Bids for LSS Cycle 3 project set to drop further

MIDF Research says potential bidders include Ranhill and TNB

PETALING JAYA: The lowest bid for the Large Scale Solar (LSS) Cycle 3 project, which recently opened for bidding, is expected to drop further compared to previous cycles, in line with lower costs involved.

MIDF Research, which maintained its “positive” stance on the power sector, said it expects the lowest bid to drop to below 30sen/ kwh levels, while the mean bid could drop to between 33sen and 34sen/kwh levels.

Over the past 10 years, solar panel prices have dropped by about 60%, or an average 6% per year.

“However, project cost is also determined by site location and proximity to interconnection points as this will impact infra cost and power loss – renewable energy (RE) supply agreements are based on electricity output at the interconnection points,” the research house noted.

Cycle 1 of the LSS, in September 2016, saw a mean bid of 45.43sen/kwh and lowest bid of 40sen/kwh for the 6MW-29MW range package.

For the largest package of 30MW-50MW, the lowest bid was 39sen/kwh, with the mean bid at 43.77sen/kwh.

As for Cycle 2, in August 2017, the largest package scheme was smaller at the 10MW-30MW range and the lowest bid shrank by 15% to 33.98sen/kwh, while the mean bid dropped 14% to 39.05sen/ kwh.

It was reported that the government would undertake an open tender this year for an estimated RM2bil worth of projects under the third cycle of the LSS scheme, to increase electricity generation from RE.

The projects are in addition to ongoing LSS projects to produce 958MW of electricity between the end of this year and 2020.

Solar accounts for about 67% of Malaysia’s RE capacity while biogas and biomass account for the second largest portion at 28%.

MIDF Research noted that a total of 500MW capacity are expected to be awarded in LSS3.

LSS1 saw a total 450MW capacity awarded, while LSS2 saw another 563MW capacity awarded.

Bidders will have six months, between February and August 2018, to submit their bids.

The research house said Ranhill Holdings Bhd is likely to put in a bid for LSS3 via JVs with local land owners, although its geothermal plant venture has hit a stumbling block.

“We would not rule out YTL Power International Bhd moving into RE in a bid to revive its domestic power business, which has only seen its Paka plant getting a shortterm power purchase agreement extension up till 2021,” it said.

It also noted that Tenaga Nasional Bhd has abundant balance sheet capacity, and having acquired the track record in LSS1 (Sepang) and LSS 2 (Bukit Selambau), is likely to return to bid for LSS 3.

“TNB also locks in exposure to smaller scale/residential solar via G-Sparx which is targeting to offer 1500MW of self-generation for solar PV investment by 2025,” it pointed out.

Other potential bidders include Cypark Resources Bhd and Malakoff Corp Bhd.