The power sector shows a promising outlook with significant growth opportunities due to the introduction of the Corporate Renewable Energy Supply Scheme (CRESS), according to a report by RHB Investment Bank (RHB) today.
RHB upgraded the sector from UNDERWEIGHT to OVERWEIGHT, maintaining a positive stance due to the Government's initiatives and projected increases in renewable energy (RE) capacity. The CRESS programme, set to begin after the Large-Scale Solar 5 (LSS5) concludes, is expected to commence next year, fostering a more liberal and competitive power market.
The scheme allows corporate firms to source RE directly from generators, enhancing flexibility and helping companies meet ESG targets. TNB's transmission and distribution business is likely to remain neutral in the near term but may benefit from increased RE input in the longer run, potentially boosting regulated earnings through higher capital expenditure in transmission and distribution assets.
The bank noted that commercial and industrial order boosts for Engineering, Procurement, Construction, and Commissioning (EPCC) players are expected as the CRESS initiative progresses. This development could attract more independent power producers and green energy power producers, offering them the ability to negotiate direct pricing for green electricity, thereby increasing the adoption of green energy.
The announcement of the CRESS guidelines in September aligns with the Government's aspirations to increase RE capacity from the current 26% (10.6GW) to 40% by 2035 and 70% by 2050. RHB's top picks in the sector include Tenaga Nasional (TNB), YTL Power, and Samaiden Group, which are poised to benefit from the growing emphasis on renewable energy and the liberalisation of the power market.
RHB highlighted that the CRESS initiative would positively impact solar EPCC players by boosting their commercial and industrial orders, contributing to a more competitive and sustainable power industry. The ongoing reforms and introduction of the CRESS scheme signify a progressive step towards a more liberalised power market, benefiting both consumers and producers in the long run.