The Energy Commission released the second (and final) batch of successful applicants for the Corporate Green Power Program yesterday (8 Nov). The entire 237MW remaining CGPP quota was awarded entailing individual project capacities of 10MW to 29.99MW each.
Like the first-round winners, the CGPP plants are expected to reach COD (commercial operation date) by end-2025 giving a timeframe of slightly more than 2 years for plant construction and commissioning. With this announcement, the entire 800MW quota under the CGPP program has been awarded.
This time around, the list of 10 successful applicants entailed few listed exposures but a clear winner is Samaiden, which secured a total gross capacity of 43.3MW via two applications. This is a timely comeback after missing out on the first round of CGPP quota award back in August 2023. With a net cash position of RM102m, we believe Samaiden would have no issues financing its CGPP plants. Other notable listed exposures to the list of CGPP winners are Thong Guan and LBS Bina which won 29.99MW and 28.67MW capacities via their respective consortiums.
Based on the last sector thematic report the house reckons the CGPP projects could entail better returns compared to LSS4 given that: (1) Under 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, (2) CGPP tariffs are likely to reflect a premium for environmental attributes e.g. RECs – as a benchmark, GETS tariff (Green Electricity Tariff) sold by Tenaga was recently raised to 21.8sen/kwh effective August 2023, (3) System Marginal Price under the NEDA wholesale market is averaging at ~22.7sen/kwh (as at September 2023), a decently large premium to the previous LSS4 winning bids of 18-20sen/kwh (for 30-50MW packages). On initial ballpark estimates, we reckon it is possible for project IRRs to hit high-single digit or low-teen levels.
Other than the asset owners, investment house MIDF believes RE EPCC players are among the biggest beneficiaries given huge EPCC prospects from the construction of the CGPP plants. It estimates the entire 800MW CGPP capacity could give rise to some RM2.4b worth of EPCC prospects. This would serve as timely order book replenishment over the next 2 years as LSS4 projects gradually reach completion by mid-2024. MIDF expects EPCC awards for the CGPP projects to start trickling down into orderbooks from 2QCY24 onwards.
Beyond the CGPP projects, MIDF believes flagship solar projects announced under the National Energy Transition Roadmap (NETR) recently could potentially boost orderbook prospects for the EPCC players further. To recap, a total of 1.5GW large-scale solar projects were announced under NETR comprising a 1GW hybrid solar plant spearheaded by UEM Group & Itramas Corporation and a 500MW solar park under Tenaga. These could entail an estimated EPCC value of RM4.5b. There is also another 2.5GW hybrid hydro floating solar to be undertaken by Tenaga at its Kenyir and Sungai Perak hydro dams, which could entail prospective EPCC jobs of some RM10b-12.5b, on our estimates.
Solar module cost has eased significantly against peak levels immediately post-Covid pandemic driven by easing supply chain issues and commissioning of large manufacturing capacities. The house believes easing solar module prices, which make up the bulk of EPCC cost (approximately half of cost), should be beneficial to EPCC players from potentially improved margins, especially those on fixed cost terms with clients (project owners). Given the lessons learned from the implementation of LSS4 projects (which were disrupted due to the sharp rise in solar module costs), MIDF reckons EPCC players would be more conservative with project costs this time around.
