PETALING JAYA: Malaysia’s utilities sector is expected to chart a strong growth trajectory in the coming years, underpinned by resilient electricity demand and robust momentum in renewable energy development. Key opportunities are emerging across the data centre (DC) landscape, large-scale solar (LSS) projects, and community-based green initiatives.
As such, RHB Research maintained its “overweight” stance on the sector, pointing to Tenaga Nasional Bhd
(TNB), YTL Power International Bhd, and Solarvest Holdings Bhd as top investment picks, citing strong fundamentals and sectoral tailwinds.
“We believe that the long-term DC growth story is crucial to Malaysia’s energy transition journey as demand for electricity from DCs is needed to support the continuous upgrade in the country’s transmission and distribution infrastructure,” the brokerage said in its strategy note.
Electricity consumption rose by 6.2% year-on-year in the 2024 financial year, buoyed by a rebound in commercial demand (+9.2%) and robust growth in the domestic segment (+8.5%).
RHB Research noted that TNB’s current renewable energy (RE) capacity stood at 4.5 gigawatt (GW), representing 21% of total capacity.
“We believe the near-term electricity demand growth will continue to remain solid, backed by the rising actual load utilisation from completed DC projects,” the brokerage added.
On infrastructure investment, contingent capital expenditure (capex) plans remain a focal point.
“TNB guided that the contingent capex is investment required to maintain the security of supply, meet potential demand growth in supporting economic priorities (for example, DCs and industries), and facilitate the energy transition, which includes infrastructure upgrade and interconnection projects,” RHB Research said.
The projects have received pre-approval from the Energy Commission and will be activated when certain demand triggers emerge. Among these are new electricity supply agreements with DCs and the scaling up of distribution automation and smart metering systems. The recovery mechanism is still under discussion, though it will maintain the regulatory return rate of 7.3%.
The latest DC update pointed to a continued expansion in capacity, with electricity supply agreements signed totalling 5.9GW in the fourth quarter (4Q) of 2024, up from 4.7GW in the previous quarter.
“There were 18 DC projects completed as of end-2024 with total capacity of 1.9GW, of which nine projects (1.3GW) were completed in 2024,” RHB Research noted.
However, geopolitical factors could weigh on longer-term prospects.
“We believe there will be increased scrutiny on DCs that China players are involved with – which may dampen investor confidence,” RHB cautioned. It added that while non-artificial intelligence (AI) DC projects should proceed as planned, the US’ AI chip export restrictions might impact future Chinese-backed DC investments.
Meanwhile, the renewable segment continues to power ahead, with Solarvest and Samaiden Group Bhd delivering results in line with expectations.
“We anticipate a stronger performance in the fourth quarter ended March 31, 2025 for Solarvest, and in the first half of its financial year ending June 30, 2025 for Samaiden Group,” said RHB Research, attributing this to the rollout of Corporate Green Power Programme (CGPP) contracts.
Solarvest recently secured a 500 megawatt (MW) engineering, procurement, construction and commissioning (EPCC) job from TNB and another 29.99MW from SV Flux. Samaiden clinched a 99MW quota under the large-scale solar (LSS) 5 programme, while Solarvest added a 60MW capacity through a 60%-held partnership.
The sector received a further boost from the announcement of LSS5+ and the upcoming LSS6, which could collectively bring in more than 6GW of new capacity.
“This round of awards is expected to introduce at least 2GW of new opportunities,” RHB Research said, noting that falling solar panel prices offer further upside for contractors.
On the residential front, the Community Renewable Aggregation Mechanism, or CREAM, is being finalised.
“Homeowners can lease or rent out their rooftop spaces to third parties, allowing the integration of multiple rooftops to develop solar photovoltaic (PV) systems to supply green electricity,” RHB Research stated.
Battery Energy Storage Systems, or BESS, are also moving ahead, it observed, with the government opening competitive bidding for four projects totalling 400MW/1,600 megawatt-hour, due to begin operations by 2026.
Summing up the outlook, RHB Research said: “Our outlook remains upbeat, as the sector – particularly the RE space – has strong growth potential, with several key drivers set to boost its near-term performance.”
