bidding the throughLSS programme three sections; integrating Domestic, solar energy Commercial into the and grid Industrial system withwhich a sharemakes of up 0.14% 10%, during 45% andthe 45%first respectivelyyear in 2017 of and the increasing total capacity up to3. 0.5% by 2020. A total of 1,000 MW projects have been introduced during 2017-2018. 800 MW from the total capacity will be awarded by competitive bidding and it will Thereenter theare systeminitiatives by stagesto harvest from energy 2017 to from 2020 the4. sun with installation of 200 MW per year under the LSS programme integrating solar energy into the grid system with a share of 0.14% during the first year in 2017 and increasing up to 0.5% by 2020. A total of 1,000 MW projects have been introduced during 2017-2018. 800 MW from the total capacity will be awarded by competitive bidding and it will enter the system by stages from 2017 to 20204.

2 SEDA 3 SEDA 4 Supply Industry Outlook 2017 (Energy Commission)

2 SEDA 47 3 SEDA 4 Supply Industry Outlook 2017 (Energy Commission) Make informed decisions Make informed decisions RedmarchMake informedSdn Bhd (823923 decisions-W) RedmarchMake informedSdn Bhd (823923 decisions-W) RedmarchMakeC -22-18 Empire informedSdn Bhd Damansara (823923 decisions -W) C -22-18 Empire Damansara No.RedmarchMake 2, Jalan informedSdn PJU Bhd 8/8A (823923 Damansara decisions-W) Perdana No.C -22 2,-18 Jalan Empire PJU Damansara8/8A(823923 Damansara -W) Perdana 47820CRedmarch-22-18 Petaling Empire Sdn Bhd Jaya,Damansara Selangor, Malaysia 47820CRedmarchNo.-22 2,-18 JalanPetaling Empire Sdn PJU Bhd Jaya,Damansara8/8A (823923 Selangor,Damansara -W) Malaysia Perdana T:No.Make +603 2, Jalan 4065 informed PJU 0085 8/8A | DamansaraF: +603 decisions 4065 Perdana 0105 T:No.Make47820C - 22+603 2,-18 JalanPetaling 4065Empire informed PJU 0085 Jaya,Damansara8/8A | Selangor,DamansaraF: +603 decisions 4065 Malaysia Perdana 0105 T:No.RedmarchREDMARCH.COM47820 +603 2, JalanPetaling 4065 Sdn PJU 0085 Bhd Jaya,8/8A |(823923 Selangor,DamansaraF: +603-W) 4065 Malaysia Perdana 0105 RedmarchREDMARCH.COM47820 Petaling Sdn Bhd Jaya, (823923 Selangor,-W) Malaysia REDMARCH.COM47820CT:- 22+603-18 Petaling 4065Empire 0085 Jaya,Damansara | Selangor,F: +603 4065 Malaysia 0105 CT:- 22+603-18 4065Empire 0085 Damansara | F: +603 4065 0105 T:No.REDMARCH.COM +603 2, Jalan 4065 PJU 0085 8/8A | DamansaraF: +603 4065 Perdana 0105 On the other hand, several biomass based power plant projects have experiencesNo.REDMARCH.COM 2, severalJalan PJU 8/8A problems Damansara in Perdana On the other hand, several biomass based power plant projects have experiencesREDMARCH.COM47820 severalPetaling Jaya, problems Selangor, Malaysiain On the other hand, several biomass based power plant projects have experiences47820T: +603 severalPetaling 4065 0085 Jaya, problems | Selangor,F: +603 4065 Malaysiain 0105 development in terms of securing fuel supply and technical matters. Hence,T: +603 Energy 4065 0085 Commission | F: +603 4065 0105 developmentOn the other hand,in terms several of securingbiomass basedfuel supply power andplant technical projects matters.have experiences Hence,REDMARCH.COM Energyseveral Commissionproblems5 in (SuruhanjayadevelopmentOn the other hand,Tenaga)in terms several has of cancelled securingbiomass threebasedfuel supplybiomass power andplant licenses technical projects due to matters.have the experiencesunfeasible Hence,REDMARCH.COM conditions Energyseveral Commissionproblems5. in (SuruhanjayadevelopmentOn the other hand,Tenaga)in terms several has of cancelled securingbiomass threebasedfuel supplybiomass power andplant licenses technical projects due to matters.have the experiencesunfeasible Hence, conditions Energyseveral Commissionproblems5. in (Suruhanjayadevelopment Tenaga)in terms has of cancelled securing threefuel supplybiomass and licenses technical due tomatters. the unfeasible Hence, conditionsEnergy Commission5. (Suruhanjayadevelopment Tenaga)in terms has of cancelled securing threefuel supplybiomass and licenses technical due tomatters. the unfeasible Hence, conditionsEnergy Commission5. (SuruhanjayaOn the other hand,Tenaga) several has cancelled biomass threebased biomass power plant licenses projects due to have the experiencesunfeasible conditions several problems5. in (SuruhanjayaOn the other hand,Tenaga) several has cancelled biomass threebased biomass power plant licenses projects due to have the experiencesunfeasible conditions several problems. in development in terms of securing fuel supply and technical matters. Hence, Energy Commission development Table 3: Peninsular in terms Renewable of securing Energy fuel Projects supply 201 and7 (MW)technical matters. Hence, Energy Commission5 (SuruhanjayaTable 3: Peninsular Tenaga) Renewable has cancelled Energy three Projects biomass 201 licenses7 (MW) due to the unfeasible conditions5. (SuruhanjayaTable 3: Peninsular Tenaga) Renewable has Biomasscancelled Energy three Projects biomass Biogas201 licenses7 (MW) due to theSolar unfeasible PV conditionsMini .Hydro Table 3: Peninsular RenewableBiomass Energy Projects Biogas2017 (MW) Solar PV Mini Hydro Perlis Table 3: Peninsular RenewableBiomass- Energy Projects Biogas201- 7 (MW) Solar16.53 PV Mini Hydro- PerlisTable 3: Peninsular RenewableBiomass- Energy Projects Biogas201- 7 (MW) Solar16.53 PV Mini Hydro- PenangPerlis Biomass- Biogas- Solar16.3516.53 PV Mini Hydro- TablePenangPerlis 3: Peninsular RenewableBiomass- Energy Projects Biogas201- 7 (MW) Solar16.3516.53 PV Mini Hydro- PerakPenangPerlisTable 3: Peninsular Renewable12.93- Energy Projects 2018.51- 7 (MW) 17.5016.3516.53 14.23- PerakPenangPerlis Biomass12.93- Biogas8.51- Solar17.5016.3516.53 PV Mini14.23 Hydro- Selangor PerakPenang Biomass12.9314- Biogas11.848.51- Solar71.4417.5016.35 PV Mini14.23 Hydro- PerlisSelangorPerakPenang 12.9314- 11.848.51- 16.5371.4417.5016.35 14.23- KualaPerlisSelangorPerak Lumpur 12.9314- 11.848.51- 16.5371.4417.502.74 14.23- PenangKualaSelangorPerak Lumpur 12.9314- 11.848.51- 16.3571.4417.502.74 14.23- NegeriPenangKualaSelangor Lumpur Sembil an 19.514- 11.846.66- 42.0916.3571.442.74 14.23- PerakNegeriKualaSelangor Lumpur Sembil an 12.9319.514- 11.848.516.66- 17.5042.0971.442.74 14.23- MelakaPerakNegeriKuala Lumpur Sembil an 12.9319.5- 8.516.66- 17.1117.5042.092.74 14.23- SelangorMelakaNegeriKuala Lumpur Sembil an 19.514- 11.846.66- 71.4417.1142.092.74 14.23- JohorSelangorMelakaNegeri Sembil an 19.51114- 11.8419.66.66- 17.7771.4417.1142.09 14.23- KualaJohorMelakaNegeri Lumpur Sembil an 19.511- 19.66.66- 17.7717.1142.092.74 - PahangKualaJohorMelaka Lumpur 13.511- 14.1519.6- 24.6917.7717.112.74 26.83- NegeriPahangJohorMelaka Sembil an 19.513.511- 14.156.6619.6- 42.0924.6917.7717.11 26.83- TerengganuNegeriPahangJohor Sembil an 19.513.511- 14.156.6619.6- 10.3142.0924.6917.77 26.83- MelakaTerengganuPahangJohor 13.511- 14.1519.6- 17.1110.3124.6917.77 26.83- KelantanMelakaTerengganuPahang 13.5- 14.15- 17.1110.3124.697.47 26.8314.8- JohorKelantanTerengganuPahang 13.511- 14.1519.6- 17.7710.3124.697.47 26.8314.8- KedahJohorKelantanTerengganu 11- 19.62.4- 15.0717.7710.317.47 14.8- PahangKedahKelantanTerengganu 13.5- 14.152.4- 24.6915.0710.317.47 26.8314.8- KedahSource:Kelantan Energy Commission 13.5- 14.152.4- 24.6915.077.47 26.8314.8- KedahKelantanSource:Pahang Energy Commission - 2.4- 15.077.47 14.8- KedahSource:Terengganu Energy Commission - 2.4- 15.0710.31 - KedahSource:Terengganu Energy Commission - 2.4- 15.0710.31 - Source:KelantanTable 3Energy shows Commission that every state- in Peninsular Malaysia- are generating7.47 solar power, while14.8 the other Source:Kelantan Table 3Energy shows Commission that every state- in Peninsular Malaysia- are generating7.47 solar power, while14.8 the other Kedah Table 3 shows that every state- in Peninsular Malaysia2.4 are generating15.07 solar power, while theother KedahtypesTable of3 showsrenewable that energyevery statesuch- asin biomass,Peninsular biogas Malaysia2.4 and miniare generatinghydro are15.07 only solar being power, utilized while in the-a handful other Source:typesTable of3Energy showsrenewable Commission that energyevery statesuch asin biomass,Peninsular biogas Malaysia and miniare generatinghydro are only solar being power, utilized while in thea handful other Source:oftypesTable states. of3Energy showsrenewable Commission that energyevery statesuch asin biomass,Peninsular biogas Malaysia and miniare generatinghydro are only solar being power, utilized while in thea handful other Table oftypes states. of3 showsrenewable that energyevery statesuch asin biomass,Peninsular biogas Malaysia and miniare generatinghydro are only solar being power, utilized while in thea handful other types of states. of renewable energy such as biomass, biogas and mini hydro are only being utilized in a handful typesTable of states. of3 showsrenewable that energyevery statesuch asin biomass,Peninsular biogas Malaysia and miniare generatinghydro are only solar being power, utilized while in thea handful other ofTableUnder states. 