Latest news with #RegulatoryPeriod4
The Star
15-07-2025
- Business
- The Star
Power sector going through surge in demand
PETALING JAYA: Listed power infrastructure players are set to gain from the strong electricity demand from energy-intensive industries such as data centres, according to Hong Leong Investment Bank (HLIB) Research. In addition, the demand for power infrastructure is set to trend higher underpinned by Tenaga Nasional Bhd 's (TNB) efforts to enhance grid resiliency and expansion of national power supply. 'Policy tailwinds, such as Malaysian Investment Development Authority's cable import restrictions and TNB's preference for local contractors, create barriers to entry for foreign competitors, further reinforcing the market position of domestic players,' the research house noted in a report yesterday. Given the robust project pipeline and rising infrastructure requirements, the sector has not yet reached its cyclical peak, according to the research house. It noted that the power sector is experiencing a surge, with peak power demand reaching a record high of 21,049MW on May 28, 2025 – a robust 10.4% year-on-year (y-o-y) increase. 'This growth significantly outpaces TNB's gross domestic product-linked demand projection of 3.5% to 4.5% and surpasses the Energy Commission's 2020 long-term forecast, which projected peak demand of 19.3MW only by 2025,' HLIB Research said. The rise is driven by the combination of organic demand and load acceleration from data centres, with the latter's utilisation surging to 485MW in March 2025 – 3.2 times increase from 148MW a year earlier. 'In response, the Energy Commission has initiated tenders for new and existing gas-fired power capacity slated for commissioning over 2025 to 2029 to maintain a healthy reserve margin. 'At the same time, renewable energy (RE) deployment remains a key policy focus, with national targets set at 31% RE capacity by 2025 and 40% by 2035. 'Amid this backdrop of rising demand and a strong pipeline of new power supply, we see a compelling multi-year investment opportunity in the domestic power infrastructure space,' HLIB Research said. On TNB, the research house said investments in transmission and distribution (T&D) continued to form a significant portion of its capital expenditure (capex) to maintain grid resiliency amid rising demand. With 34% of its planned financial year 2025 (FY25) capex already utilised in the first quarter of 2025 (1Q25), TNB is expected to incur up to RM12bil capex this year for T&D-related initiatives. 'Over the Regulatory Period 4 (RP4) period), we estimate it will invest RM3bil to RM3.5bil annually from its base capex into grid infrastructure, translating into a RM6.7bil to RM7.8bil opportunity within the transmission substation business for mechanical and engineering players. 'Notably, this estimate excludes consumer-side substations, which are also required to complete connections to end users,' HLIB Research said. Looking ahead, the research house stated that TNB's RM90bil grid investment plan implied an additional RM47bil could be deployed under RP5 (2028 to 2030), exceeding RP4's RM42.8bil and pointing toward sustained momentum in power infrastructure rollout. As of 1Q25, TNB had 2.9GW of electricity supply agreement (ESA) under construction, with an additional 0.7GW signed and is set for construction commencement. 'This is higher versus the 1.3GW ESA capacity delivered in 2024 alone, signaling a strong acceleration in infrastructure pipeline, which is likely to materialise over the next 12 months. 'Following our recent engagement with TNB, the group reaffirmed that ESA enquiries remain robust, with no cancellations to date,' HLIB Research said. It is 'overweight' on the power infrastructure sector with top picks being MN Holdings Bhd with a 'buy' call and target price (TP) of RM1.88 and Southern Cable Group Bhd at 'buy' and TP: RM1.90, both of which will be key beneficiaries of grid expansion. The research house also favoured SMRT Holdings Bhd ('buy', TP: RM2.19) for its strategic involvement in the digitalisation of Malaysia's distribution substation.
