Potential Beneficiaries Amid Malaysia's Power and Water Supply for Data Centers
With the development of data center construction in Malaysia, there are concerns about whether power and water supplies can meet the demands of data centers.
Kenanga Investment Bank Research estimates that by 2035, the potential power demand for data centers in Malaysia will reach a total maximum demand of 5 million kilowatts. Meanwhile, a study by the Lawrence Berkeley National Laboratory shows that a data center with a capacity of 100 MW uses about 1.1 million gallons of water per day for cooling, which is equivalent to the daily water usage of a city of 10,000 people.
The government has been closely monitoring the issue of high energy and water consumption. Lee Choon Hock, Chairman of the Investment, Trade and Consumer Affairs Committee in Johor, stated that “If data centre operators do not show efforts to use green energy, the committee can recommend to reject the building permission application of their data centre.”
Investors are closely watching which companies may benefit from the huge demand for power and water due to data centers.
As Malaysia's largest power company, TNB is undergoing a transition to green energy with a pipeline of green-energy projects that include several hydro and solar power plants. According to Kenanga Research, the power giant's energy transition capital expenditure budget is RM3.2 billion forthe24 financialyear. It has also allocated up to RM6 billion in capital expenditure for non-regulated power businesses such as solar power plants and hydro power plants.
TNB's market value has increased by around RM23 billion since the beginning of this year, with its stock price rising over 40% year-to-date. While Kenanga Research believes that TNB's strong performance this year is reasonable, it has downgraded TNB to a "market perform" rating from "outperform" with a target price of RM14.50 following the recent run-up in its share price.
In December 2023, YTL Power announced its partnership with US tech giant Nvidia to establish an AI data center in Malaysia in mid-2024. The group stated in a statement that the project will provide energy-efficientartificial intelligenceinfrastructure for scientists, developers, and startups in Malaysia.
YTL Power posted a 34.5% year-on-year increase in net profit for its third financial quarter ending on March 31, 2024 (Q3FY2024), mainly driven by its power generation and investment holding segment, which includes its data center development operation.
Looking to the future, YTL Power stated that its power generation division will continue to focus on improving operational efficiency and exploring diversified development beyond its core business, expanding into comprehensive multi-utility supply.
On July 1, Kab announced a partnership with JCorp to develop sustainable energy solutions, with a particular focus on energy-saving measures for data centers. The partnership will develop regional cooling systems to significantly reduce the overall energy consumption of data centers and improve their power usage efficiency.
"By having JCorp as our new partner, our confidence in driving substantial and transformative impacts has greatly increased," said Kinergy Advancement deputy chairman-cum-group managing director Datuk Lai Keng Onn. The Edge Malaysia expects that this partnership will have a positive impact on the group's future profitability and earnings per share for the financial year ending December 31, 2024.
On June 16, this petroleum and natural gas company announced the launch of Petronas Iona Tera, a liquid coolant designed specifically for data centers. The company also plans to collaborate with Iceotope to develop thermal management solutions for data centers, edge computing facilities, and blockchain operations to improve efficiency while reducing carbon emissions and water resource usage.
The company's net profit for the first quarter ended March 31, 2024 (1QFY2024) rose 7.7% from the previous year. Looking at FY2024 as a whole, the company expects its performance to "remain healthy," based on stable-earning contracts and sustained operational performance. "The group remains committed to optimizing cost efficiencies to minimize the impact of an inflationary operating cost environment," it added.
Source: the Edge Malaysia, enanyang, the sun, the Star
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Xyno : The current forecast is based on maximum power these data centres currently scheduled for built could demand.
The reality is that data centres are going to be built based on scale and will only demand that power if there is market demand.
With Singapore no longer having its moratorium on data centres, Indonesia, Thailand and Vietnam not sitting still either, it is evident that at some point oversupply will be reached.
Power supply companies therefore require careful planning not ending up with power plants or purchases of long-term resource contracts which ultimately will not be made use of.
A final note, with Malaysia trying to steer towards clean power, the data centre development in the south presents an excellent case for the development of multiple SMRs.
Invest With Cici : Good article! Utilities have risen nicely, and investors should also have a good take-profit and stop-loss planning when investing.![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")