3the shows Eleventh that Malaysiaevery state Plan, in renewablePeninsular energyMalaysia is identifiedare generating as an solaralternative power, energy while sourcesthe other to oftypesUnder states. of the renewable Eleventh energyMalaysia such Plan, as biomass,renewable biogas energy and is miniidentified hydro as are an only alternative being utilized energy in sources a handful to typessupportUnder of the therenewable Eleventh continuous energyMalaysia increasing such Plan, as energybiomass,renewable demand. biogas energy andBesides is miniidentified promoting hydro as are an onlythe alternative existingbeing utilized renewableenergy in sources a handful energy to Under ofsupport states. the the Eleventh continuous Malaysia increasing Plan, energyrenewable demand. energy Besides is identified promoting as an the alternative existing renewableenergy sources energy to Underofsourcessupport states. the thesuch Eleventh continuous as hydro, Malaysia increasing solar, Plan, biomass energyrenewable anddemand. energybiogas, Besides ismajor identified promoting focus as willan the alternativebe existing given renewableenergyin exploring sources energy new to supportUnder sources the thesuch Eleventh continuous as hydro, Malaysia increasing solar, Plan, biomass energyrenewable anddemand. energybiogas, Besides ismajor identified promoting focus as willan the alternativebe existing given renewableenergyin exploring sources energy new to support renewablesources thesuch energy continuous as hydro, sources increasing solar, in the biomass energyEleventh anddemand. Plan, biogas, includingBesides major promoting exploringfocus will thewind, be existing given geothermal renewablein exploring and energyocean new sourcessupportUnderrenewable the thesuch Eleventhenergy continuous as hydro, sources Malaysia increasing solar, in Plan, the biomass energyrenewableEleventh anddemand. Plan, energybiogas, includingBesides ismajor identified promoting exploringfocus as willan the wind, alternativebe existing given geothermal renewableenergyin exploring andsources energyocean new to sourcesUnderenergyrenewable thesources such Eleventhenergy as to hydro,further sources Malaysia solar,diversify in Plan, the biomass therenewableEleventh generation and Plan, energybiogas, mix. including is major identified exploringfocus as willan wind, alternativebe given geothermal energyin exploring andsources ocean new to renewablesourcessupportenergy sources thesuch energy continuous as to hydro,further sources increasing solar,diversify in the biomass theenergyEleventh generation anddemand. Plan, biogas, mix. includingBesides major promoting exploringfocus will thewind, be existing given geothermal renewablein exploring and energyocean new renewablesupportenergy sources the energy continuous to further sources increasing diversify in the theenergyEleventh generation demand. Plan, mix. includingBesides promoting exploring thewind, existing geothermal renewable and energyocean energy renewablesources sources such energy as to hydro,further sources solar,diversify in the biomass theEleventh generation and Plan, biogas, mix. including major exploringfocus will wind, be given geothermal in exploring and ocean new Overviewenergy sources sources such of as toBiomass hydro,further solar,diversifyas Bio-energy biomass the generation and Source biogas, mix. major focus will be given in exploring new Overviewenergy renewable sources energy of toBiomass further sources diversifyas in Bio-energy the theEleventh generation Source Plan, mix. including exploring wind, geothermal and ocean Overviewrenewable energy of Biomass sources as in Bio-energy the Eleventh Source Plan, including exploring wind, geothermal and ocean Overviewenergy sources of toBiomass further diversifyas Bio-energy the generation Source mix. The Overviewenergy biomass sources of feedstock toBiomass further in diversifyMalaysiaas Bio-energy the can generation be categorizedSource mix. into 3 different sectors, namely biomass from The Overview biomass of feedstock Biomass in Malaysiaas Bio-energy can be categorizedSource into 3 different sectors, namely biomass from agriculture,The biomass forestry feedstock and in waste. Malaysia can be categorized into 3 different sectors, namely biomass from Overviewagriculture,The biomass forestryof feedstock Biomass and in waste. Malaysiaas Bio-energy can be categorizedSource into 3 different sectors, namely biomass from Overview agriculture,The biomass forestryof feedstock Biomass and in waste. Malaysiaas Bio-energy can be categorizedSource into 3 different sectors, namely biomass from agriculture,The biomass forestry feedstock and in waste. Malaysia can be categorized into 3 different sectors, namely biomass from Tableagriculture, 4: Types forestry of Biomass and waste. Feedstock TheTable agriculture, biomass 4: Types forestry feedstock of Biomass and in waste. MalaysiaFeedstock can be categorized into 3 different sectors, namely biomass from TheTable Sector biomass 4: Types feedstock ofBiomass Biomass in Category MalaysiaFeedstock can Biomassbe categorized Type into 3 differentDescription sectors, namely biomass from agriculture,Table Sector 4: Types forestry ofBiomass Biomass and Categorywaste. Feedstock Biomass Type Description agriculture,TableSector 4: Types forestry ofBiomass Biomass and Categorywaste. Feedstock Biomass Type Description TableAgricultureSector 4: Types ofPrimaryBiomass Biomass Crop Category Feedstock WoodyBiomass biomass Type Kenaf,Description bamboo, etc. AgricultureSector PrimaryBiomass Crop Category WoodyBiomass biomass Type Kenaf,Description bamboo, etc. TableAgricultureSector 4: Types ofPrimaryBiomass Biomass Crop Category Feedstock WoodyBiomass biomass Type Kenaf,Description bamboo, etc. TableAgriculture 4: Types ofPrimary Biomass Crop Feedstock Sugar,Woody starch, biomass oil Jatropha,Kenaf, bamboo, sago waste, etc. OPT juice SectorAgriculture BiomassPrimary Crop Category Sugar,BiomassWoody starch, biomass Type oil Jatropha,DescriptionKenaf, bamboo, sago waste, etc. OPT juice SectorAgriculture BiomassPrimary Crop Category Sugar,BiomassWoody starch, biomass Type oil Jatropha,DescriptionKenaf, bamboo, sago waste, etc. OPT juice Secondary agriculture SolidSugar, agricultural starch, oil EmptyJatropha, fruit sago bunch, waste, mesocarp OPT juice fibre, Agriculture SecondaryPrimary Crop agriculture SolidWoodySugar, agricultural starch, biomass oil EmptyKenaf,Jatropha, bamboo,fruit sago bunch, waste, etc. mesocarp OPT juice fibre, Agriculture residuesSecondaryPrimary Crop agriculture residSolidWoodySugar, uesagricultural starch, biomass oil palmEmptyKenaf,Jatropha, kernel bamboo,fruit sago bunch, shell, waste, etc. paddy mesocarp OPT straw, juice fibre, husk residuesSecondary agriculture residSolid uesagricultural palmEmpty kernel fruit bunch, shell, paddy mesocarp straw, fibre, husk residuesSecondary agriculture WetSugar,residSolid biomass uesagricultural starch, oil PalmJatropha,palmEmpty oilkernel fruit mill sago bunch, shell,effluent, waste, paddy mesocarp sagoOPT straw, juicesludge, fibre, husk residuesSecondary agriculture WetSugar,residSolid biomass uesagricultural starch, oil PalmJatropha,palmEmpty oilkernel fruit mill sago bunch, shell,effluent, waste, paddy mesocarp sagoOPT straw, juicesludge, fibre, husk residues Wetresid biomassues pig/Palmpalm cattle/ oilkernel mill chicken shell,effluent, paddy manure sago straw, sludge, husk Secondaryresidues agriculture SolidWetresid biomass uesagricultural Emptypig/Palmpalm cattle/ oilkernel fruit mill chickenbunch, shell,effluent, paddy mesocarp manure sago straw, sludge, fibre, husk Forestry PrimarySecondary forest agriculture WoodySolidWet biomass agricultural biomass ResiduesEmptypig/Palm cattle/ oil fruit mill from chickenbunch, effluent, cultivation mesocarp manure sago and sludge, fibre, Forestry residuesPrimary forest residWoodyWet biomassues biomass palmResiduespig/Palm cattle/ oilkernel mill from chicken shell,effluent, cultivation paddy manure sago straw, and sludge, husk Forestry residuesPrimary forest residWoodyues biomass harvesting/palmResiduespig/ cattle/ kernel from chicken loggingshell, cultivation paddy acmanuretivities straw, and husk Forestry residuesPrimary forest WetWoody biomass biomass Palmharvesting/Residuespig/ cattle/ oil mill from chickenlogging effluent, cultivation acmanure sagotivities and sludge, Forestry SecondaryresiduesPrimary forest forest WoodyWet biomass biomass WoodPalmharvesting/Residues oil chips, mill from logging effluent,saw cultivation dust ac sago tivities and sludge, Forestry SecondaryresiduesPrimary forest forest Woody biomass pig/Woodharvesting/Residues cattle/ chips, from chickenlogging saw cultivation dust acmanure tivities and residuesSecondary forest Woody biomass pig/Woodharvesting/ cattle/ chips, chickenlogging saw dust acmanure tivities Forestry PrimaryresiduesSecondary forest forest Woody biomass ResiduesWoodharvesting/ chips, from logging saw cultivation dust ac tivities and WasteForestry PrimaryresiduesSecondary residuesforest forest LandscapeWoody biomass waste BiomassResiduesWood chips, residues from saw cultivation dustfrom maintenance and Waste residuesPrimarySecondary residues forest LandscapeWoody biomass waste harvesting/BiomassWood chips, residues logging saw dustfrom ac tivities maintenance Waste residuesPrimary residues Landscape waste activitiesharvesting/Biomass residues (green logging and from ac woodytivities maintenance cuttings) Waste SecondaryPrimaryresidues residues forest WoodyLandscape biomass waste WoodactivitiesBiomass chips, residues (green saw and dustfrom woody maintenance cuttings) Waste SecondaryPrimary residues residuesforest OrganicWoodyLandscape biomasswaste waste (from OrganicWoodactivitiesBiomass chips, householdresidues (green saw and dustfrom w woodyaste maintenance i.e. cuttings) food Waste residuesSecondaryPrimary residues residues OrganicLandscape waste waste (from OrganicactivitiesBiomass householdresidues (green and from w woodyaste maintenance i.e. cuttings) food residuesSecondary residues Organic waste (from Organicactivities household (green and w woodyaste i.e. cuttings) food Waste PrimarySecondary residues residues LandscapeOrganic waste waste (from BiomassOrganicactivities householdresidues (green and from w woodyaste maintenance i.e. cuttings) food Waste PrimarySecondary residues residues LandscapeOrganic waste waste (from BiomassOrganic householdresidues from waste maintenance i.e. food 5 Secondary residues Organic waste (from activitiesOrganic household (green and w woodyaste i.e. cuttings) food 5 Energ y Commission activities (green and woody cuttings) 5 Energ y Commission 5 Energ y Commission Secondary residues Organic waste (from Organic household waste i.e. food 5 Energ y Commission Secondary residues Organic waste (from Organic household waste i.e. food 5 Energy Commission 48 Energ y Commission 5 5 Energy Commission Energy Commission Make informed decisions

