PEKAT: New Solar PPA to Bolster Growth, Analyst Reaffirms Buy Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading player in the renewable energy sector has secured a significant 21-year Power Purchase Agreement (PPA) for a 25MWac self-consumption solar farm, integrated with a 40MWh Battery Energy Storage System (BESS) in Pahang. This landmark project is set to substantially enhance the company’s solar asset portfolio and drive future earnings growth.
Key Project Secured
Under the terms of the agreement, the company’s wholly-owned subsidiary, Pentas RE, will retain ownership of the solar photovoltaic (PV) assets throughout the concession period. Commercial operations for the project are targeted to commence in October 2026. This long-term commitment is expected to provide stable, visible revenue streams for over two decades.
Attractive Financial Returns
The project is estimated to yield an attractive equity Internal Rate of Return (IRR) of 17%, which significantly surpasses the typical 8-10% observed for similar assets. This higher IRR is partly attributable to the energy performance sharing arrangement, offering additional upside potential through earnings accretion from maximum demand charge savings. With an estimated tariff of 25sen/kWh, the PPA is projected to generate a cumulative revenue of RM239 million over its 21-year lifespan. This is expected to contribute approximately RM4 million annually to the company’s PATAMI, representing about 7% of the 2027E PAT forecast, based on an investment cost of RM90 million and an 80:20 debt-equity financing structure.
Future Expansion and Risks
Looking ahead, the company is anticipated to continue expanding its solar asset portfolio. Active discussions are underway for additional projects, including potential Commercial & Industrial (C&I) rooftop solar assets and initiatives under the CRESS programme. Despite this positive outlook, key downside risks remain, including potential project execution delays, intense market competition, and volatility in solar PV panel prices.
PhillipCapital has reiterated its BUY rating on the company, maintaining an unchanged target price of RM1.90. The investment bank remains positive on the company’s earnings prospects, highlighting its continued benefit from Malaysia’s renewable energy initiatives.
