Malaysia is gearing up to significantly boost its renewable energy capacity, particularly in solar power, with expectations of substantial investment in upcoming projects. UOB Kay Hian (UOBKH) Research has projected a robust pipeline of engineering, procurement, construction, and commissioning (EPCC) contracts worth between RM5.6 billion to RM7 billion over the next one to two years.
These contracts are set to be rolled out under two major initiatives: the Corporate Green Power Programme (CGPP) and the fifth round of the Large-Scale Solar (LSS5) scheme. The combined allocation will cover multiple solar projects totaling 2,800 megawatts (MW).
UOBKH Research estimates that the construction costs, ranging from RM2 million to RM2.5 million per MW, will drive the substantial EPCC opportunities in the Malaysian solar sector. The research also anticipates better EPCC margins compared to previous projects due to higher tariffs under the CGPP.
“Utility-scale solar projects typically yield gross margins of 10% to 15%, which are expected to recover to normal levels after recent challenges,” stated UOBKH Research. It highlighted that solar companies are set to benefit from recurring income streams generated by owning solar assets under various government schemes.
Solarvest Holdings Bhd aims to grow its recurring income assets to 30% of revenue, while Samaiden Group Bhd targets 10% by FY27 through these schemes. The declining prices of solar modules, which constitute a significant portion of project costs, are anticipated to further drive adoption and margin expansion in the sector.
“Prices of solar modules have dropped sharply from US$0.28/watt in 3Q21 to US$0.11/watt currently, marking a decline of over 90% since 2010,” noted the research. This reduction is attributed to oversupply in China’s solar module market, which accounts for 80% of global supply.
Looking ahead, China’s solar module production capacity is expected to grow substantially, maintaining downward pressure on prices globally. UOBKH Research identified Pekat Group Bhd as a key player in the sector, citing its diversified portfolio and strategic acquisitions as drivers for future growth.