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No.RedmarchMake 2, Jalan informedSdn PJU Bhd 8/8A (823923 Damansara decisions-W) Perdana Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara MakeCRedmarch47820-22-18 Petaling Empire informedSdn Bhd Jaya,Damansara (823923 Selangor, decisions -W) Malaysia No. 2, Jalan PJU 8/8A Damansara Perdana MakeNo.CT:- 22+603 2,-18 Jalan 4065Empire informed PJU 0085 Damansara8/8A | DamansaraF: +603 decisions 4065 Perdana 0105 47820 Redmarch Petaling Sdn Bhd Jaya, (823923 Selangor,-W) Malaysia 47820No.REDMARCH.COM 2, JalanPetaling PJU Jaya,8/8A Selangor,Damansara Malaysia Perdana RedmarchT:C- 22+603-18 4065Empire Sdn 0085 Bhd Damansara |(823923 F: +603 -W) 4065 0105 T:47820 +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 CREDMARCH.COMNo.-22 2,-18 Jalan Empire PJU Damansara8/8A Damansara Perdana REDMARCH.COMT: +603 4065 0085 | F: +603 4065 0105 household) waste, waste papers,No.REDMARCH.COM47820 2, JalanPetaling etc. PJU Jaya,8/8A Selangor,Damansara Malaysia Perdana 47820T: +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 Organichousehold) waste (from Foodwaste, processing waste papers,T:REDMARCH.COM +603residues 4065 etc. 0085 from | F: trade,+603 4065 0105 household) waste, waste papers,REDMARCH.COM etc. industry) markets, etc. household)Organic waste (from waste,Food processing waste papers, residues etc. from trade, Tertiary residues OrganicSolid biomass waste (from (from FoodWoody processing fractions residuesfrom construction, from trade, industry)household) markets,waste, waste etc. papers, etc. industry) markets,demolition, etc. bulk transport activities Tertiary residues SolidOrganic biomass waste (from (from WoodyFood processing fractions residuesfrom construction, from trade, Tertiary residues SolidWetOrganic b biomassiomass waste (from (from WoodySewageFood processing fractionssludge residuesfrom construction, from trade, industry) demolition,markets, etc. bulk transport activities Source: Malaysia BiomassTertiary Industry residues Action Plan 2020SolidWetindustry) b biomassiomass (from Sewagedemolition,markets,Woody fractionssludge etc. bulk transportfrom construction, activities Wet biomass Sewage sludge Source: Malaysia BiomassTertiary Industry residues Action Plan 2020industry)WetSolid b biomassiomass (from SewageWoodydemolition, fractionssludge bulk transportfrom construction, activities Source:The biomass Malaysia industry Biomass Industry creates Action value Plan from 2020 biomass feedstock as a substitute for non-sustainable raw Source: Malaysia Biomass Industry Action Plan 2020Wetindustry) biomass Sewagedemolition, sludge bulk transport activities material for the production of intermediate and end products such as energy, chemicals, fertilisers Source:The biomass Malaysia industry Biomass Industry creates Action value Plan from 2020Wet biomass biomass feedstock asSewage a substitute sludge for non-sustainable raw Source:Theand materials.biomass Malaysia industry Biomass The products Industry creates Actionfrom value Planbiomass from 2020 biomasscan be categorized feedstock intoas a thesubstitute following for group: non-sustainable raw material for the production of intermediate and end products such as energy, chemicals, fertilisers material a) Biofor-energy: the production solid pellets, of intermediate liquid biofuels and and end biogas/syngas products such as energy, chemicals, fertilisers Theand materials.biomass industry The products creates from value biomass from biomasscan be categorized feedstock intoas a thesubstitute following for group: non-sustainable raw andThe materials.b)biomassBio-chemical: industry The products createsgreen from chemical value biomass from and biomasscanbio-polymers, be categorized feedstock lactic intoas acid, a thesubstitute food following additives for group: non-sustainable raw materiala) Biofor-energy: the production solid pellets, of intermediate liquid biofuels and and end biogas/syngas products such as energy, chemicals, fertilisers materiala)c) Biofor-energy:-fertilizers: the production solid compost, pellets, of intermediate soil liquid conditioner, biofuels and and soilend biogas/syngas stabilizer products such as energy, chemicals, fertilisers and materials.b) Bio-chemical: The products green from chemical biomass and canbio-polymers, be categorized lactic into acid, the food following additives group: and materials.b)d) Bio-chemical:-composites: The products green composite from chemical biomass wood, and can bio-polymers,engineered be categorized lumber, lactic into acid,eco-friendly the food following additives products group: a)c) Bio-energy:-fertilizers: solid compost, pellets, soil liquid conditioner, biofuels and soil biogas/syngas stabilizer c)a) Bio-fertilizers:-energy: solid compost, pellets, soil liquid conditioner, biofuels and soil biogas/syngas stabilizer b)d) Bio-chemical:-composites: green composite chemical wood, and bio-polymers,engineered lumber, lactic acid,eco-friendly food additives products The d)b)use Bioof -composites:-chemical:biomass as green acomposite form chemical of wood,bio-energy and bio-polymers,engineered generation lumber, lactic is acid,sustainableeco-friendly food additives andproducts abundantly available c) Bio-fertilizers: compost, soil conditioner, soil stabilizer throughoutc) Bio -fertilizers:Malaysia, whilecompost, it also soil reducesconditioner, greenhouse soil stabilizer gas emissions and the need for landfills. The d)use Bioof -composites:biomass as acomposite form of wood,bio-energy engineered generation lumber, is sustainableeco-friendly andproducts abundantly available TheBiomass d)use Biocanof -composites: biomassbe converted as acomposite intoform renewable of wood,bio-energy energyengineered generation from lumber, the formis sustainableeco-friendly of solid (pellets), andproducts abundantly liquid (biofuels) available or throughout Malaysia, while it also reduces greenhouse gas emissions and the need for landfills. throughout gaseous (syngas Malaysia, or biogas). while it also reduces greenhouse gas emissions and the need for landfills. TheBiomass use canof biomassbe converted as a intoform renewable of bio-energy energy generation from the formis sustainable of solid (pellets), and abundantly liquid (biofuels) available or BiomassThe use canof biomassbe converted as a intoform renewable of bio-energy energy generation from the formis sustainable of solid (pellets), and abundantly liquid (biofuels) available or throughoutgaseous (syngas Malaysia, or biogas). while it also 6reduces greenhouse gas emissions and the need for landfills. Biomass gaseousthroughoutIn 2016, (syngasthecan keyMalaysia,be convertedbiomassor biogas). while companies into it renewablealso reducesin Malaysia energy greenhouse are: from the gas form emissions of solid (pellets),and the liquidneed (biofuels)for landfills. or 6 Biomass Detikcan be Aturan converted Sdn Bhd into renewable6 energy from the form of solid (pellets), liquid (biofuels) or gaseousIn 2016, (syngasthe key biomassor biogas). companies in Malaysia are: Ingaseous 2016, (syngastheHyper key Fusion biomassor biogas). International companies Sdn6 in MalaysiaBhd are:  Detik Aturan Sdn Bhd In 2016, theDetikHeng key HuatAturan biomass Resources Sdn companies Bhd Bhd 6 in Malaysia are:  Hyper Fusion International Sdn6 Bhd In 2016, theHyperMTS key Fibromat Fusion biomass International (M) companies Sdn Bhd Sdn in MalaysiaBhd are:  HengDetik HuatAturan Resources Sdn Bhd Bhd  HengBioDetik Enoco HuatAturan Sdn Resources Sdn Bhd Bhd Bhd  MTSHyper Fibromat Fusion International (M) Sdn Bhd Sdn Bhd  MTSCiptaHyper Fibromat Briquettes Fusion International (M) Sdn Sdn Bhd Bhd Sdn Bhd  BioHeng Enoco Huat Sdn Resources Bhd Bhd  BioWarisHeng Enoco HuatNove Sdn Resources Sdn Bhd Bhd Bhd  CiptaMTS Fibromat Briquettes (M) Sdn Sdn Bhd Bhd  CiptaMTS Fibromat Briquettes (M) Sdn Sdn Bhd Bhd  WarisBio Enoco Nove Sdn Sdn Bhd Bhd  WarisBio Enoco Nove Sdn Sdn Bhd Bhd  Cipta Briquettes Sdn Bhd  Cipta Briquettes Sdn Bhd Oil Palm-based Waris Nove Biomass Sdn Bhd Oil Palm-based Waris Nove Biomass Sdn Bhd Oil Palm-based Biomass 7 OilMalaysia Palm-based generates Biomass about 7.9% of GDP from the agriculture sector in 2018 . Within this sector, palm 7 oil is the largest contributor and makes up an estimated 47% of agriculture7 activity. This places MalaysiaOil Palm-based generates Biomass about 7.9% of GDP from the agriculture sector in 2018 . Within this sector, palm MalaysiaOil Palm-based generatesas the second Biomass about largest 7.9% ofpalm GDP oil from producer the agriculture in the world sector after in 2018Indonesia,7. Within with this production sector, palm of oil is the largest contributor8 and makes up an estimated 47% of agriculture activity. This places Malaysiaoil20 ,500is the,000 generatesaslargest tonsthe second incontributor about2018 largest .7.9% The and ofpalmpalm GDPmakes oil oilfrom producer sectorup the an agriculturecorrespondinglyestimated in the world sector47% after of generatesin agriculture 2018Indonesia,7. Withinthe activity. withlargest this production sector, Thisamount places palm of Malaysia as the second largest8 palm oil producer in the world after Indonesia,7 with production of oil20Malaysiabiomass ,500is the,000 feedstock generatesaslargest tonsthe second incontributor in about2018 Malaysia. largest8 .7.9% The and ofAnpalmpalm GDP makesestimated oil oilfrom producer sectorup the an83 agriculturemillioncorrespondinglyestimated in the dry world sector47%tons after ofwas generatesin agriculture 2018 Indonesia,generated. Withinthe activity. withinlargest this2012 production sector, Thisamountand placesthis palm ofis 20,500,000 tons in 20188. The palm oil sector correspondingly generates the largest amount9 of Malaysia20oilbiomassexpected ,500is the,000 feedstock toaslargest tonsincreasethe second incontributor in 2018to Malaysia. about largest. The 100and Anpalmpalm million makesestimated oiloil producerdry sectorup tons an83 millioncorrespondinglyestimatedby in 2020, the dry world primarily 47%tons after ofwasgenerates drivenagriculture Indonesia,generated by theincrease activity. withinlargest 2012 productionin yield Thisamountand placesthis. ofis biomass feedstock in Malaysia. An estimated 83 million dry tons was generated in 2012 and 9this is Malaysia expectedbiomass feedstock toas increasethe second in to Malaysia. about largest8 100 Anpalm million estimated oil producerdry tons 83 millionby in 2020, the dry world primarily tons after was driven Indonesia,generated by increase within 2012 productionin yield and 9this. ofis 20expected,500,000 to tonsincrease in 2018to about8. The 100 palm million oil drysector tons correspondinglyby 2020, primarily generates driven by theincrease largest in yieldamount. of 20Primarily,expected,500,000 tothe tonsincrease main in source2018to about. ofThe 100 biomass palm million oil feedstock drysector tons correspondinglybycomes 2020, from primarily by-products generates driven by of theincrease palm largest oil in thatyieldamount can9. beof biomass feedstock in Malaysia. An estimated 83 million dry tons was generated in 2012 and this is convertedPrimarily,biomass feedstock theinto main bioenergy, in source Malaysia. suchof biomass An as estimatedthe feedstockoil palm 83 million frondscomes dry(OPF),from tons by-products oil was palm generated trunks of palm (OPT),in 2012oil thatempty and can 9this fruit be is Primarily,expected tothe increase main sourceto about of 100 biomass million feedstock dry tons bycomes 2020, from primarily by-products driven by of increase palm oil in thatyield can9. be Primarily,brunchesexpected to(EFB),the increase main palm source tokernel about ofshells 100 biomass (PKS),million feedstockmesocarp dry tons by comesfibre 2020, (MF) from primarily and by-products the driven palm oilby of millincrease palm effluent oil in thatyield (POME). can. be In converted into bioenergy, such as the oil palm fronds (OPF), oil palm trunks (OPT), empty fruit converted the plantations, into bioenergy,OPFs are regularly such as cut the during oil palm harvesting fronds of (OPF), fresh fruitoil palm brunches trunks (FFBs) (OPT), and empty pruning fruit of Primarily,brunches (EFB),the main palm source kernel ofshells biomass (PKS), feedstockmesocarp comesfibre (MF) from and by-products the palm oil of mill palm effluent oil that (POME). can be In brunchesPrimarily,the palm trees, (EFB),the main thereforepalm source kernel it is ofshells available biomass (PKS), throughout feedstockmesocarp thecomesfibre year. (MF) from In and the by-products the mills palm the oilremoval of mill palm effluent of oil the that palm(POME). can fruits be In convertedthe plantations, into bioenergy,OPFs are regularly such as cut the during oil palm harvesting fronds of (OPF), fresh fruitoil palm brunches trunks (FFBs) (OPT), and empty pruning fruit of theconvertedfrom plantations, the fruitinto brunches bioenergy,OPFs are willregularly such leave as cut thethe during EFBsoil palm harvestingbehind, fronds while of (OPF), fresh MF fruitoiland palm brunchesPKS trunksare recovered(FFBs) (OPT), and empty duringpruning fruitthe of brunchesthe palm trees,(EFB), thereforepalm kernel it is shells available (PKS), throughout mesocarp thefibre year. (MF) In and the the mills palm the oilremoval mill effluent of the palm(POME). fruits In thebrunchesextraction palm trees,(EFB), of crude thereforepalm palm kernel oilit is (CPO)shells available and(PKS), palmthroughout mesocarp kernel thefibreoil (PKO) year. (MF) Inrespectively. and the the mills palm the In oil removaladdition, mill effluent of the the palm palm(POME). oil fruits mill In thefrom plantations, the fruit brunches OPFs are willregularly leave cut the during EFBs harvestingbehind, while of fresh MF fruitand brunchesPKS are recovered(FFBs) and duringpruning the of fromtheeffluent plantations, the (POME) fruit brunches OPFsaccumulates are willregularly asleave a liquid cut the during biomassEFBs harvestingbehind, at the whilemills of fresh fromMF fruit andthe sterilizationbrunchesPKS are recovered(FFBs) and andmilling duringpruning process the of theextraction palm trees, of crude therefore palm oilit is(CPO) available and palmthroughout kernel theoil (PKO) year. Inrespectively. the mills the In removaladdition, of the the palm palm oil fruits mill extractiontheof FFBs. palm trees, of crude therefore palm oilit is(CPO) available and palmthroughout kernel theoil (PKO) year. Inrespectively. the mills the In removaladdition, of the the palm palm oil fruits mill fromeffluent the (POME) fruit brunches accumulates will asleave a liquid the biomassEFBs behind, at the whilemills fromMF andthe sterilizationPKS are recovered and milling during process the effluentfrom the (POME) fruit brunches accumulates will asleave a liquid the biomassEFBs behind, at the whilemills fromMF andthe sterilizationPKS are recovered and milling during process the extractionof FFBs. of crude palm oil (CPO) and palm kernel oil (PKO) respectively. In addition, the palm oil mill ofextraction FFBs. of crude palm oil (CPO) and palm kernel oil (PKO) respectively. In addition, the palm oil mill effluent (POME) accumulates as a liquid biomass at the mills from the sterilization and milling process effluent6 (POME) accumulates as a liquid biomass at the mills from the sterilization and milling process of Malaysian FFBs. Investment Development Authority (MIDA) 7 of6 FFBs. 6 Department of Statistics Malaysia: GDP 2018 8 Malaysian Investment Development Authority (MIDA) 76 Malaysian Investment Development Authority (MIDA) 7 MalaysianStatista Investment Development Authority (MIDA) 9 Department of Statistics Malaysia: GDP 2018 87 Department of Statistics Malaysia: GDP 2018 86 MalaysianStatistaDepartmentNational Biomass Investment of Statistics Strategy Development Malaysia: 2020 GDP Authority 2018 (MIDA) 986 Statista 97 DepartmentNationalStatistaMalaysian Biomass Investment of Statistics Strategy Development Malaysia: 2020 GDP Authority 2018 (MIDA) 97 National Biomass Strategy 2020 49 8 NationalDepartment Biomass of Statistics Strategy Malaysia: 2020 GDP 2018 8 Statista 9 NationalStatista Biomass Strategy 2020 9 National Biomass Strategy 2020 Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana 47820 Petaling Jaya, Selangor, Malaysia T: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM

