KUALA LUMPUR (June 4): Large-scale solar ventures (LSS) will allow palm oil producers to generate up to 54 times more operating profits per hectare compared to oil palm, Maybank Investment Bank flagged.
SD Guthrie Bhd (formerly Sime Darby Plantation Bhd) (KL:SIMEPLT), Kuala Lumpur Kepong Bhd (KL:KLK), and IOI Corp Bhd (KL:IOICORP) are potential beneficiaries given their estate locations, Maybank said in a note to clients. Genting Plantations Bhd (KL:GENP), TH Plantation Bhd (KL:THPLANT) and United Plantations Bhd (KL:UTDPLT) may also benefit, it said.
“Only selected planters with the right estate location may benefit from this solar potential should they choose to capitalise on this opportunity,” Maybank said.
So far, only SD Guthrie has made public its renewable energy ambition with a one-gigawatt (GW) capacity target.
Earlier this month, Sime Darby Plantation and its major shareholder Permodalan Nasional Bhd, revealed plans to collaborate on a 1,000-acre development in the proposed Kerian Integrated Industrial Park to attract green electrical and electronics investments.
The site, located within the group’s Tali Ayer Estate in Perak, will feature solar farms owned and operated by Sime Darby Plantation. Since 2018, Sime Darby Plantation has leased a significant portion of its land for solar farms under the LSS schemes.
However, not all agricultural land may be suited for LSS, Maybank noted. Apart from flat-to-gently undulating land requirement, LSS farms are preferably located near the national grid and its interconnection points.
Maybank’s rough estimates show that 1GW capacity may bring in recurring annual income of RM134 million to RM266 million using 1,500-1,700ha of land compared to the sector’s average oil palm operating profit of RM4,444 per hectare achieved for the past 10 year.
Some planters have been leasing their land for LSS farms at double to triple the average returns of oil palm on a per mature hectare basis, Maybank noted.
“Such moves helped planters gain immediate rental returns as opposed to the typical seven-year gestation period for oil palm to generate maiden profits after replanting,” the house said.
Rather than leasing to other renewable energy companies, “it makes financial sense” for planters to be producers themselves and maximise their land values, while allowing their land to “further accrete in value when the concession ends after 20 years or so,” Maybank added.
Malaysia is pushing for renewable energy to boost economic growth as part of its climate change policy to transition away from coal and natural gas that make up the bulk of its energy mix.
Under the Malaysia Renewable Energy Roadmap, the share of renewable energy in Malaysia will rise to 40% of 18GW in 2035, of which solar will account for 7.28GW, according to the Sustainable Energy Development Authority.