KUALA LUMPUR (Nov 4): More independent power producer (IPP) awards from Sarawak are expected through 2030 as the state looks to generate 15GW and grow the capacity beyond 2030, according to a Kenanga thematic report following a three-day visit to the state.

"Another key takeaway is the state’s increasing openness to private capital participation in infrastructure assets — including solar IPPs, water-treatment plants and CPS (cascading power sources) hydropower projects — to help fund Sarawak’s infrastructure buildout over the coming years.

"We view this as a medium- to long-term opportunity for local firms," Kenanga said in the report on Wednesday.

Sarawak Energy aims to increase generation capacity from 6GW to 10GW by 2030 and 15GW by 2035, with the main buyer potentially being Singapore, followed by West Kalimantan.

The house noted that while the 1285MW Baleh hydropower project is expected to commence operations by 2030, near-term capacity growth will be driven by two combined-cycle gas turbine plants in Samalaju and Miri, with an aggregate capacity of up to 2GW.

Kenanga said Sarawak also retains a structural energy-cost advantage over Peninsular Malaysia, underpinned by its hydro baseload capacity, providing scope for continued tariff competitiveness to support new industrial development. 

"Tariffs could trend higher as more gas-fired capacity comes online, although we expect the bulk of any increase to be borne by incoming industrial users investing in the state. Against this backdrop, solar power has become increasingly attractive."

With 950MW of solar already awarded or under development, the state has about 550MW left to award to the private sector, likely to be expedited in the next one or two years to hit the 1.5GW target in 2030, said Kenanga.

The house estimates potential Engineering, Procurement, Construction, and Commissioning (EPCC) value for solar projects could go up to RM7.3-12.2 billion in total if Sarawak Energy ramps up its solar to 2.2-3.7GW by 2035.

Sarawak Energy has announced a request for proposal for five priority river basins under the Cascading Power Sources (CPS) model, with the earliest final investment decision realistically in 2027 and EPCC work starting in 2H27 or 2028.

Kenanga estimates the total construction cost of the five CPS dams could be up to RM16.7 billion, with full operations only starting in 2034-2035.

Kenanga sees two avenues for exposure to Sarawak's infrastructure buildup, namely asset ownership through companies such as Ibraco Bhd (KL:IBRACO), Pansar Bhd (KL:PANSAR) and Solarvest Holdings Bhd (KL:SOLAVEST) that could jointly bid with partners for solar IPPs, CPS projects and water-treatment plants.

Secondly, through EPCC exposure through companies like Hartanah Kenyalang Bhd (KL:HKB) and Kee Ming Group Bhd (KL:KEEMING), the buildup should generate sizeable contracts across solar EPCC, substations and civil works.

Overall,  the research firm said Sarawak continues to offer substantial long-term opportunities across asset ownership potentially extending to 2035, but the award cycle could be prolonged, and timing matters.