Figure 4 and 5 below show the projected upstream volume of biomass waste for 2020; 85-111 million tons for solid waste and 70-110 million tons for liquid waste. Moving forward, the forecasted biomass volume growth will be influenced by a combination of plantation expansion and FFB yield improvement. FFB yield improvement in turn is possible with continuous enhancement in plantation management, crop material and replanting of mature plantations.

Figure 4: Potential Upstream Volume for Solid Waste Biomass (dry weight in million tons)

Source: National Biomass Strategy 2020

Figure 5: Potential Upstream Volume for Liquid Waste Biomass (wet weight in million tons)

Source: National Biomass Strategy 2020

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Redmarch Sdn Bhd (823923-W) MakeC-22-18 Empire informed Damansara decisions No. 2, Jalan PJU 8/8A Damansara Perdana RedmarchMake informedSdn Bhd (823923 decisions-W) 47820Make Petaling informed Jaya, Selangor, decisions Malaysia CMake -22-18 Empire informed Damansara decisions RedmarchMake informedSdn Bhd (823923 decisions-W) RedmarchMakeT: +603 4065 informedSdn 0085 Bhd |(823923 F: +603 decisions-W) 4065 0105 CRedmarchMakeNo. -22 2,-18 Jalan Empire informedSdn PJU Bhd Damansara8/8A (823923 Damansara decisions -W) Perdana CREDMARCH.COMRedmarch -22-18 Empire Sdn Bhd Damansara (823923 -W) No.C47820Redmarch-22 2,-18 JalanPetaling Empire Sdn PJU Bhd Jaya,Damansara8/8A (823923 Selangor,Damansara -W) Malaysia Perdana No.CRedmarch-22 2,-18 Jalan Empire Sdn PJU Bhd Damansara8/8A (823923 Damansara -W) Perdana 47820No.T:C- 22+603 2,-18 JalanPetaling 4065Empire PJU 0085 Jaya,Damansara8/8A | Selangor,DamansaraF: +603 4065 Malaysia Perdana 0105 C47820No.-22 2,-18 JalanPetaling Empire PJU Jaya,Damansara8/8A Selangor,Damansara Malaysia Perdana T:47820REDMARCH.COMNo. +603 2, JalanPetaling 4065 PJU 0085 Jaya,8/8A | Selangor,DamansaraF: +603 4065 Malaysia Perdana 0105 No.T:47820 +603 2, JalanPetaling 4065 PJU 0085 Jaya,8/8A | Selangor,DamansaraF: +603 4065 Malaysia Perdana 0105 Key Drivers for Adoption of Biomass as an Energy Source REDMARCH.COMT:47820 +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 47820REDMARCH.COMT: +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 REDMARCH.COMT: +603 4065 0085 | F: +603 4065 0105 T:REDMARCH.COM +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM Key Drivers for Adoption of Biomass as an Energy Source REDMARCH.COM Key DriversAvailability for Adoption of biomass of feedstock Biomass as an Energy Source Key DriversMalaysia’s for Adoption tropical climate of Biomass all year aslong an added Energy with Source high soil fertility has generated large Key DriversAvailability for Adoption of biomass of feedstock Biomass as an Energy Source Key Driversvolume for of Adoption biomass feedstock. of Biomass Other as anthan Energy oil palm Source biomass, there are other feedstock  Malaysia’sAvailability tropical of biomass climate feedstock all year long added with high soil fertility has generated large  Availabilityavailable from of biomass forestry feedstock and other waste sectors, such as wood biomass, municipal solid  volumeMalaysia’sAvailability of tropical biomassof biomass climate feedstock. feedstock all year Other long than added oil palmwith highbiomass, soil fertility there arehas othergenerated feedstock large  AvailabilityMalaysia’swaste, rice tropical huskof biomass and climate straws feedstock alland year kenaf. long The added cultivation with highof dedicated soil fertility crops has for generated energy such large as Malaysia’savailablevolume of from tropicalbiomass forestry climate feedstock. and all other year Other wastelong than added sectors, oil palmwith such highbiomass, as soilwood fertility there biomass, arehas othergeneratedmunicipal feedstock largesolid volumeMalaysia’sjatropha ofand tropicalbiomass algae haveclimate feedstock. been all identifiedyear Other long than as added potential oil palmwith feedstock highbiomass, soil offertility there renewable arehas othergenerated energy feedstock as largewell. volumewaste,available rice of from huskbiomass forestry and feedstock.straws and and other Otherkenaf. waste Thethan sectors, cultivation oil palm such ofbiomass, asdedicated wood there biomass, crops are for other municipalenergy feedstock such solid as availablevolumeCommercial of from biomass crops forestry such feedstock. as and kenaf other andOther waste kenaf than fibresectors, oil arepalm alsosuch biomass, potential as wood there renewable biomass, are other energymunicipal feedstock sources. solid availablejatrophawaste, rice andfrom husk algae forestry and have straws andbeen and other identified kenaf. waste The as sectors, potentialcultivation such feedstock of asdedicated wood of renewablebiomass, crops for municipalenergy assuch solidwell. as waste,availableAt present, rice from huskMalaysia forestry and producesstraws and and other an kenaf. average waste The ofsectors, cultivation 200 tons such of of kenaf asdedicated wood fibre biomass, everycrops month.for municipalenergy such solid as waste,Commercialjatropha rice and husk crops algae and such have straws as been kenaf and identified andkenaf. kenaf The as fibre potentialcultivation are also feedstock of potential dedicated of renewablerenewable crops for energyenergy sources. assuch well. as jatrophawaste, rice and husk algae and have straws been and identified kenaf. The as potentialcultivation feedstock of dedicated of renewable crops for energy assuch well. as jatrophaAtCommercial present, and Malaysia crops algae such have produces as been kenaf anidentified and average kenaf as of fibre potential 200 are tons also feedstockof kenafpotential fibre of renewablerenewable every month. energyenergy sources. as well.  CommercialSupportjatropha fromand crops algae government such have as been kenaf and identified government and kenaf as fibre potential bodies are also feedstock potential of renewablerenewable energyenergy sources. as well. Commercial At present, Malaysia crops such produces as kenaf an and average kenaf of fibre 200 are tons also of kenafpotential fibre renewable every month. energy sources. AtTheCommercial present, continuous Malaysia crops positive such produces as kenafsupport an and average from kenaf governmentof fibre 200 are tons also of with kenafpotential tax fibre andrenewable every non-tax month. energy incentives sources. in  At present, Malaysia produces an average of 200 tons of kenaf fibre every month. producingAtSupport present, from value Malaysia government added produces products and an government and average renewable of bodies200 energytons of haskenaf gathered fibre every a positive month. environment  TheSupport continuous from government positive support and government from government bodies with tax and non-tax incentives in  Supportfor the biomass from government industry. For and instance, government the National bodies Biotechnology Policy 2005, the National  SupportproducingThe continuous from value government addedpositive products support and government and from renewable government bodies energy withhas gatheredtax and anon-tax positive incentivesenvironment in  TheSupportGreen continuous Technology from government positive Policy support 2009,and government the from Renewable government bodies Energy with Act tax 2011, and thenon-tax National incentives Biomass in Theforproducing the continuous biomass value industry.addedpositive products Forsupport instance, and from renewable the government National energy Biotechnology withhas gatheredtax and Policy anon-tax positive 2005, incentives environmentthe National in producingTheStrategy continuous 2020 value and addedpositive the productsSME support Master and from Planrenewable government2012-2020 energy has withhas impacted gatheredtax and the anon-tax positive biomass incentivesenvironment industry byin producingGreenfor the Technologybiomass value industry.added Policy products For2009, instance, andthe renewableRenewable the National energy Energy Biotechnology has Act gathered 2011, Policy athe positive 2005,National environmentthe NationalBiomass forproducingcreating the biomass the value demand industry.added and products pricingFor instance, forand biomass renewable the National products. energy Biotechnology has gathered Policy a positive 2005, environmentthe National forStrategyGreen the Technologybiomass 2020 and industry. thePolicy SME For2009, Master instance, the Plan Renewable the 2012-2020 National Energy Biotechnology has impactedAct 2011, Policythe the biomass 2005,National the industry NationalBiomass by Greenfor the Technologybiomass industry. Policy For2009, instance, the Renewable the National Energy Biotechnology Act 2011, Policy the 2005,National the NationalBiomass GreencreatingStrategy Technology the2020 demand and thePolicy and SME pricing 2009, Master forthe biomassPlan Renewable 2012-2020 products. Energy has impactedAct 2011, the the biomass National industry Biomass by StrategyGreenIn the BudgetTechnology 2020 2020,and thePolicy the SME government 2009, Master the Plan announcedRenewable 2012-2020 thatEnergy has renewable impactedAct 2011, energy the the biomass suppliersNational industry wouldBiomass beby Strategy creating the2020 demand and the and SME pricing Master for biomassPlan 2012-2020 products. has impacted the biomass industry by creatingStrategyable to competethe2020 demand and directly the and SME pricingin Masterthe forretail biomassPlan market 2012-2020 products. following has theimpacted liberalization the biomass of the industry electricity by creatingIn the Budget the demand 2020, theand government pricing for biomass announced products. that renewable energy suppliers would be creatingmarket. Also,the demand the government and pricing had for significantlybiomass products. expanded the qualifying list of green assets ableIn the to Budget compete 2020, directly the government in the retail announced market following that renewable the liberalization energy suppliers of the electricitywould be forIn the Green Budget Investment 2020, the Tax government Allowance announced (GITA) under that renewablethe MyHijau energy directory suppliers in 2018would and be market.ableIn the to Budget competeAlso, the2020, directlygovernment the government in the had retail significantly announced market following expanded that renewable the the liberalization qualifying energy listsuppliers of of the green electricitywould assets be Inextendedable the to Budget compete