· Solar has been given a push, moving from the national grid to private energy providers as updates to schemes such as CRESS reignite interest in corporate renewable energy offtake.
· With two large-scale solar (LSS) rounds under construction, LSS6 in bidding with, and the Corporate Renewable Energy Supply Scheme (CRESS) being nailed to a 2028 deadline. There are plenty of demand and contracts for all solar players to compete for.
· Recent CRESS updates such as the Acceleration Package set the pace. As PETRA cut the system access charge for firm green supply to 14 sen/kWh from 20 sen, for ten-year contracts on projects operating by the end of 2028, with non-firm supply still pays 40 sen. As the project timeframe receives a deadline of 2028, we expect the first EPCC contracts under the Acceleration Package to be awarded in 4Q26. The incentive is substantial, as at our estimated cost of about RM5.5m per MW for firm solar, PETRA's 3,148MW of registered capacity implies about RM17bn of investment.
· Gas cannot fill the gap in time. Only 1.9GW of new gas arrives before 2029, while 5.7GW of coal contracts expire from July 2029. Until then, firm solar is the fastest firm power to build. After 2029, NEWGEN26 and the Perlis rebuild bring gas back, which favours TENAGA and KINERGY.
· OVERWEIGHT. We upgrade SLVEST to BUY and raise TPs across our solar names. Top picks: TENAGA (BUY, TP: RM16.37), SCGBHD (BUY, higher TP: RM3.35), SLVEST (BUY, higher TP: RM5.11) and SAMAIDEN (BUY, higher TP: RM3.99).
Sector Recap
NETR set the direction, and 2026 has been about delivery. The National Energy Transition Roadmap targets a 70% renewable share of installed capacity by 2050, and the 13th Malaysia Plan adds an interim target of 35% by 2030. Since the roadmap's launch in mid-2023, the government has released 6.7GW of large-scale solar quota, about three times the roughly 2.2GW offered across LSS1 to LSS4 combined, so solar volume is no longer the constraint. What the roadmap did not foresee was data centre demand, and the firm capacity and 500kV transmission it has since required. Much of this year's policy has been an attempt to fill that gap.
RP4 doubled the grid budget. Regulatory Period 4 allows RM42.82bn of regulated capex over 2025 to 2027, made up of RM26.55bn of base capex and RM16.27bn of contingent capex, at an unchanged 7.3% return. Counting contingent capex, that is roughly twice RP3's annual rate. Contingent capex covers projects the Energy Commission (ST) has pre-approved, each released only when a trigger occurs, such as a data centre signing a supply agreement or a smart meter or EV charging rollout. Tenaga projects 80% to 85% utilisation of contingent capex, which implies about RM40bn of spending over the period. Since FY2025, contingent capex has also earned the full 7.3% return, with revenue recognised in the year it is spent. Each trigger therefore feeds straight into Tenaga's earnings and, through the tenders that follow, into the order books of its suppliers.
The transmission buildout. The Ayer Tawar to Lenggeng 500kV line was commissioned in December 2025, and on 28 August work began on the first substation of a new 500km backbone from Paka to Kulai East, due for completion by 2030. Of the other large substations, Gurun East was awarded in May 2025, reportedly at RM427.5m, while bids for Paka closed in February and have yet to be awarded. Tenaga does not publish a forward list of 500kV tenders, but according to channel checks, potential contractors have been informed that 500kV overhead line tenders will start in October and substation tenders in December.
New RP new pricing. The July 2025 tariff unbundled the bill around an average base tariff of 45.40 sen/kWh, 14% above RP3's 39.95 sen, but the burden fell unevenly. On our estimates, maximum demand charges for medium-voltage users rose by 115% to about 200%, depending on their old tariff, which strengthened the case for battery peak-shaving. High-voltage users' all-in cost barely moved, because higher energy charges replaced the old 16 sen ICPT surcharge. Data centres fared worse: we estimate the new Ultra-High Voltage class raised their all-in cost by about 25%. Grid power therefore became dearer mainly for data centres and for medium-voltage users with peaky loads, the buyers CRESS and behind-the-meter storage now serve.
2026 has stress-tested the AFA's pass-through mechanism. Since July 2025, the Automatic Fuel Adjustment has moved monthly with coal and gas prices and the ringgit. Surcharges of up to 10% of the generation tariff, about 3.2 sen/kWh, apply automatically, while anything larger needs the Minister's approval. After nine months of rebates, the AFA turned into a surcharge in May after the Hormuz crisis. As of September, Tenaga projected December's surcharge to be 5.48 sen, well above the automatic band. In response, on 17 September the government raised the household exemption threshold from 600kWh/month to 800kWh/month for September to December, with Tenaga expecting to absorb about RM120m to RM150m of the cost. Management calls this a one-off contribution outside the regulatory framework, with the government working on a permanent fix to the AFA mechanism from January 2027.
LSS5 and LSS5+ have filled order books through 2028. The two rounds awarded about 1.9GW and 1,975MWac respectively, and the government puts their combined investment at about RM12bn, roughly RM6bn each, of which EPCC is the largest share. Tariffs from previous rounds were not published, but we estimate them at 13.75 to 18 sen/kWh. Every plant also needs a substation and a Tenaga interconnection, so the same awards that fill solar order books also add work for grid contractors.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.066897 | 4.098439 |
| EUR | 4.625269 | 4.628818 |
| CNY | 0.608190 | 0.608746 |
| HKD | 0.518605 | 0.522139 |
| SGD | 3.180150 | 3.201722 |