KUALA LUMPUR, June 13 — RHB Research remains positive on the utilities sector as electricity demand is set to remain “fairly resilient” in 2024.
The research house said Tenaga Nasional Bhd (TNB) should continue benefiting from the continuous upgrade in transmission and distribution assets, where energy demand can be anchored by mushrooming data centre developments.
“We continue to like Malaysia’s solar power landscape, as structural growth is fuelled by a solid number of government initiatives and aided by favourable market conditions as solar power panel prices are expected to remain soft throughout 2024,” it said in a note.
Furthermore, RHB Research said electricity demand rose at a much faster 9.6 per cent year-on-year (y-o-y) versus the gross domestic product (GDP) growth of 4.2 per cent in the first quarter of 2024 (1Q 2024) — largely driven by stronger commercial (11.2 per cent) and domestic (16.8 per cent) segments.
Demand hit a new peak of 20,028MW in April.
The research firm noted that TNB has highlighted that the strong commercial demand growth was largely led by the commercialisation of a 150MW data centre in the first quarter.
There are two projects with a total capacity of 535MW completed under the Green Lane Pathway and another seven more (about165MW) to be completed by this year.
It said that TNB also aims to sign electricity supply agreements for 10 projects with 2GW in energy demand. “Despite strong demand growth of 9.6 per cent y-o-y in 1Q 2024, TNB still guided for an annual demand growth of 2.5-3 per cent for this year and the upcoming regulatory period,” it said.
Moreover, RHB Research noted that the Corporate Green Power Programme (CGPP) is making significant progress, with off-taker agreements nearing finalisation and financial close on the horizon.
Recently, one of the solar power players, Sunview Group Bhd, secured an engineering, procurement, construction, and commissioning contract under the programme, marking the beginning of contract awards.
“We anticipate more jobs to be awarded in the coming months. Looking ahead, we also expect the announcement of five winners of Large Scale Solar (LSS) in the second half of 2024 (2H 2024) after the application deadline on July 24.
“Further boosting the earnings of solar players is the commercial trading of Malaysia Renewable Energy Certificates (mRECs), which is designed to increase market demand for renewable energy (RE) by allowing companies to trade certificates representing RE production,” it added.
Meanwhile, RHB Research said the potential announcement of third-party access (TPA) is a significant step towards the reform of the power industry, which would lead to a more liberal and competitive market.
Near-term earnings should still be safeguarded by the Incentive-Based Regulation (IBR) framework and contracted power purchase agreements (PPA), but the wheeling charges pricing determination is crucial to entice energy trading with new power suppliers. “This may pressure existing independent power producers (IPPs) such as TNB and Malakoff Corporation Bhd to strive for higher generation efficiency and provide cleaner energy alternatives, with more players entering the space,” it said.
At the same time, this is also an opportunity for existing IPPs to sell their power output to new clients upon their PPA expiry.
“We believe this could attract more players to become power producers (of green energy, perhaps) since they may be able to determine their pricing.
“That said, green energy trading, in our view, may be under the TPA - and this may not be executed so soon, as the latest connection points and power system study can only be identified after the LSS five awards,” it added.
RHB continues to like the Malaysian solar power landscape, as structural growth is fuelled by a solid number of government initiatives and aided by favourable market conditions, as solar power panel prices are expected to remain soft throughout 2024.
Hence, it has maintained its “overweight” call on the utilities sector as a result, with solar power players well positioned for continued growth and expansion in the coming years. — Bernama