both 2020, GITA directly theand government Greenin the Incomeretail announced market Tax Exemption following that renewable (GITE)the liberalization incentives energy suppliers toof 2023the electricitywould which beis formarket.able Green to competeAlso, Investment the directlygovernment Tax in Allowancethe had retail significantly market(GITA) following underexpanded the the theMyHijau liberalization qualifying directory list of of the ingreen 2018electricity assets and ableencouragingmarket. to competeAlso, for the the directlygovernment market. in the had retail significantly market following expanded the the liberalization qualifying list of of the green electricity assets extendedformarket. Green Also, bothInvestment the GITA government and Tax Green Allowance had Income significantly (GITA) Tax Exemption underexpanded the (GITE) theMyHijau qualifying incentives directory list to of 2023 ingreen 2018 which assets and is market. for Green Also, Investment the government Tax Allowance had significantly (GITA) underexpanded the theMyHijau qualifying directory list of ingreen 2018 assets and encouragingextendedfor Green bothInvestment for GITAthe market. and Tax Green Allowance Income (GITA) Tax Exemption under the (GITE) MyHijau incentives directory to 2023in 2018 which and is forGovernmentextended Green bothInvestment bodies GITA andsuch Tax Green asAllowance Malaysian Income (GITA) TaxInvestment Exemption under Developmentthe (GITE) MyHijau incentives directoryAuthority to 2023 in(MIDA) 2018 which aland sois encouragingextended both for GITAthe market. and Green Income Tax Exemption (GITE) incentives to 2023 which is extendedencouragingprovides taxboth forexemption GITAthe market. and forGreen Pioneer Income Status Tax andExemption Investment (GITE) Tax incentives Allowance to 2023for qualifying which is Government encouraging forbodies the market. such as Malaysian Investment Development Authority (MIDA) also encouraging companies. There for the are market. also grant disbursement available to assist biomass players in research Governmentprovides tax bodiesexemption such for as Pioneer Malaysian Status Investment and Investment Development Tax Allowance Authority for (MIDA) qualifying also Governmentand development, bodies licensing,such as Malaysianobtaining Investmentinternational Development standards andAuthority certification, (MIDA) alandso companies.providesGovernment tax There bodiesexemption are suchalso for grantas Pioneer Malaysian disbursement Status Investment and available Investment Development to assist Tax biomass Allowance Authority players for (MIDA) in qualifying research also Governmentpurchasingprovides tax new bodiesexemption technology. such for as UpPioneer Malaysian to 2018, Status MIDAInvestment and has Investment approved Development 753 Tax renewable Allowance Authority energy for (MIDA) qualifying projects also andcompanies.provides development, tax There exemption are licensing, also for grant Pioneer obtaining disbursement Status international and available Investment tostandards assist Tax biomass Allowanceand playerscertification, for in qualifying research and provideswithcompanies. a total tax Thereinvestment exemption are also of for grantRM Pioneer 15181.3 disbursement Status million. and available Biomass Investment toprojects assist Tax biomassspecifically Allowance players made for in qualifyingup research of 128 purchasingandcompanies. development, newThere technology. are licensing, also grant Up obtaining todisbursement 2018, MIDA international availablehas approved tostandards assist 753 biomass renewable 10and playerscertification, energy in researchprojects and companies.projectsand development, (17%) There with are totallicensing, also cumulative grant obtaining disbursement investment international available of RM 4,882 tostandards assist million biomass and. The playerscertification, total investmentin research and withpurchasingand adevelopment, total new investment technology. licensing, of RM Up 15181.3 obtainingto 2018, million. MIDA international hasBiomass approved projectsstandards 753 specifically renewable and certification, madeenergy up projects of 128and amountandpurchasing development, represents new technology. 32%licensing, of totalUp obtainingto renewable 2018, MIDA international energy has approved investment standards 753 andrenewable and is thecertification, energysecond projectshighest and projectswithpurchasing a total (17%) new investment with technology. total of cumulative RM Up 15181.3 to 2018, investment million. MIDA hasBiomass of approvedRM 4,882 projects 753million specifically renewable10. The total madeenergy investment up projects of 128 amongpurchasingwith a totalother new investment renewable technology. ofenergy RM Up 15181.3 sources.to 2018, million. TheMIDA biomass hasBiomass approved sector projects was 753 specifically expectedrenewable10 to madeenergy meet up its projects oftarget 128 with a total investment of RM 15181.3 million. Biomass projects specifically10 made up of 128 projectswith a total (17%) investment with total of cumulative RM 15181.3 investment million. Biomass of RM 4,882 projects million specifically10. The totalmade investment up of 128 amountprojectswith a total (17%)represents investment with total32% of cumulativeof RM total 15181.3 renewable investment million. energy Biomass of RM investment 4,882 projects million specificallyand10 .is The the total madesecond investment up highest of 128 ofwithprojects attracting a total (17%) investment RM25 with billion total of cumulativein RM investments 15181.3 investment million. by 2020. Biomass of RM 4,882 projects million specifically10. The totalmade investment up of 128 amongamountprojects other (17%)represents renewable with total32% energycumulativeof total sources. renewable investment The biomassenergy of RM investmentsector 4,882 was million expectedand10 .is The the to total secondmeet investment its highest target amount projects (17%)represents with total32% cumulativeof total renewable investment energy of RM investment 4,882 million and .is The the total second investment highest amountofamong attracting other represents RM25 renewable billion 32% energy ofin investmentstotal sources. renewable byThe 2020. biomassenergy investmentsector was expectedand is the to secondmeet its highest target amongamountFollowing other represents tables renewable show 32% the energyof approved total sources. renewable investment The biomassenergy by MIDA investmentsector in wasthe expectedbiomassand is the industry to secondmeet andits highest target palm among of attracting other RM25 renewable billion energy in investments sources. byThe 2020. biomass sector was expected to meet its target ofamongbiomass attracting other industry RM25 renewable respectively. billion energy in investments sources. byThe 2020. biomass sector was expected to meet its target ofFollowing attracting tables RM25 show billion the in approved investments investment by 2020. by MIDA in the biomass industry and palm of attracting RM25 billion in investments by 2020. biomassFollowing industry tables showrespectively. the approved investment by MIDA in the biomass industry and palm Following tables show the approved investment by MIDA in the biomass industry and palm Following biomass industry tables showrespectively. the approved investment by MIDA in the biomass industry and palm biomassFollowing industry tables showrespectively. the approved investment by MIDA in the biomass industry and palm biomass industry respectively. biomass industry respectively.

Source: MIDA

Source: MIDA Source: MIDA Source: MIDA 10 Source: MIDA MalaysianSource: Investment MIDA Development Authority (MIDA): Tax Incentive for Green Technology Industry

10 Malaysian Investment Development Authority (MIDA):51 Tax Incentive for Green Technology Industry 10 10 10 Malaysian Investment Development Authority (MIDA): Tax Incentive for Green Technology Industry 10 Malaysian Investment Development Authority (MIDA): Tax Incentive for Green Technology Industry 10 Malaysian Investment Development Authority (MIDA): Tax Incentive for Green Technology Industry 10 Malaysian Investment Development Authority (MIDA): Tax Incentive for Green Technology Industry Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana 47820 Petaling Jaya, Selangor, Malaysia T: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM

 Availability of local academic expertise Malaysia’s research institutions such as the Malaysian Palm Oil Board (MPOB), Forest Research Institute of Malaysia (FRIM), and the Standards and Industrial Research Institute of Malaysia (SIRIM), local universities and GLCs have the capabilities and potential to utilize and create value from biomass resources. Adding with provisions from the central government, Malaysia’s in-house research and development efforts have been successful in generating new patents and innovations as well as creating a pool of talented researchers with the right technical know-how and skills for the local biomass sector.

Key Challenges for Nationwide Adoption of Biomass as an Energy Source

 Access to and supply of biomass feedstock Although there is an abundant upstream volume supporting the biomass industry, there are gaps in terms of accessibility and mobility of the upstream sector. For Malaysia to fully capitalize on the downstream potential of oil palm biomass, there is a need to establish a systematic supply chain or an efficient collection system from the plantations and mills to the downstream market. In order for the downstream players to have long term and regular access to the biomass feedstock, the logistics and transportation of feedstock will need to be sorted out. An efficient system is critical as low density and high moisture biomass may face rapid decomposition. For oil palm biomass, the remote location of many plantations and mills will result in high transportation cost.

Other than transportation cost, there are a range of acquisition, collection and pre- processing cost incurred by SMEs to access the biomass feedstock. Typically, oil palm fronds can be obtained during plantation replanting, pruning of the oil palm tree and harvesting of FFBs. The choice of collection method, either simple manual collection with a wheelbarrow, collection with buffalo or motorized cart, will depends on the terrain, availability of labour and economies of scale. The collection cost ranges from RM 16-67 per dry tonne depending on collection method.