The Star
11-07-2025
- Business
- The Star
Tariff reform to reshape power sector
The shift in cost structure is expected to spur demand for renewable solutions. PETALING JAYA: Power and utilities companies are expected to benefit from the upcoming electricity tariff restructuring, with industry analysts forecasting a surge in renewable energy (RE) adoption, grid investment, and energy storage solutions. The shift, effective July 1, 2025, is part of the Regulatory Period 4 (RP4) reforms aimed at reshaping the nation's electricity market towards greater efficiency and sustainability. According to TA Research, the tariff overhaul is likely to generate far-reaching implications across the energy value chain. 'The new tariff schedule is essentially designed to drive load smoothing and improve overall system efficiency, evident by the enhanced time-of-use coverage and rising maximum demand charges – this could in turn catalyse demand for RE and energy storage to reduce grid power consumption, especially during peak hours,' the research house said in a sector update. Electricity users will now be billed based on four distinct components – energy, capacity, network and retail charges – moving away from the previously tiered structure. While domestic consumers are largely insulated through the Energy Efficiency Incentive, an estimated 29% of the 3,300 non-domestic medium voltage users could face higher bills, particularly those with low load factors. This shift in cost structure was expected to spur demand for renewable solutions. 'RE engineering, procurement, construction, and commissioning (EPCC) players such as Samaiden Group Bhd , Solarvest Holdings Bhd , Sunview Group Bhd and Pekat Group Bhd are potential beneficiaries of potentially increasing demand for RE under the new RP4 tariffs and ahead of the upcoming carbon pricing implementation,' TA Research noted. Meanwhile, incumbent utility firms such as Tenaga Nasional Bhd (TNB) and Malakoff Corp Bhd are also poised to benefit. 'Beyond the EPCC players, incumbent utility companies such as TNB and Malakoff are also potential beneficiaries of expanding RE asset portfolios, while TNB specifically is a beneficiary of grid capital expenditure to accommodate higher RE penetration,' the firm added. A key area of opportunity lies in the Corporate Renewable Energy Supply Scheme (Cress), which allows large energy users to directly source RE from private producers. TA Research said, 'At estimated effective rate of 58.98 sen per kilowatt-hour (kWh), we estimate the difference between grid power and Cress will narrow from close to 10 sen per kWh previously to just about two sen per kWh.' The narrowing price gap, combined with the additional green attribute value of three to five sen per kWh, made Cress more attractive under the new RP4 tariff schedule. Furthermore, carbon pricing – expected to be introduced in 2026 – could tilt the economics even further in favour of RE. 'The incremental cost for grid power could further narrow the difference with Cress to sub one sen per kWh, which would further improve the attractiveness of Cress,' it said. TA Research maintained its 'overweight' call on the power and utilities sector, citing demand-supply tightness in the generation market; record-high RE rollout; and expansion in grid capital expenditure to accommodate the energy transition. The research house pegged its target prices for Samaiden at RM1.38, TNB at RM17.30 and Malakoff at RM1.08.
The Star
04-07-2025
- Business
- The Star
EPCC players set to benefit as solar panel prices hit lowest point in 2025
KUALA LUMPUR: Engineering, procurement, construction and commissioning (EPCC) players are poised to benefit the most in 2025, as solar panel prices are projected to hit their lowest point this year, said Kenanga Investment Bank Bhd (Kenanga Research). In a note today, it said the total EPCC contract value has surged to RM17.4 billion from RM12.4 billion, ensuring sustained sector activity until the end of 2028. "Thus far, we have already seen RM2.9 billion in contract awards announced by listed firms. "In this space, we see market leader Solarvest Holdings Bhd as a key beneficiary and expect it to grab at least 30 per cent of the EPCC market share,' it said. Kenanga Research expects a pick-up in contract flows over the medium term with the corporate renewable energy supply scheme (CRESS) back on the table and upside from the new tariff. Its top pick is Solarvest because it is better positioned to benefit from the solar EPCC momentum, while maintaining its position