PETALING JAYA: Winners of the Corporate Green Power Programme (CGPP) could potentially enjoy better returns compared to the fourth cycle of the large-scale solar (LSS4) projects.
MIDF Research said going by its initial ballpark estimates, the CGPP could reap internal rate of returns (IRRs) in the high-single-digit levels.
This is because the initiative, which will be utilising virtual power purchase agreements, is based on a willing buyer-willing seller approach.
“Under the CGPP, players are free to secure their own offtaker, hence giving better pricing power as opposed to stiff competition to supply to a single offtaker under the LSS auction mechanism,” said the research firm in a report yesterday.
According to MIDF Research, the CGPP tariffs are also likely to reflect a premium for environmental attributes like renewable energy certificates.
As a benchmark, the research firm noted that the Green Electricity Tariff sold by Tenaga Nasional Bhd (TNB) was raised to 21.8 sen per kilowatt hour (kwh) effective August this year.
Meanwhile, the system’s marginal price under the New Enhanced Dispatch Arrangement (Neda) wholesale market is averaging about 25 sen per kwh as at June 2023, which is “a decently large premium to LSS4 winning bids of 18 to 20 sen per /kwh for 30-50MW packages,” it said.
On Monday, the Energy Commission (EC) announced that a total 563.42MW under the CGPP were awarded to 22 solar power producers.
There is still a balance of 236.58MW quota to be awarded out of the 800 MW offered under CGPP, which received a total of 71 applications, according to the EC.
Most of the players secured about 30MW, while a few players secured a smaller capacity in the range of seven to 15MW. It is unclear when the remaining quota of 236.58MW will be awarded.
A number of listed companies were among the winners, with TNB appearing to be the biggest winner with a total of 90MW capacity secured via three different applications.
The other listed companies include Solarvest Holdings Bhd, Sunview Group Bhd, Pekat Group Bhd, Sime Darby Plantation Bhd, MK Land Holdings Bhd, Sunway Construction Group Bhd, Mega First Corp Bhd, JAKS Resources Bhd and HSS Engineers Bhd.
Moving forward, execution is key, said RHB Research.
According to the research firm, tenders for the engineering, procurement, construction and commissioning work would probably kick in by end-2023, as the Neda approval could take three to six months.
It said the financial closure process of some projects may take relatively longer than the previous LSS projects, given the offtakers’ credibility that will have to be assessed separately.
“While the tariffs are not disclosed, we estimate the IRR of these solar projects could vary depending on the agreed tariff locked in with their respective offtakers – some projects potentially fetching IRR of low mid-teens, given that solar panel prices have retraced to about US$0.18 to US$0.22 per watt,” it said.