Over the next 10 years, approximately 240 million tons of oil palm trunks will become available during replanting. However, due to different maturities of the plantations, the source of supply will not be consistent and this possess challenges for long term supply of feedstock.

 Local SMEs lack support in terms of technological know-how to produce high value products In the current biomass market, majority of those utilizing biomass resources is in the production of low value-add or commodity-based products with low entry barriers. This allows internal and external competitors to enter and exit the market freely which disrupt and compete with the existing players, rendering the industry unsustainable over the long run.

Involvement of smaller local players in producing high value product are also limited by lack of access to technological know-how in converting the biomass feedstock into differentiated high value products. There are currently a few initiatives to adopt refining technologies to convert biomass into high value products such as biofuels and green chemicals, however most of these ventures require large investments and imported technologies which are beyond the capabilities of many local SMEs. The current strategic actions and initiative implemented are also fairly skewed towards the bigger plantation players, government agencies and foreign companies, thus there are higher entry barrier for smaller local players.

Make informed decisions

MakeRedmarch informedSdn Bhd (823923 decisions-W) Make informed decisions MakeC -22-18 Empire informed Damansara decisions RedmarchMake informedSdn Bhd (823923 decisions-W) RedmarchNo. 2, Jalan Sdn PJU Bhd 8/8A (823923 Damansara-W) Perdana CRedmarch-22-18 Empire Sdn Bhd Damansara (823923 -W) Make47820CRedmarch-22-18 Petaling Empire informedSdn Bhd Jaya,Damansara (823923 Selangor, decisions -W) Malaysia MakeNo. C-22 2,-18 Jalan Empire informed PJU Damansara8/8A Damansara decisions Perdana MakeT:No. C- 22+603 2,-18 Jalan 4065Empire informed PJU 0085 Damansara8/8A | DamansaraF: +603 decisions 4065 Perdana 0105 47820RedmarchMakeNo. 2, JalanPetaling informedSdn PJU Bhd Jaya,8/8A (823923 Selangor,Damansara decisions-W) Malaysia Perdana REDMARCH.COM47820RedmarchNo. 2, JalanPetaling Sdn PJU Bhd Jaya,8/8A (823923 Selangor,Damansara-W) Malaysia Perdana T:C47820Redmarch- 22+603-18 Petaling 4065Empire Sdn 0085 Bhd Jaya,Damansara |(823923 Selangor,F: +603 -W) 4065 Malaysia 0105 T:C47820Redmarch- 22+603-18 Petaling 4065Empire Sdn 0085 Bhd Jaya,Damansara |(823923 Selangor,F: +603 -W) 4065 Malaysia 0105 REDMARCH.COMNo.T:C- 22+603 2,-18 Jalan 4065Empire PJU 0085 Damansara8/8A | DamansaraF: +603 4065 Perdana 0105 CREDMARCH.COMNo.T:- 22+603 2,-18 Jalan 4065Empire PJU 0085 Damansara8/8A | DamansaraF: +603 4065 Perdana 0105 47820REDMARCH.COMNo. 2, JalanPetaling PJU Jaya,8/8A Selangor,Damansara Malaysia Perdana  No.47820REDMARCH.COM 2, JalanPetaling PJU Jaya,8/8A Selangor,Damansara Malaysia Perdana Perceived high risk from financiers T:47820 +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 47820T: +603 Petaling 4065 0085 Jaya, | Selangor,F: +603 4065 Malaysia 0105 REDMARCH.COMT: +603 4065 0085 | F: +603 4065 0105  PerceivedWith bio-energy high risk in fromits infancy financiers stage, local financiers lack the knowledgeT:REDMARCH.COM +603 4065and 0085 awareness | F: +603 4065 to 0105  Perceived high risk from financiers REDMARCH.COM  Perceived high risk from financiers REDMARCH.COM PerceivedWithfully understandbio-energy high risk thein fromits different infancy financiers types stage, of local biomass financiers ventures lack and the the knowledge risks involved. and awareness This includes to theWith viability bio-energy of the in technology,its infancy stage, the technical local financiers nature oflack the the products knowledge and andthe awarenessniche market to  Perceivedfully understand high risk the from different financiers types of biomass ventures and the risks involved. 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If the low oil price environment persists, there are concerns that this may  Octoberindustry in2019 Malaysia.. If the low oil price environment persists, there are concerns that this may discourage Competition the from government solar energy to promote and grow the biomass and overall renewable Indiscourage the Budget the 2020, government the government to promote announced and grow a 70% the income biomass tax andexemption overall ofrenewable up to 10  industryCompetition in Malaysia. from solar energy  industryCompetition in Malaysia. from solar energy Inyears Competition the forBudget companies from 2020, solar the undertaking energy government solar announced leasing aactivities. 70% income The taxattractive exemption schemes of up couldto 10 potentiallyIn the Budget shift 2020, investment the government and funding announced away from a biomass 70% income into the tax solar exemption energy ofmarket up to. 10  Competitionyears for companies from solar undertaking energy solar leasing activities. The attractive schemes could  yearsCompetition for companies from solar undertaking energy solar leasing activities. The attractive schemes could InpotentiallyCompetition the Budget shift from 2020, investment solar the energy government and funding announced away from a biomass 70% income into the tax solar exemption energy ofmarket up to. 10 Inpotentially the Budget shift 2020, investment the government and funding announced away from a biomass 70% income into the tax solar exemption energy ofmarket up to. 10 years for companies undertaking solar leasing activities. The attractive schemes could years for companies undertaking solar leasing activities. The attractive schemes could Future Outlookpotentially and shift Opportunitiesinvestment and funding away from biomass into the solar energy market. potentially shift investment and funding away from biomass into the solar energy market. Future Outlook and Opportunities Future Outlook and Opportunities FutureElectricity Outlook consumption and Opportunitieshas increased 3.6% CAGR from 123,162 GWh in 2013 to an estimated

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Having government setplace onthe relied equalthe target country’s onis weight looking fossilto achieve fuelsrenewableon to thefacilitate for 20%environment the resources electricity bulkRM33 of billionits andespecially energy,generation theinvestment economic Malaysia palm from oil in dimensionRE accordingly12. The to achievegovernment the target has 13also. Having set the relied target on fossilto achieve fuels for 20% the electricitybulk of its energy,generation Malaysia from dimensionrenewableREhasbiomass accordingly implemented and energy. solar.The to achieve thesegovernment sources policies the by 2025.target hasto capitalize Thealso. Having government set onthe relied the target country’s onis looking fossilto achieve fuelsrenewable to facilitate for 20% the resources electricity bulkRM33 of billionits especially energy,generation investment Malaysia palm from oil in renewablehas implemented energy thesesources policies by 2025. to capitalize The13 government on the country’s is looking renewable to facilitate resources RM33 billion especially investment palm oil in renewable has implemented energy thesesources policies by 2025. to capitalize The13 government on the country’s is looking renewable to facilitate resources RM33 billion especially investment palm oil in REbiomass accordingly and solar. to achieve the target13. Having relied on fossil fuels for the bulk of its energy, Malaysia REbiomass accordingly and solar. to achieve the target13. Having relied on fossil fuels for the bulk of its energy, Malaysia has implemented these policies to capitalize on the country’s renewable resources especially palm oil 11has implemented these policies to capitalize on the country’s renewable resources especially palm oil biomass MIDA and solar. 1112 biomass and solar. 11 biomass and solar. 11 MIDAMinistry of Economic Affairs 121311 MIDA 12 MIDA 12 MinistryMIDA of EconomicEnergy, Science, Affairs Technology, Environment and Climate Change 111312 Ministry of Economic Affairs 1113 Ministry of Economic Affairs 1113 MIDAMinistry of EconomicEnergy, Science, Affairs Technology, Environment and Climate Change 121113 MIDAMinistry of Energy, Science, Technology, Environment53 and Climate Change 12 MIDAMinistry of Energy, Science, Technology, Environment and Climate Change 12 MinistryMIDA of EconomicEnergy, Science, Affairs Technology, Environment and Climate Change 1312 Ministry of Economic Affairs 13 Ministry of Economic Affairs 13 Ministry of Energy, Science, Technology, Environment and Climate Change 13 Ministry of Energy, Science, Technology, Environment and Climate Change Make informed decisions

Redmarch Sdn Bhd (823923-W) C-22-18 Empire Damansara No. 2, Jalan PJU 8/8A Damansara Perdana 47820 Petaling Jaya, Selangor, Malaysia T: +603 4065 0085 | F: +603 4065 0105 REDMARCH.COM

From 2012 to 2018, total installed capacity for renewable energy in Peninsula Malaysia increased rapidly at rate of 30% CAGR from 101MW to 490MW while electricity generation from renewable energy in Malaysia increased at a rate of 34% CAGR from 142,458MW to 837,582MW. Total installed capacity is expected to rise further to reach 2,080MW by 2020, representing a CAGR of 52% during the five-year period.

Figure 6: Cumulative Solid Biomass Capacity Target (MW/year)

1,340

800

110 89

2011 2016 2020 2030

Source: SEDA, National Biomass Strategy 2020

Installed capacity for biomass will grow by 73% CAGR from 89MW in 2016 to 800MW in 2020 and then by 14% CAGR to reach 1,340MW in 2030. This will be achieved through a combination of installing small power plants in the vicinity of grid connected mills, or larger and more efficient power plants closer to industrial clusters.

Steady economic growth of between 4% to 5% is projected for Malaysia over the next five years and this is expected to drive electricity demand growth at a similar rate. Under this scenario with key policies in place and the FiT mechanism implemented, the government is expected to continue its drive to reach its renewable energy goals.

54 APPENDIX IV

FURTHER INFORMATION

1. DIRECTORS' RESPONSIBILITY STATEMENT

This Circular has been seen and approved by our Board and they individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirm that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading.

2. CONSENT AND DECLARATION

Consents

M&A Securities, being the Adviser has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereon in the form and context in which they appear.

Ong & Wong Chartered Accountants, being the Reporting Accountants for the Proposed Rights Issue with Warrants, has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name, letter on the pro forma consolidated statements of financial position as at 30 June 2019 of Vsolar and its subsidiaries in relation to the Proposed Rights Issue with Warrants and all references thereto, in the form and context in which they appear in this Circular.

Redmarch, the independent market researcher has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and report on the “Independent Market Assessment of the Malaysian Biomass Market” in the form and context in which they appear.

Conflict of Interest

M&A Securities, Ong & Wong Chartered Accountants and Redmarch have given their confirmations that no conflict of interest exists or is likely to exist in relation to their roles as the Adviser, Reporting Accountants and independent market researcher for the Proposed Rights Issue with Warrants, respectively.

3. MATERIAL LITIGATION

As at the LPD, to the best knowledge of our Board, neither Vsolar nor its subsidiaries are engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and our Board has no knowledge of any proceedings pending or threatened against Vsolar and its subsidiaries or of any facts likely to give rise to any proceeding which may materially and adversely affect the financial position or business of Vsolar and its subsidiaries.

