Periodic/Sector reports
Renewable Energy: It Is Hot, It Is Hazy, It Is Expensive, And So, Solar Gets A Boost
OVERWEIGHT (Maintained)
Analyst
Analyst
Highlights
- The government introduced the CRESS Acceleration Package with a lower SAC of 14 sen/kWh for firm output. This exceeded our earlier expectation of 15 sen/kwh. More importantly, this CRESS Acceleration Package mandates a 10-year PPA with COD no later than 31 Dec 28.
- To meet the timeline, we expect a slew of positive CRESS announcements in the next three months. This represents a positive catalyst for Solarvest, Pekat and Northern Solar, which underpins strong earnings visibility given the doubling of the orderbook and layering of the low-margin EPCC business with higher-margin asset ownership.
- Maintain OVERWEIGHT. Our sector top picks are Solarvest, Pekat Group and Northern Solar.
Analysis
- Goodie for the solar players: CRESS Acceleration Package. The Ministry of Energy Transition and Water Transformation (PETRA) announced the Corporate Renewable Energy Supply Scheme (CRESS) Acceleration Package – which is intended to drive a faster renewable energy (RE) adoption in Malaysia. Key points of the CRESS Acceleration Package: - A 30% reduction in system access charge (SAC) to 14 sen/kwh for firm output; - A mandatory 10-year contractual period power purchase agreement (PPA) to be enforced by PETRA to ensure the project is bankable; - Must achieve commercial operation date (COD) by 31 Dec 28 to enjoy the CRESS Acceleration Package terms; and - The programme is open to existing registered RE developers and offtakers, as well as newcomers who can meet the set requirements.
- SAC revision: Exceeded our expectation. We note that PETRA have reduced the SAC from 20 sen/kwh to 14 sen/kwh for firm output (with battery storage). This exceeded our expected 15 sen/kWh revision – please refer to our publication on 14 Sep 26. The regulator is also implementing several other CRESS enhancements, including: a) simplifying the CRESS procedures, b) enhancing technical requirements for solar photovoltaic (PV) and Battery Energy Storage System (BESS), and c) enhancing the principles for determining SAC from Regulatory Period 5 (RP5) starting from 2028.
- Expect meaningful CRESS wins for RE players in the next three months. Given that the COD is no later than 31 Dec 28, developers like Solarvest, Pekat and Northern Solar will have to finalise CRESS projects within the next three months to catch the CRESS Accelerated Package (14 sen/kwh firm SAC). Assuming a construction period of 18-24 months, financial close is likely within the next six months.
- A meaningful catalyst for the sector. Such positive regulatory undertaking represents a key re-rating catalyst for the sector. Our sensitivity analysis suggests every 50MW CRESS win will raise the market caps of Solarvest/Pekat/Northern Solar by 5%/10%/55% respectively.
Highlights
- The government introduced the CRESS Acceleration Package with a lower SAC of 14 sen/kWh for firm output. This exceeded our earlier expectation of 15 sen/kwh. More importantly, this CRESS Acceleration Package mandates a 10-year PPA with COD no later than 31 Dec 28.
- To meet the timeline, we expect a slew of positive CRESS announcements in the next three months. This represents a positive catalyst for Solarvest, Pekat and Northern Solar, which underpins strong earnings visibility given the doubling of the orderbook and layering of the low-margin EPCC business with higher-margin asset ownership.
- Maintain OVERWEIGHT. Our sector top picks are Solarvest, Pekat Group and Northern Solar.
Analysis
- Goodie for the solar players: CRESS Acceleration Package. The Ministry of Energy Transition and Water Transformation (PETRA) announced the Corporate Renewable Energy Supply Scheme (CRESS) Acceleration Package – which is intended to drive a faster renewable energy (RE) adoption in Malaysia. Key points of the CRESS Acceleration Package: - A 30% reduction in system access charge (SAC) to 14 sen/kwh for firm output; - A mandatory 10-year contractual period power purchase agreement (PPA) to be enforced by PETRA to ensure the project is bankable; - Must achieve commercial operation date (COD) by 31 Dec 28 to enjoy the CRESS Acceleration Package terms; and - The programme is open to existing registered RE developers and offtakers, as well as newcomers who can meet the set requirements.
- SAC revision: Exceeded our expectation. We note that PETRA have reduced the SAC from 20 sen/kwh to 14 sen/kwh for firm output (with battery storage). This exceeded our expected 15 sen/kWh revision – please refer to our publication on 14 Sep 26. The regulator is also implementing several other CRESS enhancements, including: a) simplifying the CRESS procedures, b) enhancing technical requirements for solar photovoltaic (PV) and Battery Energy Storage System (BESS), and c) enhancing the principles for determining SAC from Regulatory Period 5 (RP5) starting from 2028.
- Expect meaningful CRESS wins for RE players in the next three months. Given that the COD is no later than 31 Dec 28, developers like Solarvest, Pekat and Northern Solar will have to finalise CRESS projects within the next three months to catch the CRESS Accelerated Package (14 sen/kwh firm SAC). Assuming a construction period of 18-24 months, financial close is likely within the next six months.
- A meaningful catalyst for the sector. Such positive regulatory undertaking represents a key re-rating catalyst for the sector. Our sensitivity analysis suggests every 50MW CRESS win will raise the market caps of Solarvest/Pekat/Northern Solar by 5%/10%/55% respectively.
OVERWEIGHT (Maintained)
Analyst
Analyst
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This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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