KUALA LUMPUR (Jan 29): Analysts are upbeat on the renewable energy (RE) sector following the recent announcements by the Ministry of Energy Transition and Public Utilities (Metpu), highlighting players in engineering, procurement, construction and commissioning (EPCC) as main winners.
MIDF Research expects players like Samaiden Group Bhd, Sunview Group Bhd, Pekat Group Bhd and Solarvest Holdings Bhd to be the immediate-term beneficiaries due to the potential step-up in demand for RE EPCC services.
Metpu's recent announcements included the extension of the Net Energy Metering (NEM) programme with an added quota of 400MW, the initiation of the fifth bidding cycle of the large-scale solar (LSS) programme featuring quotas of 2GW, allowing bids of up to 500MW.
Additionally, there is a low-carbon energy-generation programme of 400MW to be implemented through the New Enhanced Dispatched Arrangement mechanism for non-solar energy. Furthermore, a pilot project for a battery energy storage system, with a cumulative capacity of 400MWh, is set to be carried out by Tenaga Nasional Bhd (TNB).
“The 2.4GW combined solar quota under the latest LSS and NEM programme translates into an estimated RM7.2 billion to RM8.4 billion worth of EPCC jobs, which we expect to be tendered out in the next 12 to 24 months, providing significant order book expansion opportunities.
“This is on top of upcoming tenders for 800MW Corporate Green Power Programme power plants, which we expect to come within the first half of 2024 entailing RM2.4 billion worth of EPCC jobs, and the first 500MW of UEM Group Bhd-Itramas Corp Sdn Bhd’s 1GW hybrid solar National Energy Transition Roadmap flagship project in Johor entailing potentially RM1.5b worth of EPCC jobs,” it said in a note on Monday.
Meanwhile, big players such as TNB and YTL Power International Bhd are likely to come in as anchors in their consortiums, especially for larger capacity bids.
Notably, the latest LSS has raised the capacity bid limit to 500MW, which is five times the previous 100MW limit for LSS3, and 10 times the 50MW limit for LSS4.
“We reckon that a project of such size could entail a huge capex (capital expenditure) of some RM2 billion to RM2.3 billion, which requires fairly demanding balance sheet capacity. Having said that, we note that prior LSS winners also included non-utilities players from the property, plantation and construction sectors,” it said.
Therefore, MIDF reaffirmed its “positive” call on the power sector, due to the clear and firm policy layout for the energy transition. It also believes that the latest announcement underpins the policy drive to achieve 70% RE penetration by 2050.
Among MIDF's top picks with a “buy” call are Samaiden, Sunview and Pekat being the immediate-term beneficiaries of the various RE programme roll-outs, while TNB, being the sole operator of the grid, is expected to see a step-up in capex to accommodate RE supply expansion.
Hong Leong Investment Bank Research, meanwhile, also maintained its “overweight” rating of the RE sector, with its top picks Solarvest and Samaiden as the key winners from the slew of programmes announced.
“In our view, the key highlight was the comeback of the LSS competitive bidding programme (LSS5), with a significantly larger quota size of 2GW (2.4 times larger than LSS4 awards).
"We are conservatively estimating solar EPCC opportunities of RM7 billion from the LSS5 programme. While granular details were by and large missing, quota awards for LSS5 could come in the first half of 2025, with EPCC contracts to be formalised thereafter," it said.
The research house, however, noted that it is still unclear if foreign participation limits will still be in place as it was with LSS4 considering the increased scale.
"Nevertheless, we reckon that with panel prices continuing to decline (11 US cents or 52.06 sen per watt), bid tariffs could reach a new low," it added.