MALAYSIA has evolved PPP activity in areas of transport and urban infrastructure, while the momentum of renewable energy continues. We also see a growing activity in financing for green infrastructure projects with a recent USD 800MN Sukuk issuance by Malaysia, and other secondary market transactions which provide an avenue for international investors to enter into the market.
Read the key developments in Q22021 in Malaysia in our latest insight.
MALAYSIA FOCUSING ON INCREASING RENEWABLE ENERGY CAPACITY
Malaysia is focusing on its power generation plan with a target of 31% renewable energy (RE) in its installed capacity in 2025, and 40% in 2035, as its energy transition plan until 2040. The installed capacity for RE in Malaysia is 7,995 megawatts (MW), and by 2035, the RE installed capacity is projected to more than double to 18,000 MW.
To increase the share of RE in the power capacity mix, the government will be focusing on Peninsular Malaysia, as it accounts for 80% of Malaysia’s electricity demand. Out of the 31% RE target in 2025, 26% comes from Peninsular Malaysia and out of the 40% in 2035, the peninsula accounts for 32%. More than 7,000 MW of coal power plants’ Power Purchase Agreements (PPA’s) will expire by 2033, and be replaced mostly by gas and RE, lowering Malaysia’s carbon emissions.
Malaysia has welcomed Japan’s Asia Energy Transition Initiative (AETI) in providing support in terms of expertise, knowledge sharing and capacity building towards the development of a sustainable, affordable, and reliable energy future for ASEAN.
YINSON INVESTS IN EV BATTERY STARTUP OYIKA
MALAYSIA'S Yinson Holdings has invested in Oyika, a Singapore startup that provides a battery-swap subscription service bundled with an electric motorbike (e-motorbike), to make electric vehicles (EVs) more accessible in South-east Asia. This is in line with its net zero carbon ambition and follows another recent investment in autonomous driverless solution company MooVita.
With its investment in Oyika through its green technology’s division, Yinson is seeking to accelerate the adoption of EVs in South-east Asia by supporting the startup in its aim to further develop its technology and strengthen its market position in the region. The EV battery startup works with local e-motorbike manufacturers to adapt their brand-agnostic technology for local use. Its swappable batteries work with most e-motorbike brands and models in South-east Asia.
MALAYSIA'S KPOWER PLANS FUNDRAISE FOR 100 MW RENEWABLES PROJECTS Renewables company KPower plans to raise MYR 100 Mn (USD 24 Mn) through a private placement of shares to finance its clean energy projects in Malaysia.
The Kuala Lumpur-listed company will use the proceeds to finance a 50 MW solar power project in Pahang state, a total of 50.25 MW of mini hydro power projects and other upcoming renewable energy projects in Malaysia. The Pahang solar power project is estimated to cost about MYR 160m. The company will use MYR 32m from the fundraise as the equity requirement for the project, while the remaining will be funded via debt.
KPower won the project in March 2021 through the fourth round of large-scale solar (LSS 4) auctions conducted by Malaysia's Energy Commission. The company will also use about MYR 40m from the proceeds of the private placement to develop the mini hydro power projects with a total capacity of 45 MW in Pahang and 5.25 MW in the state of Perak. These projects are estimated to cost a total of MYR 510m.
PETRONAS AND PTTEP MAKE OFFSHORE MALAYSIA GAS DISCOVERY
Energy company Petronas and Thai oil and gas firm PTT Exploration and Production (PTTEP) have discovered gas in the Kulintang-1 wildcat exploration well off the coast of Malaysia. The well - called Block SK438 - is in the shallow waters of Balingian province, about 230km off the coast of Miri in Sarawak state.
PTTEP - Thailand's largest oil and gas company by assets and majority government-owned - owns an 80% operating interest in SK438, while a Petronas unit owns the remaining. PTTEP was awarded the production sharing contract (PSC) of the block in March 2018 through an annual auction held in Malaysia.
In March 2021, PTTEP and Petronas discovered oil and gas in Balingian province, off the coast of Sarawak. In the same month, the Thai company also completed the acquisition of a 20% interest in a gas block in Oman for USD 2.4Bn from London-based BP.
Earlier in February 2021, PTTEP made its largest-ever gas discovery off the coast of Malaysia at the Lang Lebah-2 well, which is part of the Sarawak SK410B project. The appraisal showed more than 600 meters of net gas pay and a flow rate of 50 million cubic feet of gas per day. It was the second discovery that month after PTTEP found gas in the Dokong-1 exploration well in Block SK417, off the coast of Sarawak state.
Other oil and gas assets PTTEP own in Malaysia include producing assets in Block K, SK309, SK311, the Rotan-Buloh field in Block H and the jointly operated gas fields with Petronas Carigali in the Malaysia-Thailand joint development area. PTTEP is also an investor in an LNG liquefaction plant in Sarawak.
HANWHA ENERGY SELLING SEVERAL ASIAN SOLAR ASSETS
South Korea's Hanwha Energy is selling a portfolio of Malaysian and Vietnamese solar projects. Hanwha's assets include two in Malaysia: the 48 MW Chuping Solar farm, which was finished in December; and a 155 MW under construction solar project, which was successfully tendered as part of the Large Scale Solar 3 process. The company also owns the Cam Lam 100 MW solar farm in Vietnam, which was completed in June 2019.