in Pekat Group Bhd (Pekat). It said Solarvest has a strong market position, execution track record, clientele, and value proposition of its photovoltaic system financing programme. It also has strong earnings visibility backed by sizeable outstanding order and tender books, as well as recurring income from a growing portfolio of solar assets. Meanwhile, Pekat stands out for its focus on high-margin residential and commercial rooftop solar projects, but the game changer here is its newly acquired switchgear business. As one of the top four medium voltage switchgear suppliers to Tenaga Nasional Bhd , EPE Switchgear (M) Sdn Bhd is set to ride on TNB's massive Regulatory Period 4 capex, with further upside from leveraging PEKAT's network to capture a larger slice of private sector deals such as data centres. Kenanga Research maintains its "Overweight' rating on the sector. - Bernama
Focus Malaysia
02-07-2025
- Business
- Focus Malaysia
New RP4 tariff kicks off, rooftop solar offsets maintained
YESTERDAY marked the first day of the new base tariff under Regulatory Period 4 (RP4) at 45.40 sen/kWh with the new Automatic Fuel Adjustment (AFA) replacing the Imbalance Cost Pass-Through (ICPT) mechanism being set at 0 this month, in line with the adoption of the new tariff. Meanwhile, the Ministry of Energy Transition and Water Transformation (PETRA) announced the continuation for rooftop solar users to earn electricity bill credits for excess solar power generated and exported to the grid as per the Net Energy Metering (NEM) programme, which dispels concerns among rooftop solar adopters that they were losing out. The previous tariff under RP3 lumps everything under a single figure plus the ICPT while the revision under RP4 provides further granularity, breaking it down in terms of generation energy charge, generation capacity charge, network charge, retail charge and the AFA, which is up to 10% of the prevailing energy cost. 'We view the latest announcement by PETRA as a neutral for households with rooftop solar systems, at least a decade until the end of Dec-35,' said MIDF Research. While domestic and low voltage solar rooftop users continue to be able to offset all three component charges (energy, network and capacity), medium and high voltage users can offset only up to 25% of the network and capacity charges while energy charges can be offset in full. We view this to be fair, as it ensures heavy users pay their fair share of the fixed network upkeep. In the past, non-solar consumers have indirectly subsidised the network and capacity charges for solar users. This new offset method under the new tariff will minimise the under recovery of fixed cost and ensures users pay their fair share of the infrastructure cost. Primarily designed for medium voltage to high voltage users, TOU is now offered to all, including domestic and non-domestic low voltage customers as an option, with smart meters installed. We maintain our POSITIVE stance on the Utilities sector. The latest tariff framework under RP4 provides greater stability and transparency, especially through the dynamic AFA that removes the lag in fuel-cost recovery thus, protecting Tenaga (BUY, TP: RM16.40) from fuel price swings. Electricity demand is also expected to be strong this year, with a projected growth of 3.5% to 4.5%. In May-25, peak electricity demand hit three new highs, with the latest on 27th May at 20.75GW. Meanwhile, the recent request for proposal (RFP) for new gas-fired power generation capacity also presents a positive catalyst for the sector. This will be undertaken via two categories, which is the extension of the concession period for existing gas-fired power plants with expiring or expired existing power purchase agreements (PPAs) and through the development of new gas-fired power plants. This is expected to add about 8GW of new capacity. We expect independent power producers (IPPs) such as Malakoff (Non-rated) and YTL Power International (BUY, TP: RM4.51) to be among the front runners for this new scheme. The renewable energy subsector remains our top preference, as the key immediate-term beneficiaries of RE initiatives, the aggressive rollouts of large scale solar (LSS) schemes and the longer-term National Energy Transition Roadmap (NETR). In addition to the stronger demand expected, margins are expected to be favourable, following the steep decline in solar module prices, which are now at an all-time low. —July 2, 2025 Main image:
Malaysian Reserve
30-06-2025
- Business
- Malaysian Reserve
