Orderbook replenishment begins

The CGPP awards (to 22 producers totaling 563MW) marks the start of a new orderbook replacement cycle (c.MYR2b of works) for the solar EPCC players, with Solarvest, Sunview and Pekat also among the selected solar producers. Individual tariffs for each solar power producer have yet to be disclosed. Unlike LSS4, we expect reasonable project returns for CGPP producers. Among the RE pure-plays, we have HOLD ratings for both Cypark and Solarvest. In the broader utilities space, we have a BUY rating on Mega First (BUY, CP: MYR3.30, TP: MYR4.30).

22 successful bidders

For the Corporate Green Power Programme (CGPP), the Energy Commission has selected 22 Solar Power Producers (SPP) out of 71 applications. Successful listcos under our research coverage include Tenaga (TNB MK, HOLD, CP: MYR9.56, TP: MYR10.00), Solarvest, Mega First, Sime Plantation (SDPL MK, HOLD, CP: MYR4.47, TP: MYR4.30) and Sunway Construction (SCGB MK, HOLD, CP: MYR1.77,TP: MYR1.73). Plant capacity ranges from 7MW to 30MW each, totaling 563MW out of an 800MW quota. To recap, the CGPP allows Solar Power Producers to enter into a virtual power purchase agreement (VPPA) with Corporate Consumers with varying tenures. Applications for the CGPP will continue until end-2023 (or until the quota is exhausted). EPCC/construction of solar plants under the CGPP are required to be completed no later than end-2025.

We expect higher tariffs for the SPPs

Individual CGPP tariffs have not yet been disclosed. In general, we expect higher tariffs of between 24-28sen/kWh compared to LSS4 (17-24sen/ kWh). As a reference, the average System Marginal Price (the price which a CGPP producer initially sells to a Single Buyer) was at c.25sen/kWh in Jun 2023. Given declining price trends for solar-related materials, we expect CGPP producers to enjoy reasonably healthy project returns.

Potential EPCC works of c.MYR2b

Assuming EPCC works of MYR3.6m per MW, we estimate the 563MW of awarded capacity could generate c.MYR2b of EPCC works. This would provide opportunities for RE pure-plays to replenish their solar EPCC orderbooks (which we currently expect to exhaust by end-2023). Notable solar EPCC players include Solarvest, Cypark, Sunview (SUNVIEW MK, Not Rated), Pekat (PEKAT MK, Not Rated) and Samaiden (SAMAIDEN MK, Not Rated).

Source: Maybank Research - 16 Aug 2023