Solar industry seeing renewed investor interest
THE solar industry is seeing renewed investor interest, on the back of a recovery play for the industry and the imminent award of Large Scale Solar 4 (LSS4) projects.
Share prices of solar companies have been on the rise since November.
Additionally, recent newsflow have shown companies securing solar projects, venturing into the solar industry, or announcing that they are in the bidding race for LSS4 projects.
Cypark Resources Bhd, which owns, operates and manages approximately 47 MW of direct current (MWdc) of solar plants, saw its share price rise by 70% from 81 sen in early November to RM1.38, as of yesterday’s close.
Likewise, Solarvest Holdings Bhd’s share price ran up 77.8% to RM2.08 from RM1.17 in early November.
It is also interesting to note that Samaiden Group Bhd, which was listed on the Ace Market of Bursa Malaysia in mid-October, saw its share price surge 86% to RM1.51 as of yesterday’s close.
According to an analyst, the share price rally of solar counters is partly due to a recovery play as fund managers seek companies with cheaper valuations and stable earnings.
Big money: A solar plant in Gemas, Negri Sembilan. Heavy investments are required for solar farms and it will typically take 10 to 20 years for solar farm owners to generate returns from their investments.Big money: A solar plant in Gemas, Negri Sembilan. Heavy investments are required for solar farms and it will typically take 10 to 20 years for solar farm owners to generate returns from their investments.
“The market is also anticipating the award of LSS4 projects, which was supposed to be announced in December, but could be delayed to January.
“The award of LSS4 projects has garnered a lot of interest due to the larger MW sizes as well as the greater participation of local companies.
“There will be two types of project packages to be awarded under LSS4,20MW to 30MW and 30MW to 60MW, ” the analyst says.
Apart from LSS4, opportunities in renewable energy continue to be sought after given the government’s target to increase the share of renewable energy to 20% by 2025 from 2% in 2019.
The Energy Commission is developing solar projects through schemes such as Net Energy Metering (NEM), Large Scale Solar (LSS) and Self Consumption (SELCO). As a result, the market has seen the emergence of new players in the RE industry, particularly in solar.
Just a week ago, Taliworks Corp Bhd made its debut in solar power generation through the acquisition of four existing solar power projects with six years of operating experience.
According to CGS-CIMB, Taliworks’ combined 19MW solar facilities, being among the first generation renewable energy power purchase agreements (Reppas), will benefit from feed-in tariff (FIT) rates that are six to seven times higher than the prevailing average FIT rates of 17.7 sen per kWh for LSS3 and 16.6 sen to 18 sen per kWh for LSS4.
In line with its aim to acquire value-accretive brownfield projects with immediate recurring income, Taliworks does not intend to participate in future LSS projects.
Meanwhile, Kumpulan Powernet Bhd (KPower) has identified solar engineering, procurement, construction and commissioning (EPCC) as one of its key growth areas.
According to AmInvestment Research, this is partly due to the generally low executive risk for solar EPCC projects.
KPower has participated in the LSS4 tender for 50MW, which could also involve asset ownership, in addition to EPCC packages.
“We believe KPower is giving Samaiden, Solarvest, Cypark Resources and Megafirst Corporation a run for their money -- a handful of listed companies that have proven capability and track record in carrying out EPCC solar projects.
“We gather there is a possibility that new entrants could also emerge winners for the LSS4 work packages.
“If this happens, KPower may reach out to them to set up JVs to carry out the work packages.
“KPower could be targeting another 50MW to 100MW under this joint venture model, ” says AmInvestment Research in a recent report.
It is interesting to note that solar asset owners like Cypark have a longer turnover period as compared to solar EPCC players like Solarvest and Samaiden.
An analyst explains that heavy investments are required for solar farms and it will typically take 10 to 20 years for solar farm owners to generate returns from their investments.
“Solar companies that predominantly work on solar EPCC jobs have a faster churn rate.
“A small scale solar EPCC project generally takes six to nine months to complete, while a large solar EPCC project takes one and a half to two years to complete, ” the analyst says.