This article first appeared in The Edge Malaysia Weekly on July 7, 2025 - July 13, 2025

SHARE prices of better known companies in the solar and utility infrastructure segments have seen a continued upward bias this year, way ahead of the long telegraphed power tariff restructuring that became effective on July 1.

For solar firms, expectations of higher electricity prices alluded to more solar adoption, while depressed photovoltaic (PV) panel prices improved installation costs and made return on investment more attractive.

The utility sector was also riding the tailwinds of continued data centre and power infrastructure investments, as well as a slew of large scale solar (LSS) project awards to be announced by the government this year, which will in turn require more utility infrastructure.

At least three companies in these segments saw their share price breach new record highs in the past two weeks, including pure-play solar installation and energy producer Solarvest Holdings Bhd (KL:SLVEST); solar firm Pekat Group Bhd (KL:PEKAT), which also provides power distribution equipment and earthing systems; as well as utilities solutions firm MN Holdings Bhd (KL:MNHLDG).

Even after the strong rally in share prices seen since 2024, these counters have remained screaming buys among analysts.

However, the actual tariff schedule means the players could be in for a bumpy ride, as two of their fastest growing segments — rooftop solar and data centres — will see some impact from the policy announcement.

The government last month concluded the net energy metering (NEM) programme after nearly 10 years. Under the discontinued programme, for every kilowatt-hour (kWh) of solar energy generated, a user can offset one kWh of electricity bill — even for night-time use — making it attractive from a cost perspective.

NEM capacity totalled over 2gw since its launch in 2016, and allowed smaller solar installers to grow their top line without having to go for LSS projects, which required higher capex and were few and far between.

With the NEM axed, the Ministry of Energy Transition and Water Transformation (Petra) in May said it is looking into reviewing potential new frameworks and mechanisms for future rooftop solar programmes that are “more inclusive and equitable and beneficial” to all electricity users.

“One could expect future schemes to incorporate the changes in the tariff structure,” a director of a solar firm says, “and if future rooftop solar projects only allow offset of energy charges, it will take eight years of electricity bills offset to justify the investment, from around five years now.

“The uptake will slow down significantly, unless there is an increase in fuel costs and electricity bills rise again to a level where solar again makes sense as the alternative energy source. It’s relative.”

However, renewable energy outfit Samaiden Group Bhd (KL:SAMAIDEN) group managing director Datuk Chow Pui Hee believes that adoption will continue despite the longer payback period.

“The payback period [for solar projects] may be extended by two to four years, but [the total payback period] is still less than 10 years whereas a solar photovoltaic system can last 25 to 30 years,” she tells The Edge in a written reply.

“[While] earlier movers have better advantage [rates], I believe users will make the right decision to continue with green projects despite longer return on investment (ROI); [if] the returns are made known and budgeted.”

The alternative, self-consumption (SelCo) solar only allows real-time usage, and users who want to keep that solar energy for night-time use will need batteries, which could double the overall costs.

Meanwhile, the government has introduced Community Renewable Energy Aggregation Mechanism (CREAM), which allows building owners to lease out rooftop spaces to companies that will act as “aggregated solar farms” and sell the energy to any buyer.

This, however, will take time to kick off. The open-market programme, open for registration since June, is expected to take eight months from application to commissioning, according to official guidelines.

Further, a lack of clarity in the pricing mechanism could slow adoption (read main story), and the same pricing uncertainty weighs on another open market programme, CRESS, which targets utility-scale solar.

With rooftop solar adoption seen slowing, the remaining near-term catalysts for the industry would be 595mw worth of earlier NEM quotas that are under construction, as well as the outcome of the latest LSS Petra 5+ bidding round, totalling 2,000mw, which closed in February.

On the contrary, those who are in the utility infrastructure segment — such as Pekat Group with its exposure to switchgear equipment, and MN Holdings with an order book of over RM1 billion — may continue to ride demand growth from ongoing data centre projects and grid expansion by Tenaga Nasional Bhd (KL:TENAGA), which has been affirmed by the government through the announcement of the new tariff structure.

It has been reported that data centre developers are reportedly seeking clarity on the “accuracy” of the tariff components due to the expected 10% to 15% increase in their bills.

However, their tariffs post-adjustment “remain competitive regionally” at less than half of Singapore’s and just about 5% higher than Thailand’s, PublicInvest Research estimates in its recent note. “We believe Malaysia’s data centre prospects remain intact, supported by its regional cost competitiveness, infrastructure resilience and geographical strength.”

Tenaga, in its analyst briefing in May, points to as much as RM12 billion in capital expenditure this year, inclusive of up to RM2 billion worth of contingent capex to mainly support demand growth and energy transition.

Other potential catalysts include yet another 2,000mw of solar capacity proposed under LSS6, as well as 1,600mwh worth of battery storage capacity. Both are targeted for commissioning in 2026, but bidding has yet to be launched. 

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