55 4. MATERIAL CONTRACTS

Save as disclosed as below, as at the LPD, neither Vsolar nor its subsidiaries has entered into any contracts which are or may be material, not being contracts entered into in the ordinary course of business, during the past 2 years preceding the date of this Circular:

(i) Cube World Sdn Bhd (“CWSB”), our wholly owned-subsidiary had on 18 April 2019 entered into a Collaboration Agreement with PB Control Limited (“PB”) whereby CWSB and PB have agreed to enter into the Collaboration Agreement to examine the viability of establishing a production facility in Malaysia for the manufacture of a line of heavy-duty fast charges and its related range of electric vehicle solutions and to supply, install and commission industrial electrical charging system or infrastructure at various in-bound logistics terminals in China; and

(ii) Solar Interactive Sdn Bhd (“SISB”), our wholly-owned subsidiary had on 4 September 2019 entered into a strategic alliance and collaboration agreement with Genbayu Gemilang Sdn Bhd (“Genbayu”) whereby Genbayu and SISB have agreed to collaborate in the development of a solar RE generation facility by utilising Genbayu’s land bank measuring approximately 121.4 hectares located at Mukim Setul, Seremban, Negeri Sembilan.

5. MATERIAL COMMITMENT

As at the LPD, our Board is not aware of any material commitment, incurred or known to be incurred, which may have a material impact on the results or financial position of Vsolar and its subsidiaries.

6. CONTINGENT LIABILITIES

Save as disclosed below, as at the LPD, our Board is not aware of any contingent liabilities, incurred or known to be incurred, which upon becoming enforceable, may have a substantial impact on the ability of Vsolar and its subsidiaries to meet their obligations as and when they fall due:

Secured RM

Corporate guarantee given to a licensed bank for credit facilities granted 800,000 to our wholly-owned subsidiary, Fast Track Solution Sdn Bhd

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7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the Registered Office of our Company at No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, 50480 Kuala Lumpur, Wilayah Persekutuan (KL) during normal business hours (except public holidays) from the date of this Circular up to and including the date of the EGM:

(i) Constitution of Vsolar;

(ii) The audited consolidated financial statements of Vsolar for the FYE 30 June 2018 and 30 June 2019;

(iii) The unaudited financial statements of Vsolar for the 6 months financial period ended 31 December 2019;

(iv) Consent letters and declarations referred to in Section 2 above;

(v) The Undertaking letter by the Asiabio Capital;

(vi) The draft Deed Poll;

(vii) Pro forma consolidated statement of financial position of Vsolar and its subsidiaries as at 30 June 2019 together with the Reporting Accountants’ letter thereon;

(viii) The material contract referred to in Section 4 above; and

(ix) The Independent Market Assessment on the Malaysian Biomass Market prepared by Redmarch.

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APPENDIX V 1. ADDITIONAL FINANCIAL INFORMATION

The financial information of Vsolar are as follows:

18-months FPE Annualised 12-months FYE 12-months FYE 12-months FYE 6-months FPE 6-months FPE 30 June results of FPE 30 30 June 30 June 30 June 31 December 31 December 2016 June 2016 2017 2018 2019 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 2,618 1,745 1,716 2,155 2,989 1,043 1,142 Operating loss (8,121) (5,414) (3,879) (1,792) (1,536) (1,945) (643) Net loss (7,976) (5,317) (3,701) (1,621) (1,539) (1,914) (608) attributable to equity holders

GP margin (%) (4.01) (4.01) 21.45 22.65 27.93 42.57 30.30 Net loss margin (310.17) (310.17) (227.07) (83.67) (51.64) (186.48) (56.30) (%) Gearing ratio 4.14 4.14 1.89 1.34 0.78 0.39 1.06

Total assets 16,398 16,398 17,533 17,240 16,230 16,611 16,774 Total borrowings 601 601 306 214 112 59 162 Equities 14,851 14,851 16,725 16,610 15,070 15,042 15,279

Comparison between annualised results of FPE 30 June 2016 and FYE 30 June 2017

Our revenue remained relatively consistent between RM1.75 million in the annualised results of FPE 30 June 2016 and RM1.72 million in FYE 30 June 2017.

Net loss attributable to equity holders decreased by RM1.62 million or 30.39% from RM5.32 million in the annualised results of FPE 30 June 2016 to RM3.70 million in FYE 30 June 2017 mainly due to one-off impairment loss of capital work-in-progress of RM2.0 million of a solar RE plant in Mukim Serendah due to the termination of the SEDA licence awarded to Cipta Cantik Sdn Bhd on 26 March 2015.

There were no material changes in our financial position (total assets, total borrowings and equities) for annualised results of FPE 30 June 2016 and FYE 30 June 2017.

Comparison between FYE 30 June 2017 and FYE 30 June 2018

Our revenue increased by RM0.44 million or 25.58% from RM1.72 million in FYE 30 June 2017 to RM2.15 million in FYE 30 June 2018 mainly due to higher contribution from the trading in information technology products such as motherboard, rack mount and tower server, amounting to approximately RM1.3 million and further complimented by the revenue generated from the sale of electricity to TNB of RM0.4 million.

Net loss attributable to equity holders decreased by RM2.08 million or 56.20% from RM3.70 million in FYE 30 June 2017 to RM1.62 million in FYE 30 June 2018 mainly due to one-off share based payment (employee’s share options scheme granted on 23 June 2017) amounting to RM1.58 million in FYE 30 June 2017.

There were no material changes in our financial position (total assets, total borrowings and equities) for FYE 30 June 2017 and FYE 30 June 2018.

Comparison between FYE 30 June 2018 and FYE 30 June 2019

Our revenue increased by RM0.83 million or 38.70% from RM2.15 million in FYE 30 June 2018 to RM2.99 million in FYE 30 June 2019 mainly due to higher contribution from the trading in information technology products such as motherboard, rack mount and tower server and further complimented by the revenue generated from the sale of electricity to TNB.

Net loss attributable to equity holders decreased by RM0.08 million or 5.05% from RM1.62 million in FYE 30 June 2018 to RM1.54 million in FYE 30 June 2019 mainly due to lower operating expenses, primarily on lower staff cost.

There were no material changes in our financial position for FYE 30 June 2018 and FYE 30 June 2019.

Comparison between FPE 31 December 2018 and FPE 31 December 2019

Our revenue decreased by RM0.10 million or 8.67% from RM1.14 million in FPE 31 December 2018 to RM1.04 million in FPE 31 December 2019 mainly due to lower contribution from the trading in information technology products such as motherboard, rack mount and tower server.

Net loss attributable to equity holders increased by RM1.31 million or 214.80% from RM0.61 million in FPE 31 December 2018 to RM1.91 million in FPE 31 December 2019 mainly due to one-off share based payment (employee’s share options scheme) amounting to RM1.27 million in FPE 31 December 2019.

There were no material changes in our financial position (total assets, total borrowings and equities) for FPE 31 December 2018 and FPE 31 December 2019.

59 2. Value creation of the Proposed Rights Issue with Warrants to the Company and its securities holders

As disclosed in Appendix I, we intend to utilise the proceeds from the Proposed Rights Issue with Warrants for the development of up to 10MW of biomass/biogas RE plants. Thereafter, upon successful commissioning, our Board expects that the RE business will be able to generate a more consistent and recurrent stream of income for Vsolar moving forward. This is expected to result in improved profits for us and ultimately better value for our securities holders. In the long run, our working capital requirements are expected to be funded by internally generated funds, mainly from our RE business.

3. Impact of the Proposed Rights Issue with Warrants on our Company and its securities holders

The Proposed Rights Issue with Warrants is expected to enhance our financial position vis-à-vis increased working capital as well as capital expenditure requirements without incurring finance costs. The Proposed Rights Issue with Warrants (when implemented) is expected to raise total cash proceeds of RM8.20 million (based on the Minimum Scenario) up to RM39.54 million (based on the Maximum Scenario) and will immediately improve its net current asset position. Please refer to Appendix II for further details.

4. Adequacy of the Proposed Rights Issue with Warrants in addressing our Company’s financial concerns, i.e. how the Proposed Rights Issue with Warrants is able to turnaround VSolar

Despite the growth of revenue and reduction of loss for its existing business from FYE 30 June 2017 to FYE 30 June 2019, it is insufficient to turnaround our Group within a short period of time. Although our solar PV plant in Perak provides sustainable cash flows to the Group, future growth is limited as we have entered into the power purchase agreement with TNB on 1 August 2013 for a concession of 21 years which fixes our returns for the duration of the 21-year concession.

As such, our Board proposes to undertake the Proposed Rights Issue with Warrants in conjunction with the joint venture to develop biomass/biogas RE plants to increase our RE capacity. In this respect, our Board is of the view that the Proposed Rights Issue with Warrants is adequate to fulfil our short and medium term funding requirements without incurring finance costs as compared to bank borrowings or other debt instruments. We have not undertaken any fund raising activities for the past 12 months. Despite being almost debt-free, based on our present financial position and past financial performance, Vsolar will not likely be able to undertake enough borrowings to address our funding requirements as set out in Section 2.5 of this Circular.

60 5. Steps or actions which have been taken/will be taken to improve the financial condition of Vsolar

We have been expanding our business, as shown in the growth of revenue for FYE 30 June 2017 to FYE 30 June 2019, particularly in the trading of computer hardware. Our Board is of the opinion that RE segment is more profitable compared to our other business segments, and hence decided to dedicate more financial resources to grow our RE segment. Other than the joint venture to develop up to 10MW of biomass/biogas RE plant, we are also in the midst of negotiating the following business arrangement:

(i) Collaboration agreement on 18 April 2019 which was announced on the even date between Cube World Sdn Bhd, a wholly-owned subsidiary of Vsolar and PB Control Limited (“PB”) to examine the viability of establishing a production facility in Malaysia for the manufacture of a line of heavy-duty fast chargers and its related range of Electric Vehicle solutions and to supply, install and commission industrial electrical charging system or infrastructure at various in-bound Logistics Terminals in China to be identified by PB. As at LPD, there was no material development on this collaboration agreement; and

(ii) Collaboration and alliance agreement on 4 September 2019 which was announced on the even date between Solar Interactive Sdn Bhd (“Solar Interactive”), a wholly-owned subsidiary of Vsolar and Genbayu Gemilang Sdn Bhd (“Genbayu”) to collaborate in the development and construction of the Solar Energy Generation Facility to be situated on a land measuring approximately 121.4 hectares located at Mukim Setul, Seremban, Negeri Sembilan. Solar Interactive has on 2 October 2019 entered into memorandum of understanding with Mattan Engineering Sdn Bhd to co-operate to conduct a feasibility study on the said land prior to the commencement of the development of the facility. As at LPD, we are in the discussion with Mattan Engineering Sdn Bhd to perform full feasibility study, the timing of which is depending on the announcement of the upcoming bidding period of large scale solar projects by the Malaysian Government.

The Proposed Rights Issue with Warrants represents a part of our Board’s long term strategy in enhancing our Company’s financial position whilst shifting the focus of our Group’s business strategy towards the RE business, where income is expected to be more stable and consistent.