TNB insulated as new electricity tariff kicks in from July
The EC confirms that base electricity tariff for Peninsular Malaysia under RP4 has been set at 45.4 sen/kWh, 13.6% higher than RP3 by RUPINDER SINGH TENAGA Nasional Bhd (TNB) is expected to remain operationally resilient under the new electricity tariff framework announced by the Energy Commission (EC), with analysts maintaining that the group's earnings outlook remains largely intact despite structural changes to the tariff mechanism. The EC last week confirmed that the base electricity tariff for Peninsular Malaysia under Regulatory Period 4 (RP4) has been set at 45.4 sen/kilowatt-hour (kWh) for the period between July 1, 2025 and Dec 31, 2027. This is 13.6% higher than the RP3 base tariff of 39.95 sen, but slightly lower than the previously approved 45.62 sen/kWh for RP4. While the hike appears substantial on paper, analysts said the net impact on TNB is neutral given the continued application of the incentive-based regulation (IBR) framework, which guarantees a regulatory return of 7.3% on its regulated asset base (RAB). 'The IBR framework provides regulatory adjustments such that TNB ultimately earns the regulatory rate of return on the regulated asset base,' said CIMB Securities Sdn Bhd, adding that the RAB is expected to grow 'healthily', supported by RM26.6 billion in base capital expenditure (capex) and RM16.3 billion in contingent capex during RP4. TNB is forecast to post a core net profit of RM4.36 billion in financial year 2025 (FY25), up 3.6% from RM4.21 billion in FY24. Earnings per share (EPS) is expected to rise to 75.2 sen, with dividend yields of 3.2%-3.9% projected for FY25-FY27. TNB is currently trading at 7.5 times enterprise value (EV)/ Ebitda based on FY25 forecasts, CIMB Securities noted. Importantly, the EC also announced the replacement of the imbalance cost pass-through (ICPT) mechanism with a new automatic fuel adjustment (AFA) system that allows monthly adjustments based on market fuel prices and exchange rates, rather than semi-annual reviews under ICPT. Public Investment Bank Bhd (PublicInvest) said the AFA's monthly cadence will result in 'faster recovery of fuel and generation costs' and will ease TNB's working capital burden by reducing the lag in subsidy payments. 'We opine this new adjustment mechanism to be more beneficial to TNB compared to the previous ICPT,' it said. MIDF Amanah Investment Bank Bhd (MIDF Investment) similarly welcomed the shift, noting that 'any monthly variance in fuel and power purchase cost will be automatically adjusted, providing a timelier cost pass through to consumers rather than every six months'. It raised its target price (TP) for TNB to RM16.40 from RM15.13 previously, citing better cashflow clarity and long-term growth prospects. Consumers to See Limited Impact For residential users, the new tariff schedule comes with an energy efficiency incentive (EEI) that will cushion monthly bills. According to TNB, households consuming between 50kWh and 900kWh per month will see electricity bills reduced by 1% to 15%, thanks to rebates of up to 25 sen/kWh. Customers consuming above 1,000kWh will not qualify for the EEI and will be subject to AFA surcharges depending on fuel prices. For instance, under the current structure, users consuming above 1,500kWh are charged an ICPT surcharge of 10 sen/kWh. The EC also streamlined the customer categorisation structure: Tariffs will now be split by voltage level (domestic vs non-domestic, and low/medium/high voltage) instead of activity-based groupings. MIDF Investment added that 23.6 million domestic users and low-voltage non-domestic users with consumption of 200kWh and below will largely be unaffected by the tariff changes. Sector Outlook Stable Electricity demand remains robust. In May, the country registered three all-time highs in peak demand, with the latest at 20.75 gigawatts (GW) on May 27. MIDF Investment projects electricity demand growth of 3.5% to 4.5% in 2025, outpacing the country's GDP growth. While the new AFA mechanism introduces a more dynamic pricing regime, analysts agree that the regulatory safeguards remain intact for TNB. 'Regardless of tariff changes, the IBR framework ensures stable returns,' CIMB Securities said. PublicInvest kept its 'Neutral' call on the stock, while MIDF Investment reiterated a positive stance on the utilities sector as a whole, with TNB well-positioned as a beneficiary of both energy transition initiatives and domestic demand growth. This article first appeared in The Malaysian Reserve weekly print edition
