Malaysia RE Roadmap (MyRER) 2022-2035

To increase RE share to 31% in 2025, 40% in 2035

The recently launched Malaysia Renewable Energy Roadmap (MyRER) for 2022-2035 is expected to boost RE from 23% or 8.45GW of national installed capacity mix in 2020, to 31% in 2025, and 40% in 2035. The
strategic pillars for the RE growth will continue to leverage on the existing untapped resources i.e. solar PV, bioenergy and hydro. New technologies and resources are also expected to support the MyRER post-2025. We remain POSITIVE on the sector, with BUY ratings for Cypark and Solarvest.

Solar PV as main contributor to RE additions

As of 2020, solar PV accounted for 1.5GW of RE capacity, and this is expected to jump to 4.7GW by 2025, and 7.2GW by 2035. The solar energy pillar is built upon existing programmes (i.e. Net Energy Metering (NEM) and Large Scale Solar (LSS)), but is to be complemented with the possibility of introducing new business models i.e. corporate PPAs, Third Party Access (TPA), Peer-to-Peer energy trading and monetization of RE certificates. Other energy pillars to increase RE capacity also include bioenergy (e.g. biomass, biogas, waste-to-energy (WTE)), hydro as well as potential new technology and solutions post-2025 e.g. battery storage and hydrogen solution.

Tender for LSS5

While we expect the tender for LSS5 to be opened this year, tariff reference is expected to be higher than LSS4 (lowest bid at 13.99 sen/kWh), due to major procurement and supply chain disruptions that led to increase in solar-related material prices. We believe the disruptions will also pose a temporary risk to project execution and potential delays in existing solar project installations into 2HCY22.

Expect earnings recovery in 2022

Looking into 2022, we expect an earnings recovery for RE stocks, as movement restrictions are eased and work momentum for solar installations catches up. Strong orderbook for Solarvest at MYR635m will continue to support earnings growth. Meanwhile, the earnings profile for Cypark is expected to improve as its RE portfolio is to grow from FY22 onwards, whereby it expects to manage and operate a combined solar capacity of 230MW, from 40MW currently, as well as kick-start its first 25MW WTE plant.