High demand for power charges up sector

RHB Research said power demand hit a new peak of 20,028MW in April.

PETALING JAYA: The utilities sector will remain buoyed by healthy demand of electricity in the country, according to RHB Research.

The research house had an “overweight” rating on the sector as demand for electricity should “stay fairly resilient in 2024”, driven by data centres.

It noted that in the first quarter of 2024 (1Q24), electricity demand rose at a much faster 9.6% year-on-year (y-o-y) versus gross domestic product growth of 4.2%, largely driven by stronger commercial (up 11.2%) and domestic (up 16.8%) segments. Demand hit a new peak of 20,028MW in April.

Tenaga Nasional Bhd (TNB) highlighted that the strong commercial demand growth was largely led by the commercialisation of a 150MW data centre in 1Q24,” RHB Research pointed out.

It added there were two projects with a total capacity of 535MW completed under the Green Lane Pathway and another seven more (around 165MW) to be completed by this year.

Among the utility companies, RHB Research listed TNB, along with YTL Power International Bhd and Samaiden Group Bhd, as its top sector picks.

“TNB should also continue benefiting from the continuous upgrade in transmission and distribution assets, where energy demand can be anchored by mushrooming data centre developments,” the brokerage said.

“TNB also aims to sign electricity supply agreements for 10 data centre projects with 2GW in energy demand,” it added, noting despite strong electricity demand growth in 1Q24, TNB still guided for an annual demand growth of 2.5% to 3% y-o-y for this year and the upcoming regulatory period.

RHB Research said it was also optimistic about the country’s solar power landscape.

“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 explained.

RHB Research noted the corporate green power programme had made significant progress, with off-taker agreements nearing finalisation and financial close on the horizon.

Anticipating more renewable-energy (RE) jobs to be awarded in the coming months, the brokerage said it also expected the announcement of five large-scale solar winners in the second half of 2024.

“Further boosting the earnings of solar players is the commercial trading of Malaysia Renewable Energy Certificates, which is designed to increase market demand for RE by allowing companies to trade certificates representing RE production,” the research house said.

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