UOB Kay Hian Private Limited
Date of Report: Friday, 22 August 2025
Malaysia’s Renewable Energy Sector: Robust Growth Ahead with Solar, BESS, and Policy Tailwinds

Malaysia’s Green Transition Powers Up: Sector Overview and Regulatory Outlook

Malaysia’s renewable energy market is entering a period of exponential growth, fueled by government initiatives, attractive tenders, and strong order books among key players. The sector is set to benefit from the national green policy, with large-scale solar (LSS) projects and battery energy storage systems (BESS) driving investment and construction activity. Regulatory tailwinds and upcoming policy changes further reinforce the positive outlook for utilities and engineering, procurement, construction, and commissioning (EPCC) contractors.

• 30 bidders for MyBeST BESS projects – RM1.2bn in EPCC jobs anticipated.
• Solar PV capacity to exceed 6.5GW (2026-27) – RM13bn-16bn EPCC opportunities.
• Sector rating: OVERWEIGHT – Top picks: Tenaga Nasional and Pekat Group.

Key Projects: MyBeST BESS and Large-Scale Solar (LSS)

MyBeST: Malaysia’s First Grid-Connected Battery Energy Storage System

The MyBeST initiative marks Malaysia’s entry into utility-scale battery energy storage, with four sites (likely in Perak and Negri Sembilan) each hosting 100MW/400MWh BESS assets.

• Project Value: ~RM300m per site, requiring 5–7 acres each.
• Tender Status: 30 bids submitted; award expected by Q4 2025.
• Commercial Operation Date: April 2027.

Key bidders include Tenaga, Malakoff, YTL Power, Petronas Gas, Gamuda, Gentari, and Mega First. EPCC opportunities are expected for Solarvest, Samaiden, and Pekat.

LSS5+ and LSS6: Expanding Malaysia’s Solar Footprint

Government tenders for LSS5+ and LSS6 are set to boost solar PV capacity beyond 6.5GW in 2026-27. With construction costs at RM2.0m-2.5m/MW, the next three years could see RM13bn-16bn in replenishment opportunities for EPCC contractors.

Financial Metrics and Peer Comparisons

Below is a summary table of sector top picks and peer comparison metrics for leading companies involved in Malaysia’s renewable energy transition.

Company Highlights and Investment Analysis

Tenaga Nasional Berhad (TNB)

Tenaga remains the sector’s bellwether, with 51% market share of installed capacity in Peninsular Malaysia. TNB’s generation unit is poised to benefit from new power plants and government reforms.

• Earnings Visibility: Driven by tariff autonomy and decoupling from government purview.
• Dividend Potential: Higher payout likely.
• Valuation: Trades at 17.3x 2025F EPS, +2SD above five-year mean PE at target price.

Key Re-rating Catalysts:

• Autonomy to change electricity prices by up to 7% without Cabinet approval.
• Recognition of contingent capex in 2026-27 earnings.
• Potential listing of profitable genco/RE divisions.
• Earnings-accretive mergers and acquisitions.

Pekat Group

Pekat stands out as the top renewable energy pick, supported by a robust RM630m orderbook and full-year consolidation of EPE Switchgear (60% owned).

• Execution Track Record: Pekat’s margins are resilient despite higher solar module costs and competitive pressure.
• Growth Prospects: Expected to capitalize on upcoming solar projects and margin recovery opportunities.

Malakoff Corporation

Malakoff is a major contender for BESS and solar projects, offering stable dividend yields and attractive PE multiples. Its participation in large-scale tenders positions it well for future growth.

• Dividend Yield: 5.2% for FY25F and FY26F.
• Valuation: 16.5x FY25F PE, 13.3x FY26F PE.

Other Key Solar EPCC Players

Solarvest, Samaiden, and Sunview are set to benefit from EPCC opportunities, especially as large-scale solar and hybrid policy reforms accelerate.

• Solarvest: 25.0x FY25F PE, 1.0% yield.
• Samaiden: 24.9x FY25F PE, 0.9% yield.
• Sunview: 16.0x FY25F PE, no dividend yield.

Policy Changes: Net Billing, CRESS, and SAC Revision

Net Billing Successor to NEM 3.0

Malaysia is finalizing a new hybrid rooftop solar policy, expected to blend Net Energy Metering (NEM) and Self-Consumption (SelCo) frameworks. The anticipated Net Billing model will:

• Allow excess solar to be sold at a lower fixed tariff.
• Charge grid imports at retail rates.
• Mandatory BESS adoption for residential is unlikely due to cost constraints.

CRESS SAC Revision to Bolster Take-up

• System Access Charge (SAC): Expected to drop by 5 sen/kWh (from current 25 sen/kWh for firm output).
• Impact: Enables more competitive tariffs and preserves project returns (~10% IRR).
• First Movers: Data centre operators expected to lead adoption, with asset owners benefitting from economies of scale.

Challenges: Solar Module Cost Inflation and Tax Policy

China’s Anti-Involution Policy Raises Module Prices

• Price Forecast: Solar module prices to rise to US\$0.10/watt (+12% by year-end).
• Impact on Margins: Gross margin impact mitigated by forward purchasing, but net IRR for solar projects could fall by 1-1.5% due to cost inflation and wider SST (sales and service tax) scope.
• LSS5 and LSS5+ IRR: Likely to hover between 5-7%.

Service Tax (SST) Impact on Solar Projects

• SST: 6% service tax on construction services effective July 2025, with potential exemption for projects completed by December 2025.
• Payback Shift: Rooftop solar payback periods may extend from 3.5 years to 5 years post-2026, dampening demand in commercial, industrial, and residential segments until electricity tariffs rise.

Investor Action Points and Sector Outlook

• Maintain OVERWEIGHT: Sector orderbooks remain elevated, with 6-7GW of solar plant-ups anticipated.
• Key Events:
  • LSS5+ winner announcement in August 2025
  • LSS6 bidding in Q3 2025
  • MyBeST awards by Q4 2025
• Top Picks: Tenaga Nasional and Pekat Group for robust growth and execution.

Conclusion: Malaysia’s Renewable Energy Market on the Threshold of Transformation

Malaysia’s renewable energy sector is set for a multi-year expansion, driven by strong policy support, innovative financing structures, and aggressive solar and BESS deployment. While rising module costs and new tax policies present headwinds, the sector’s fundamentals remain robust. Key players like Tenaga Nasional, Pekat, and Malakoff are well positioned to capture growth and deliver investor returns, with EPCC contractors standing to gain from record orderbooks.
Investors should closely watch upcoming tender announcements and regulatory reforms, as these will shape the competitive landscape and unlock further opportunities across the utility, EPCC, and solar asset owner segments.