KUALA LUMPUR, Sept 6 — RAM Ratings estimates that independent power producers (IPPs) require another RM13.3 billion to finance forthcoming facilities, such as large-scale solar plants, with local bonds and sukuk markets as key funding sources.
The rating agency said this was in line with its projection that Malaysia’s grid would increase by about 10,000 megawatts (MW) by 2021 based on data from the Energy Commission, and an expectation of capacity growth in Sabah and Sarawak.
In a statement today, RAM’s co-head of infrastructure and utilities Chong Van Nee said capacity-expansion prospects remained favourable for the sector and would largely be dominated by fossil-fuel plants, as the core of Malaysia’s electricity generation, despite the push for renewable energy.
Up to RM17 billion bonds and sukuk have been raised for new plants since 2014.
In its special commentary on the Malaysian power sector, “Charging Up Capacity,” RAM maintained its stable outlook, underpinned by the sector’s sound regulatory framework.
“We expect power demand to keep increasing by around two to three per cent per annum, in accordance with the country’s resilient economic growth.
“RAM envisages Malaysia’s gross domestic product to expand 5.4 per cent this year, and this is reflected by the healthy operational and financial performances of Tenaga Nasional Bhd (TNB), Sarawak Energy Bhd and Sabah Electricity Sdn Bhd,” it said.
RAM said Malaysia’s power sector had recorded a 5.6 per cent year-on-year rise in electricity demand in 2016, mainly driven by the commercial segment and partly due to an increase in electricity consumption on the back of the El Nino phenomenon at mid-year.
It said the market had also welcomed the debut of the country’s first H-Class combined-cycle, gas-turbine power plant owned by TNB Northern Energy Sdn Bhd in Seberang Prai, and Tanjung Bin Energy Sdn Bhd’s 1,000 MW ultra-supercritical coal-fired power plant in Johor in 2016.
“Taking into account the commencement and retirement of plants owned by the utility companies, Malaysia’s total installed capacity came up to about 29,000 MW as of end-2016,” it added.
Meanwhile, subsidy rationalisation remained a focal point, as gas prices had been increasing every six months, hitting RM22.70 per mmBTU in Peninsular Malaysia (effective from July 1 to Dec 31, 2017).
However, it said TNB remained neutral to fuel cost changes as any fluctuation would be passed on to consumers under the incentive-based regulation framework.
“That said, we expect an upward pressure on electricity tariffs, given the persistent uptrend in fuel costs,” RAM added. — Bernama