MALAKOF: Consortium Shortlisted for 470MWac Solar Plant, Rating Maintained

A consortium has been shortlisted by the Energy Commission to undertake the development of a 470MWac Large Scale Solar (LSS) plant in Larut and Matang, Perak. This development is viewed as a positive step towards increasing renewable energy exposure for the consortium’s primary entity, marking its first LSS win after previous unsuccessful tenders.

Project Details and Financial Impact

The shortlisted project involves an 80% equity interest for the main entity within the consortium. The new 470MWac LSS plant is expected to significantly increase the entity’s total effective generating capacity from 4,992MW to 5,368MW. This expansion notably excludes the Prai Power Plant, which expired on August 30, 2025.

Financially, the LSS plant is estimated to generate an annual revenue of approximately RM163 million, based on an assumed tariff of 18 sen/kWh. With a pre-tax profit margin of 20% and factoring in the 80% stake, the project is projected to contribute about RM26 million in pre-tax profit annually. This contribution would represent approximately 6% of the group’s estimated FY26F pre-tax earnings.

Risks and Future Outlook

Despite the positive shortlisting, a key risk identified for the project is the potential impact of rising solar panel costs on profit margins. According to Bloomberg, the price of polysilicon, a crucial material for solar panel production, has seen an increase of over 30% since mid-July.

The LSS plant is anticipated to achieve completion in late FY27F or early FY28F. Consequently, any earnings contribution from this project is only expected to materialize from FY28F onwards.

Analyst’s Recommendation

An investment bank has opted to maintain its HOLD recommendation on the shares. The target price has been set at RM0.88 per share, which is based on a FY26F price-to-earnings (PE) ratio of 14 times, consistent with the five-year average PE.