RE Purchase is Now Opened to Corporates
Energy Commission (EC) has announced the list of successful Solar Power Producer of the Corporate Green Power Programme (CGPP) which consisted of 22 companies/consortia that have been selected out of the 71 applications received (Table 1). The successful applicants represent 563MWac of export capacity out of 800MW quota that is opened. Recall that the application has commenced from 9th May 2023 and it will end by 31st Dec 2023 or until the quota is fully subscribed. The salient features of the program, among others are: (i) all solar projects are expected to begin commercial operation in 2025, and (ii) the eligible Corporate Consumer is able to purchase renewable energy (RE) “directly” from the solar power producer through a virtual power purchase agreement (PPA).
Boosting its PPA assets
In the announcement, Reservoir Link (RL) was also listed as one of the successful CGPP applicant to build and operate a solar plant with capacity of 29.99 MWac under a consortium with Sumitomo Corporation and Maqo Engineering SB. We estimate this will boost its PPA assets to 47.6MW. We believe it will not only benefit from the recurring income of the PPA revenues but also from construction revenue as the EPCC scope is likely to be awarded to it.
A Key Catalyst to RL
Moreover, we are positive with this announcement as it will allow RL to replenish RE orderbook given that most LSS4 projects are expected to reach commercial operation date by Dec 2023. As such, we raised our FY23F/24F/25F earnings forecast by 25%/6%/10% as we expect the company to benefit from the roll-out of these projects. To recap, its solar orderbook stood at RM60mn as at end 5QFY23 which is less than 1x 15MFY23 RE revenue.
Maintain ‘BUY’ call with higher TP of RM0.38
We maintain our BUY recommendation on RL with a higher fully diluted SOP-derived TP of RM0.38 (from RM0.36). Our TP implies 13x FY24F P/E.
Source: BIMB Securities Research - 8 Aug 2023
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