VSOLAR GROUP BERHAD (Registration No. 200301029575 (631995-T)) (Incorporated in Malaysia)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting (“EGM”) of Vsolar Group Berhad (“Vsolar” or the “Company”) will be held at Theatrette Room, 4th Floor, Menara Lien Hoe, No. 8 Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 25 March 2020, at 10.30 a.m. or at any adjournment thereof for the purpose of considering and, if thought fit, passing with or without any modification, the following resolution:

ORDINARY RESOLUTION

PROPOSED RENOUNCEABLE RIGHTS ISSUE OF UP TO 1,317,950,973 NEW ORDINARY SHARES IN VSOLAR (“RIGHTS SHARES”) TOGETHER WITH UP TO 878,633,982 NEW FREE DETACHABLE WARRANTS (“WARRANT(S)”) AT AN INDICATIVE ISSUE PRICE OF RM0.03 PER RIGHTS SHARE ON THE BASIS OF 3 RIGHTS SHARES FOR EVERY EXISTING ORDINARY SHARE HELD IN VSOLAR (“VSOLAR SHARE(S) OR “SHARE(S)”) TOGETHER WITH 2 WARRANTS FOR EVERY 3 RIGHTS SHARES SUBSCRIBED ON AN ENTITLEMENT DATE TO BE DETERMINED LATER (“ENTITLEMENT DATE”) (“PROPOSED RIGHTS ISSUE WITH WARRANTS”)

“THAT subject further to all the approvals from relevant authorities being obtained where necessary, approval be and is hereby given for Vsolar to undertake the Proposed Rights Issue with Warrants as follows:

(a) To provisionally issue and allot by way of renounceable rights issue of up to 1,317,950,973 Rights Shares together with up to 878,633,982 free Warrants at an indicative issue price of RM0.03 per Rights Share on the basis of 3 Rights Shares for every Vsolar Share together with 2 Warrants for every 3 Rights Shares subscribed by the entitled shareholders of the Company whose names appear in the Record of Depositors of the Company as at the close of business on the Entitlement Date;

(b) To issue and allot the Warrants based on the salient terms of which are set out in Section 2.6 of the Circular to Shareholders dated 10 March 2020 (“Circular”) and upon the terms and conditions of the deed poll to be executed by Vsolar (“Deed Poll”);

(c) To issue and allot such number of new Vsolar Shares arising from the exercise of the Warrants during the tenure of the Warrants; and

(d) To issue and allot such Warrants as may be required or permitted to be issued as a result of any adjustment under the provisions of the Deed Poll;

THAT the final issue price of the Rights Shares and the exercise price of the Warrants shall be at a relevant discount to the market price of Vsolar Shares which is deemed attractive to shareholders based on the historical trading price of Vsolar Shares and/or the 5-day volume weighted average price of Vsolar Shares prior to the price fixing date to be determined;

THAT the Board of Directors of the Company (“Directors”) be and are hereby authorised to allocate the excess Rights Shares in a fair and equitable manner on a basis to be determined by the Directors in their absolute discretion;

41 THAT the Directors be and are hereby authorised to deal with all or any of the fractional entitlement of the Rights Shares and Warrants arising from the Proposed Rights Issue with Warrants, which are not validly taken up or which are not allotted for any reason whatsoever, in such manner as the Directors may in their absolute discretion deem fit and in the best interest of the Company;

THAT all the Rights Shares and the new Vsolar Shares to be issued pursuant to the exercise of the Warrants, shall upon issue and allotment, rank equally in all respects with the then existing Vsolar Shares except for any entitlements, the entitlement date of which is before the date of allotment of the Rights Shares and the new Vsolar Shares to be issued pursuant to the exercise of the Warrants (as the case may be);

THAT the proceeds from the Proposed Rights Issue with Warrants will be utilised for such purposes as set out in Section 2.5 of the Circular and the Directors be authorised with full power to vary the manner and/or purpose of utilisation of such proceeds in such manner as the Directors may deem fit, necessary or expedient, subject to (where applicable) the approval of the relevant authorities;

THAT the Directors be and are hereby authorised to enter into and execute the Deed Poll constituting the Warrants and to do all acts, deeds and things as they may deem fit and expedient in order to implement, finalise and give effect to the Deed Poll;

AND THAT the Directors be and are hereby authorised with full power to make any modifications, variations and/or amendments in any manner as may be in the best interest of the Company or as may be required by the relevant authority/authorities to give effect to the Proposed Rights Issue with Warrants, and to take all such steps as they may deem necessary or expedient in the best interest of the Company to implement, finalise and give full effect to the Proposed Rights Issue with Warrants.”

BY ORDER OF THE BOARD

Lee Wee Hee (MAICSA 0773340) Wong Yuet Chyn (MAICSA 7047163) Company Secretaries

Kuala Lumpur 10 March 2020

Notes: 1. A member of the Company who is entitled to attend, speak and vote at this meeting may a proxy to attend, speak and vote on his behalf. A proxy may not be a member of the Company and a member may appoint any person to be his proxy without limitation.

2. Where a member of the Company appoints two (2) or more proxies to attend at the same meeting, he shall specify in the instrument of proxy the proportions of his shareholdings to be represented by each proxy. He must also specify which proxy is entitled to vote on a show of hands and only one (1) of those proxies is entitled to vote on a show of hands.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991 (“SICDA”), he may appoint up to two (2) proxies in respect of each security account it holds with ordinary shares of the Company standing to the credit of the said security account.

4. Where a member of the Company is an exempt authorised nominee holding ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”) there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

An exempt authorised nominee refers to an authorised nominee defined under the SICDA who is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. The instrument appointing a proxy shall be in writing by the appointer or an attorney duly authorised in writing or, if the appointer is a corporation, whether under its seal or by an officer or attorney duly authorized.

6. The instrument appointing either a proxy, a power of attorney or other authorities, where it is signed or certified by a notary as a true copy shall be deposited at the Registered Office of the Company at No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, 50480 Kuala Lumpur, Wilayah Persekutuan (KL), not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof, or in the case of a poll, not less than twenty-four (24) hours before the time appointed for taking of the poll.

7. In respect of deposited securities, only members whose names appear in the Record of Depositors on 16 March 2020 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote at this EGM.

8. Pursuant to Rule 8.31A(1) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, the resolution set out in this Notice will be put to vote by way of poll.

42 Extraordinary Extraordinary on behalf the my/our at the CHAIRMAN failing or him/her, proxyTHEMEETING my/our me/us OF for as vote to failingand/or him/her of amember/members being of …………………………………………………………………………….………………...………………...... No..……….…...………………………………………………………………) No./Company (NRIC No./Passport Registration I/We PROXY OF FORM in Malaysia) (Incorporated 3. 2. 1. Notes:- ………… Dated this day 20 of ………………………….. the fromproxy abstain hisso, vote or discretion.) at voting will “X” an with indicate (Please ✄ Ehsan No. Hoe, Persiaran Tropicana8, Golf& Country Tropicana, Petaling 47410 Resort, Jaya, DarulSelangor 1. ORDINARY RESOLUTION Address Nameof Proxy Address Nameof Proxy Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 199 Where a member of the Company appoints two (2) or more proxies to attend at the same meeting, he shall specify in the instrument of Amember of the Company who is entitled to attend, speak and vote at this EGMmay a proxy to attend, speak and vote on his behalf. A standing to the credit of the said security account. account. security said of the credit to the standing (“SICDA”), he may appoint up to two (2) proxies in show of hands and only one (1) of those proxies is entitled to vote on a show of hands. hands. of ashow on vote to entitled is proxies those of (1) one and only hands of show proxythe proportionsof his shareholdings to berepresented by each proxy.He must alsospecify which proxy isentitled ona to vote proxy may not be a member of the Company and a member may appoint any person to be his proxy without limitation. …………………………………………………………………………………………………………….……………….. Proposed Rights Issue with Rights Warrants Issue Proposed 3. 2. 1. Notes:- ………… Dated this day 20 of ………………………….. the fromproxy abstain hisso, vote or discretion.) at voting will “X” an with indicate (Please Extraordinary on behalf the my/our at the CHAIRMAN failing or him/her, proxyTHEMEETING my/our me/us OF for as vote to failingand/or him/her of amember/members being of …………………………………………………………………………….………………...………………...... No..……….…...………………………………………………………………) No./Company (NRIC No./Passport Registration I/We PROXY OF FORM in Malaysia) (Incorporated Ehsan No. Hoe, Persiaran Tropicana8, Golf& Country Tropicana, Petaling 47410 Resort, Jaya, DarulSelangor on 1. ORDINARY RESOLUTION Address Nameof Proxy Address Nameof Proxy Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 199 Where a member of the Company appoints two (2) or more proxies to attend at the same meeting, he shall specify in the instrument of Amember of the Company who is entitled to attend, speak and vote at this EGMmay a proxy to attend, speak and vote on his behalf. A

Wednesday (“SICDA”), he may appoint up to two (2) proxies in hands. of ashow on vote to entitled is proxies those of (1) one and only hands of show proxythe proportionsof his shareholdings to berepresented by each proxy.He must alsospecify which proxy isentitled ona to vote proxy may not be a member of the Company and a member may appoint any person to be his proxy without limitation. standing to the credit of the said security account. account. security said of the credit to the standing …………………………………………………………………………………………………………….……………….. Proposed Rights Issue with Rights Warrants Issue Proposed General Meeting (“EGM”) on

Wednesday General Meeting (“EGM”) , 25 March 2020 VSOLAR GROUPBERHAD , 25 March 2020 in the space provided on how youyour space you the how in caston providedto If wish dovote. not do VSOLAR GROUPBERHAD in the space provided on how youyour space you the how in caston providedto If wish dovote. not do ofthe Company tobe held at (FULL LETTERS) NAMEIN BLOCK at No. of Shares Held Shares of No. CDS AccountNo. (Registration No. 200301029575 (631995-T)) 200301029575 No. (Registration 10.30a.m. NRIC No./PassportNo. NRIC No./PassportNo. ofthe Company tobe held at (FULL LETTERS) NAMEIN BLOCK at No. of Shares Held Shares of No. CDS AccountNo. respect of each security account it holds with ordinary shares of the Company (FULL ADDRESS) (FULL (Registration No. 200301029575 (631995-T)) 200301029575 No. (Registration VSOLAR GROUP BERHAD GROUP VSOLAR 10.30a.m. NRIC No./PassportNo. NRIC No./PassportNo. 20 and at any adjournment thereof. respect of each security account it holds with ordinary shares of the Company , hereby appoint (FULL ADDRESS) (FULL 43 VSOLAR GROUP BERHAD GROUP VSOLAR

20 and at any adjournment thereof. , hereby appoint 43

Theatrette Room, 4th Theatrette Room, Menara Floor, Lien - Theatrette Room, 4th Theatrette Room, Menara Floor, Lien % of Shareholding to be to Represented %Shareholding of % of Shareholding to be to Represented %Shareholding of -

……………………………….. Signature(s) of member(s) of Signature(s) % of Shareholding to be to Represented %Shareholding of % of Shareholding to be to Represented %Shareholding of -

……………………………….. Signature(s) of member(s) of Signature(s) - For

For Against Against 1 1 Fold this flap for sealing

An exempt authorised nominee refers to an authorised nominee defined under the SICDA who is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

8. Pursuant to Rule 8.31A(1) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, the resolution set out in this Notice will be put to vote by way of poll.

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Affix AFFIX Stamp STAMP

THE COMPANY SECRETARIES VSOLAR GROUP BERHAD (Registration No. 200301029575 (631995-T))

No. 2-1, Jalan Sri Hartamas 8 Sri Hartamas 50480 Kuala Lumpur Wilayah Persekutuan (KL)

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