KUALA LUMPUR (July 29): Investment analysts are sanguine on the Corporate Renewable Energy Supply Scheme (CRESS) and view the renewable energy (RE) engineering, procurement, construction, and commissioning (EPCC) sub-sector as the immediate-term beneficiary of recent RE initiatives.

In a note on Monday, MIDF Research said it remains “neutral” on the power utilities sector due to stretched valuations, but viewed CRESS as a step towards the liberalisation of the energy market in Malaysia with the introduction of grid third-party access. "This is expected to drive the growth of corporate PPAs (power purchase agreements) and enable a higher penetration of RE,” it said.

The research house highlighted Samaiden Group Bhd (KL:SAMAIDEN) (target price [TP]: RM1.57) and said the company is poised to benefit from rising demand in RE EPCC, bolstered by a strong RM354 million order book.

MIDF also maintained a “buy” call for Sunview Group Bhd (KL:SUNVIEW) with an unchanged TP of 88 sen, supported by the company's robust RM262.8 million order book, including a newly secured RM51.9 million Corporate Green Power Programme (CGPP) EPCC project.

Sunview is anticipated to secure an additional RM150 million in contracts and has already landed significant projects in Uzbekistan and Bulgaria.

On the other hand, RHB Research has maintained an "overweight" call on utilities giants, identifying Tenaga Nasional Bhd (TNB) (KL:TENAGA) (TP: RM16.10), YTL Power International Bhd (KL:YTLPOWR) (TP: RM6.68), and Samaiden (TP: RM1.57) as its top picks.

According to the research house, the CRESS initiative aligns with the government's ambitious targets to increase RE capacity from the current 26% (10.6 gigawatts) to 40% by 2035 and 70% by 2050.

“The CRESS scheme allows eligible RE generators and corporate firms to arrange green electricity supply under agreed terms through the existing supply system,” it said in a research note.

“Additionally, these generators (with third-party access can supply renewable electricity to corporate users via TNB’s grid network by participating in the New Enhanced Dispatch Agreement (Neda) market,” it said.

Besides, the firm believes that the near-term impact on TNB’s transmission and distribution business is expected to be neutral, as these aspects are likely to fall under regulated earnings.

“That said, should we see a stronger ramp-up in domestic RE input, a higher capex spending in transmission and distribution (T&D) assets would widen its regulated earnings base too in the longer run,” it added.

CRESS adds to other green energy programmes facilitated by the government over the years.

These include the net energy metering (NEM) and self-consumption (Selco) programme involving on-site solar panel installations by residential and non-residential consumers.

Consumers can also procure green energy certificates by purchasing them via the Malaysia Green Attribute Trading System (mGATS), or acquire green electricity quotas from the grid by paying the additional Green Electricity Tariff (GET). 

https://www.theedgemarkets.com/node/720715