Shine back on solar power sector

RHB Research has upgraded the solar power sector to an “overweight” from “neutral”. — Bloomberg

PETALING JAYA: Soaring costs from the global supply chain squeeze has slowed down the roll-out of Malaysia’s solar power projects in the past two years.

But as the world economy bounces back from the coronavirus pandemic, and with the increasing adoption of green energy plus environmental, social and governance, a pick-up in projects is anticipated.

RHB Research, for one, has upgraded the solar power sector to an “overweight” from “neutral”, with its top picks being Samaiden Group Bhd and Solarvest Holdings Bhd – two of only four listed pure-play solar engineering, procurement, construction and commissioning or EPCC players.

“Together with surging demand, we see further catalysts stemming from the recent tariff hike and decreasing cost pressure from panel prices and material costs. Earnings should also scale to new highs, backed by robust order books at hand and contributions from green energy plants,” said RHB in a report yesterday.

The research firm has also upgraded both Samaiden and Solarvest to a “buy” call from “neutral” previously.

According to RHB, the cost of raw materials had begun easing by the tail end of 2022, thus lowering the price of solar panels. Against this backdrop, it believes that solar demand will pick up. Furthermore, delayed large-scale solar (LSS) projects should resume with better margins, contributing to both players’ bottom lines.

It said the implementation of a Voluntary Carbon Market will also drive companies to engage in decarbonisation projects and green investments such as solar adoption.

Elsewhere, it notes that the Corporate Green Power Programme (CGPP) applications, which opened on Nov 7, 2022 and closed on Feb 6 2023, had introduced a 600-megawatt (MW) quota.

“Assuming a contract value of RM2.3mil per MW, the total worth of solar projects under CGPP is circa RM1.4bil, which will help replenish both companies’ order books,” added RHB, which expects contract rollouts in the second half of 2023 (2H23).

As for the recent tariff hike, it said the imposition of a 20-sen per kilowatt hour surcharge (under the imbalance cost pass-through mechanism) on medium and high-voltage commercial and industrial users in 1H23 will encourage companies to switch to efficient energy sources.

“This should benefit Samaiden and Solarvest, potentially raising commercial and industrial orders,” added RHB.

On the progress of LSS projects, the research firm noted that only 56% (or 909MW) of the capacities under the LSS1-3 scheme were operational as of the fourth quarter of 2021 (4Q21).

At the beginning of 1Q22, the Energy Commission had included the 830.06MW LSS4 capacities into the database.

However, only 45% or 1160.4MW of the total LSS1-4 capacity was operational as of 2Q22. Going forward, RHB believes the situation will improve in 2023 as most LSS4 contract winners would have achieved financial closure by end-2022.

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Solar , projects , rollout , costs , rawmaterials , demand , EPCC , Samaiden , Solarvest


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