Favourable prospects in power sector, IPPs require RM13.3 bln
KUCHING: RAM Ratings observes that approximately 10,000 MW of capacity will be added to Malaysia’s grid by 2021, based on the Energy Commission’s data as well as its expectation of capacity plant-up in Sabah and Sarawak.
“We envisage the local bond and sukuk markets to be key funding sources for the sector, and estimate that independent power producers (IPPs) would require another RM13.3 billion of debt funding to finance most of these upcoming facilities, including large- scale solar plants,” explained RAM co-head of Infrastructure and Utilities Chong Van Nee in a statement yesterday.
The capacity- expansion prospects remained favourable for the sector, it added, and would largely be dominated by fossilfuel plants which remains at the core of Malaysia’s electricity generation despite the push for renewable energy.
To date, up to RM17 billion of bonds and sukuk has been raised for the new plants since 2014.
RAM, in its special commentary on the Malaysian power sector - ‘ Charging Up Capacity’ - maintained its stable outlook, underpinned by the sector’s sound regulatory framework. All RAM-rated sukuk issued by IPPs, except for one, currently carry a stable outlook.
“We expect power demand to keep increasing at around two to three per cent per annum, in consonance with the country’s resilient economic growth. RAM envisages Malaysia’s GDP to expand 5.4 per cent this year (4.2 per cent in 2016).
“This is reflected by the healthy operational and financial performances of Tenaga Nasional Bhd (TNB) and Sarawak Energy Bhd (controlled by the Sarawak government), which are both vertically integrated utility companies. Sabah’s equivalent,
We envisage the local bond and sukuk markets to be key funding sources for the sector, and estimate that independent power producers (IPPs) would require another RM13.3 billion of debt funding to finance most of these upcoming facilities, including large-scale solar plants. Chong Van Nee, RAM co-head of Infrastructure and Utilities
which is Sabah Electricity Sdn Bhd, which receives significant support from the Federal Government, has also shown improvement on both counts,” it opined.
Meanwhile, on the performance of Malaysia’s power sector last year, RAM noted that Malaysia’s power sector delivered yet another steadfast performance in 2016, recording a 5.6 per cent y- o- y rise in electricity demand for the year, mainly driven by the commercial segment and partly due to the increase in electricity consumption for cooling amid the warming effects of the El Nino phenomenon in the middle of the year.
“At the same time, the market welcomed the debut of the country’s first H-Class combinedcycle, gas-turbine plant owned by TNB Northern Energy Sdn Bhd (1,071 MW) in Seberang Prai, and Tanjung Bin Energy Sdn Bhd’s 1,000-MW ultra-super critical coalfired power plant in Johor. Taking into account the commencement and retirement of plants owned by the utility companies, Malaysia’s total installed capacity summed up to about 29,000 MW as of end2016,” it said.
Aside from that, it pointed out that subsidy rationalisation is still a focal point; the regulated price of gas has been increasing every 6 months, hitting RM22.70 per mmbtu in Peninsular Malaysia (effective from July 1 to December 31, 2017).
“However, TNB remains neutral to fuel-cost changes as any fluctuation will be passed through to consumers under the incentivebased regulation framework.
“That said, we expect upward pressure on electricity tariffs given the persistent uptrend in fuel costs,” it concluded.