RAM: Outlook for power sector positive as energy transition gains momentum from green and sustainable investments

Published on 04 Jun 2024.

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RAM Ratings has a positive outlook on the Malaysian power sector, underscored by the industry’s favourable growth prospects and robust regulatory framework as well as the financial resilience of key industry enablers that will drive the country’s net zero aspiration. 

RAM’s special commentary, Power Insight: Towards A Greener Future, examines how the domestic energy landscape has transformed and the progress made so far. With the commitment made by the country under the Paris Agreement, the race toward climate neutrality is on full steam. The paper discusses the transition challenges while identifying the opportunities afforded by renewables and green technology in both East and West Malaysia. RAM Ratings features many energy sector credits in its portfolio.  

“As of end-December 2022, Malaysia’s renewable energy (RE) installed capacity stood at 9 GW or 23% of the power system, progressing well towards the interim target of 41% by 2035. That said, policy continuity, continued rollouts of utility-scale projects and investor-friendly frameworks in line with the National Energy Transition Roadmap (NETR) remain crucial to achieving the 70% target by 2050,” notes Chong Van Nee, RAM’s Co-head of Infrastructure and Utilities Ratings.

Although Malaysia has long promoted sustainable power generation, solar photovoltaic (PV) energy is set to lead in RE plant-ups, thanks to the country’s abundant solar resource and vast land banks. The proven reliability, affordable development costs and low maintenance needs of solar PV plants enable them to be scaled up effectively. The government has to date allocated an RE quota of 9.3 GW, with almost half of it designated for large-scale solar programmes. The NETR’s commitment to jumpstarting another 4 GW of solar PV projects will further hasten utility-sized capacity installations. 

Sarawak’s progress in greening its grid far outpaces Peninsular Malaysia’s and Sabah’s, with RE making up 58% of its installed capacity. Different development priorities of the states also put Sarawak at the forefront of green hydrogen initiatives. While Peninsular Malaysia is actively transitioning coal to cleaner energy sources, Sabah’s priorities have focused on improving energy security through additional generation projects and better grid connectivity.

The government estimates that the NETR will generate total investments of up to RM1.3 tril by 2050. As Malaysia pivots to a high-value low-carbon economy, we view its well-established debt capital market as key to meeting this goal, especially in financing long-term infrastructure projects. New funding requirements will primarily stem from utility giants as they undertake substantial grid enhancements of up to RM420 bil between 2023 and 2050. Upcoming utility-scale RE projects may also draw larger-size issuances from independent power producers. We expect to see more companies along the RE supply chain tapping the market for working capital and investment needs as they grow in tandem with the RE industry. 

As of 2 May 2024, RAM’s diversified power portfolio comprised 29 rated sukuk and bond issues with a total outstanding amount of RM54.49 bil. Of this, 48% of rated issues (or 14% of total outstanding) were for RE-related projects. For the most part, RAM’s power portfolio has been stable, with 89% of credits rated at least AA3/P1 and 93% on stable outlook. 

A summary of the special commentary as well as the full report is available at www.ram.com.my to subscribers for download or purchase by the public. 

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Analytical contacts
Chu Jia Ying
(603) 3385 2519

Chong Van Nee, CFA
(603) 3385 2482

Media contact
Sakinah Arifin
(603) 3385 2500


About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Credit Rating Agencies, 2023. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


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Publication Date Published Category
Power Insight: Towards A Greener Future 04-Jun-2024 Industry Insight View PDF