FGV Annual Report 2020

Renewable Energy Palm waste is being put to good use with renewable energy production. Producing palm based bio-fuel represents the circular economy as advocated by the United Nations Environment Program (UNEP). This strategy will help to contribute towards meeting the Malaysian Government’s target to make renewable energy account for 20% of the national fuel capacity mix by 2025. Palm oil exports to European Union were mainly used for biofuel production. However, in 2019, the European Commission banned palm oil as a sustainable source of biofuels on the basis of deforestation caused by upstream activities. With reduction of demand from this market, the Government promoted the use of palm biodiesel in Malaysia and aimed tomake it compulsory for diesel vehicles to use only B20 diesel that has 20% palm biofuel content. The B20 palm biodiesel implementation, however, has been delayed from 2020 to 2021 due to the COVID-19 pandemic that has affected the transportation industry negatively. The demand for palm biodiesel declined both in Malaysia and international markets due to the COVID-19 pandemic. At FGV, palm biofuel is part of our Waste-to-Wealth strategy that is focused on renewable energy production. The Group produces renewable energy for two (2) purposes, i.e. internal consumption and sale to the grid. With growing emphasis on operational and energy efficiency, FGV mill complexes are increasingly using renewable energy as their primary source of energy. FGV subsidiaries are also exploring renewable energy as the most cost- effective option to operate energy efficient facilities and equipment. In FGV, renewable energy production comes under the ambit of the Renewable Energy Division that has a Clean Development Mechanism (CDM) programmes for emission reduction. The programme uses a methodology that is in compliance with the United Nations Framework Convention on Climate Change (UNFCCC) mechanism. Data is captured through a metering system and passed on to the Group Sustainability Team for evaluation on a quarterly basis. Palm biofuel is produced from palm by-products such as palm kernel shells (PKS), sludge oil and shredded EFB. FGV has the largest number of biogas plants in the world within a single plantation company, with 28 plants out of 68 palm oil mills in the Group. Out of the 28 plants, 11 are certified as Feed-in-Tariff projects and exported 15.4MW to the national grid in 2020. Another two (2) biogas plants in Sabah are involved in rural electrification, while one (1) biogas plant in Sarawak supplies electricity to workers housing quarters in our mill complex. Between 2018 and 2020, FGV won three (3) awards for renewable energy sustainable practices. In 2020, FGV installed the Group’s biggest renewable energy biogas power plant in Pahang. We also have a 7.5 MW biomass power plant in Sahabat, Sabah that supplies steam and electricity for FGV’s refinery, kernel crushing plant, bulking installation and the small township of Desa Kencana. FGV is the pioneer of the world’s first palm-based bio-compressed natural gas plant. The plant produces bio-compressed natural gas (BIO- CNG) from palm oil mill effluent (POME). This project is a collaboration between FGV Palm Industries Sdn. Bhd. (FGVPI), Sime Darby Energy Solutions Sdn. Bhd. (SDES) and the Malaysian Palm Oil Board. BIO-CNG is an economically viable and sustainable alternative to natural gas and it is forecasted to having good prospects in the energy sector. Among the challenges faced in renewable energy generation is the implementation of operational methods and keeping up with new requirements by regulators. In 2020, there was an additional challenge of the COVID-19 pandemic that required us to monitor the performance of our biogas plants and adjusting our financial performance accordingly. 145 Who We Are How We Operate How We Are Governed Additional Information Sustainability Matters Statement & Discussion By Our Leaders