KUALA LUMPUR: Malaysia is working on developing a dozen of major hydro power generation projects from 2017 till 2023, including the newly-announced RM5 billion plant in Kelantan by Tenaga Nasional Bhd (TNB).
Analysts said this would support the country's ambition to increase the share of renewable energy (RE) in its installed capacity to 31 per cent in 2025 under TNB's power generation plan.
This would be raised further to 40 per cent in 2035 as the government, through TNB, reduces coal-fuelled power plant capacity by 50 per cent by 2035.
As RE capacity increases, all the country's coal-powered plants would be fully retired by 2045 when the current power purchase agreements (PPAs) were honoured, they added.
Analysts at Public Investment Bank Bhd (PublicInvest) said TNB's RM5 billion project was one of the two large-scale hydro projects commissioned by the Energy Commission in Peninsular Malaysia.
The other is the Tekai plant which has 163MW commissioned.
"All in, we understand the commission had committed, in principle, to the development of 12 generation projects between 2017 and 2023 with most hydro plants located in Sarawak, a state rich in hydro resources," PublicInvest said.
Sarawak is home to the massive 2400MW Bakun project, which after some years of difficulty was undertaken and commissioned in 2011 through a contract with a Malaysia-China joint venture for the civil works.
The only major hydro project under construction currently in Sarawak is reportedly the Baleh project boasting 1,285MW.
The project comprises a concrete faced rockfill dam at 188 metres high, a radial gated spillway capable of discharging a design flood of 20,000 cubic metre per second and a surface power station housing five turbines.
Construction is scheduled to be completed in 2026.
Other major hydro projects in the pipeline in Sarawak are Limbang 2 (130MW), Belaga (160MW), Linau (182MW), Trusan 2 (240MW), Baram 3 (300MW) and Pelagus (465MW).
TNB on Tuesday announced that its wholly-owned TNB Power Generation Sdn Bhd would develop the RM5 billion hydroelectric power plant with a capacity of 300MW in Gua Musang.
Construction works of the project were estimated to take five years and would be completed by June 1, 2027, TNB said in its filing to Bursa Malaysia.
The project would also enhance the country's energy security, it added.
Kenanga Research analyst Teh Kian Yeong said the hydroelectric project was part of TNB's quest to improve its RE portfolio, thus increasing its installed capacity from 3,406MW to 8,300MW or 31 per cent in 2025 before rising further to 40 per cent in 2035 under its power generation plan.
Financially, Kenanga Research said near-term earnings contributions from the RE portfolio were still not significant with the expected commercial operations in June 2027.
Kenanga Research maintains an "Outperform" call on TNB with RM11.76 target price.
PublicInvest said while TNB's gearing would increase, the RM5 billion project was not expected to have a significant material effect.
TNB's net gearing stood at about 35 per cent as at the second quarter of 2021, the firm said, adding that the project would be financed through a combination of debt and equity.
PublicInvest affirms its "Outperform" call on TNB with an unchanged target price of RM12.42.