• Bernama reported that YTL Power (YTLP) Seraya in Singapore has been selected for a two year trial to import 100MW of electricity from Peninsular Malaysia. YTLP Seraya is a subsidiary of YTL Power (YTLP).

• This was pursuant to a request for proposal (RFP) process in March 2021. Singapore’s Energy Market Authority (EMA) said that YTLP Seraya was "best able to meet EMA's requirements to trial electricity imports via the existing interconnector".

• The project is expected to commence in early 2022F.

• In a separate article by Reuters, it was reported that Singapore will issue two RFP for 4GW of low-carbon electricity imports in its efforts to diversify from natural gas. The first proposal will be launched in November 2021 while the second is expected to be launched in 2Q2022.

• Singapore plans to import up to 4GW of low-carbon electricity by year 2035F or about 30% of its total supply.

• The city state will start with trials to resolve technical and regulatory issues over cross border power trading such as plans to import 100MW of electricity from Malaysia and 100MW of solar energy from Pulau Bulan, Indonesia.

• We believe that any earnings from the sale of electricity in Malaysia to Singapore would be minimal to YTLP as it is only 100MW. However in the long term, it places YTLP in a good position to bid for future projects from the Singapore government.

• In September 2021, YTLP acquired 664ha of oil palm estates in Kulai, Johor from Boustead Plantations to develop the land into a large scale solar power plant with a generation capacity of up to 500MW. We think that the 100MW of electricity, which would be sold to Singapore, may come from this solar power plant project.

• Prior to this, YTLP did not have any exposure to solar or hydro power projects. The group's exposure to coal is via its 20% shareholding in the 1,220MW Jawa Power Plant in Indonesia. YTLP's main power asset is its 3,100MW gas power plant in Singapore. The Singapore unit recorded a pre-tax profit of RM275.3mil in FY21 vs. a pre-tax loss of RM172.4mil in FY20.

• We maintain BUY on YTLP with a fair value of RM0.85/share.

Source: AmInvest Research - 26 Oct 2021