Hanwha does not own 100% of the assets, but it does own the majority of all three, one noted that it owns 87% of the Malaysian solar farms. Bidders will need to evaluate the Vietnamese debt guarantee linked to Cam Lam, who noted that some buyers might struggle to get comfortable with it.
In January 2021, Hanwha Energy sold 12 utility-scale solar projects with a 1.6 GW cumulative capacity to a newly formed JV between France's Total and 174 Power Global, a wholly owned Hanwha Group affiliate.
GOVERNMENT-BACKED OPERATOR REJECTS MALAYSIAN AIRPORT PRIVATIZATION PROPOSAL Malaysia Airports Holdings Berhad has criticized a proposal to privatize a Malaysian airport currently included in its portfolio.
Malaysian conglomerate WCT Holdings Berhad had filed a proposal to operate the Sultan Abdul Aziz Shah Airport - also known as Subang Airport - in the district of Petaling, near Kuala Lumpur. It had filed a preliminary proposal to the ministries of Transport, Finance, Energy and Natural Resources in March. WCT’s proposal includes a concession period until 2092. In March 2021, the company won the MYR 440.4 Mn (USD 107 Mn) project to expand the Sultan Ismail Petra Airport in Kelantan state.
MAHB, which operates a total of 39 airports in Malaysia, including the Kuala Lumpur International Airport, posted a net loss of MYR 1.1bn last year. Its shareholders include Malaysian sovereign wealth fund Khazanah Nasional with 33% and the Employees Provident Fund Board with 13%.
MALAYSIA'S MAYBANK TO STOP FINANCING NEW COAL PROJECTS
Malaysian lender Malayan Banking (Maybank) will not finance any new coal-based projects as it seeks to become carbon neutral by the year 2030 and reach net zero carbon emissions by the year 2050.The bank plans to mobilize MYR 50 Bn (USD 12 Bn) in sustainable financing across Southeast Asia by the year 2025.
The group that has operations in Southeast Asia, India, China and the UK, will include sustainability across its operations and partner stakeholders to achieve sustainable growth with a focus on enabling a responsible transition to a Low Carbon economy. Based on the M-25 plan, the bank has set a long-term goal by 2025 for return on equity (ROE) of between 13%-15% and a cost-to-income ratio of below 45%.
In 2020, the bank financed renewable energy projects worth MYR 3.5bn. It lent MYR 522m to hydro power projects, MYR 2.6bn to solar power projects and MYR 378m to waste-to-energy projects in the region.
Maybank is among a growing list of global lenders phasing out coal-led financing and refocusing on green investments.
CYPARK SIGNS AGREEMENT FOR MALAYSIAN WASTE PPP PROJECTs
Renewable energy company Cypark Resources will develop waste-to-energy (WTE) projects in public-private partnerships (PPP) in the Malaysian state of Melaka.
Cypark has signed a joint venture agreement with the Melaka state government owned PKNM Energy to develop the country's second WTE project in Sungai Udang. The Cypark-PKNM Energy JV will also explore and develop other waste management projects the state. Cypark previously developed the country's first WTE project at Ladang Tanah Merah in the state of Negeri Sembilan and is looking to develop more projects in the country. In February 2021, Malaysia's Ministry of Housing and Local Government issued a tender for the Sungai Udang project, which is estimated to have a minimum waste processing capacity of 800 tonnes per day.
MALAYSIA ISSUES USD 800MN ISLAMIC BONDS FOR GREEN INFRASTRUCTURE
Malaysia has raised USD 800Mn through the sale of Islamic bonds - also called sukuk - to finance green infrastructure projects in the country. The 10-year USD-denominated issuance - which is the first sustainability sukuk in Malaysia and the world - was priced at 2.07% per annum and oversubscribed by 6.4 times by global investors. The country additionally issued a USD 500 Mn, 30-year debt facility, priced at 3.075% per annum.
About 67% of investors in the 10-year sukuk were fund managers and insurance companies, while the rest were commercial lenders and central banks or governments. About 55% of the issuance was allocated to investors in Asia, 33% to investors from Europe, the Middle East and Africa (EMEA) and the remaining to US-based investors. The bonds have sustainable underlying assets such as vouchers for travel entitlement on Malaysia’s light rail transit (LRT), mass rapid transit (MRT) and KL Monorail networks. Malaysia, the world's largest sukuk market by value, had an initial target of USD 1 Bn for the sustainability sukuk but upsized it to USD 1.3 Bn due to high demand.
MALAYSIAN DEVELOPER LOOKS FOR INVESTORS FOR SOUTHEAST ASIA RENEWABLES GROWTH Malaysian power developer Leader Energy is talking to multiple investors including pension funds, clean energy investors and international banks to finance the expansion of its renewable energy portfolio in Southeast Asia. The company is looking to double its renewables portfolio in countries including Vietnam, Taiwan, Philippines, Malaysia, and Cambodia to about 1 GW in the next five years.
The average cost of adding around 500 MW of solar and wind power assets in the region come up to between USD 500 Mn and USD 750 Mn. The company owns a portfolio of more than 300 MW of solar assets in Southeast Asia. Leader Energy is an arm of Malaysian family-owned group HNG Capital, which is engaged in businesses including hospitality, power, metals, and property development.
List of key transactions - Malaysia Q22021
Source: Inframation, YOG INFRA analysis
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