KUALA LUMPUR (Oct 1): Kenanga Research expects more engineering, procurement, construction and commissioning (EPCC) contracts for renewable energy to be awarded as early as this month with a completion deadline by the end of 2025.

In a note on Monday, the house observed a significant increase in order books mainly driven by EPCC jobs under the Corporate Green Power Programme (CGPP).

Based on the timeline, Kenanga believes that investors should focus on the 800MW Corporate Green Power Programme (CGPP) in 4Q2024, valued at RM2.4 billion, while the RM5 billion LSS5 EPCC contract awards are expected in 1Q2025.

These initiatives are expected to sustain sector growth throughout 2028, it added.

"Based on our estimates, the 800MWp capacity under the CGPP will translate to RM2.4 billion solar EPCC jobs.

"Thereafter, the Energy Commission will embark on the 2GW LSS5, the largest LSS programme thus far, in four packages," said Kenanga.

The house noted that under LSS5, developers could bid up to 500MW (versus only 50MW previously) with operations scheduled to commence in 2026.

"We expect bidders to submit rates that are comparable to LSS4 (that is at a project internal rate of return (IRR) of 8%). We estimate that there will be at least RM5 billion worth of PV system EPCC jobs coming from the LSS5," it said.

Kenanga maintained its overweight stance on the renewable energy sector, supported by the robust execution of initiatives and the increasing quota allocation, particularly in solar.

Meanwhile, declining panel prices due to oversupply will boost margins for solar EPCC contractors and stimulate investment in solar systems. Its sector top picks comprise Solarvest Holdings Bhd (KL:SLVEST) (outperform; target price: RM1.91) and Samaiden Group Bhd (KL:SAMAIDEN) (outperform; target price: RM1.51).

Solarvest shares fell 1 sen or 0,6% to RM1.56 at the time of writing, translating into a market capitalisation of RM1.1 billion.

Samaiden shares gained 3 sen or nearly 3% to RM1.05 in early trade, valuing the group at RM439.6 million.

Kenanga noted that the newly unveiled Corporate Renewable Energy Supply Scheme (CRESS) in September aims to liberalise the energy market by enabling corporate consumers to purchase green electricity directly from renewable energy (RE) developers via an open grid access system, reducing reliance on TNB's conventional supply.

RE developers using TNB's grid must pay a system access charge (SAC) of 25 sen/kWh for firm output and 45 sen/kWh for non-firm output, with the SAC subject to periodic review.

By eliminating the competitive bidding process of the LSS program, CRESS allows developers and consumers to negotiate tariffs directly.

Kenanga estimates that solar producers need to set prices at a minimum of RM0.64/kWh to achieve an 8% project IRR, higher than current conventional electricity tariffs, prompting potential diversification into bioenergy and hydropower to remain competitive.