KUALA LUMPUR (Sept 14): RHB Investment Bank Research (RHB IB) has maintained its “overweight” call on the power sector, and said electricity demand is set to remain fairly resilient in the second half of 2023 (2H2023).

In a sector note on Thursday, the research house said that with core prices expected to normalise in the upcoming quarters, the impact of fuel margins may still affect coal-fired power plant players’ bottom lines — albeit to a moderate extent.

“We remain positive on the National Energy Transition Roadmap, given its clear goals and funding requirements being laid out.

“Further concrete frameworks and mechanisms are expected to be announced in the coming months,” it said.

RHB IB said in the recent reporting period, eight companies under its coverage released their quarterly results, and two booked numbers that were within expectations.

“The four disappointments were Malakoff Corp Bhd, Taliworks Corp Bhd, Ranhill Utilities Bhd, and Tenaga Nasional Bhd (TNB).

“For Ranhill, the negative deviation was due to a weaker-than-expected water segment, while Taliworks disappointed on higher-than-expected costs and the slow progress of the Sungai Rasau project,” it said.

RHB IB also said electricity demand rose in tandem with gross domestic product growth in the second quarter of 2023 (2Q2023), up 3.3% year-on-year, with new peak demand of 19,716MW recorded in May.

“We saw a rise in the coal generation mix to 60.1% (1Q2023: 53.7%) at the expense of the gas mix which, in turn, dropped to 34% (1Q2023: 39.5%).

“TNB’s total renewable energy (RE) capacity stood at 4GW as of June, and it is targeting to increase the domestic RE capacity by another 1.2GW by 2025. TNB is also looking to secure five data centres with total consumption of about 2GW this year."

Meanwhile, RHB IB said that as gas continues to be the dominant source of fuel for baseload power, existing independent power producers, namely TNB and Malakoff, are likely to see further gas-fired plant expansion in future, following the retirement of existing coal-fired plants.

“Capital expenditure-intensive projects — hydrogen and carbon capture, usage and storage or CCUS — are likely to be spearheaded by big corporations such as Petronas and TNB, while the battery energy storage system or BESS market remains largely untapped,” it said.