Highlights

• The Minister of PETRA announced that DCs in Malaysia will be required to source at least 30% of their total energy consumption from RE. To date, the CRESS programme has attracted 11 applicants with 3GW of CRESS potential. Apart from Gamuda’s and Tenaga’s CRESS announcements, Northern Solar announced yesterday that they had also received a letter of award for 189MW CRESS project. We believe there is another 500MW-1GW of CRESS contracts that will be dished out by Dec 26.  
   
• The LSS6 bidding for Package 1 and 2 closed on 27 Oct 26 and we expect successful applicants to be announced by 1H27. The total EPCC market size is estimated at RM10b-11b. 
   
• Tailwinds from the positive regulatory framework will drive sector outperformance in the near term. Maintain OVERWEIGHT. Top picks: Solarvest, Pekat.
   

Analysis

• PETRA officially declares the 30% RE rule for DCs. The Minister of Energy Transition and Water Transformation (PETRA), Datuk Seri Fadillah Yusof, recently announced in Parliament that the government has approved a requirement for data centres (DC) in Malaysia to source at least 30% of their energy from renewable energy (RE), based on their total installed capacity or energy consumption. This directive will be backed by a comprehensive regulatory framework and implementation guidelines, to be developed by the Energy Commission (EC), outlining the obligations for DCs to source at least 30% of their energy from RE, including provisions for on-site self-generation. 
   
• A total addressable market of RM20b. Against this backdrop, we expect a total addressable market of RM20b, based on a development cost of RM5m/MW and 4GW of cumulative demand over the next five years. Tenaga expects a total of 13GW of power demand from DCs over the next 3-5 years. At 30% of the 13GW demand outlook, we believe at least 4-5GW of RE is up for negotiations in the next 3-5 years. Sizeable landbank is an important leverage when negotiating for CRESS projects. 
   
• 500MW-1GW CRESS to be dished out in the near term. PETRA previously disclosed that the CRESS programme has attracted 11 applicants representing a combined capacity of 3GW. We expect the pace of CRESS wins to accelerate by Dec 26, considering that only about 50% of the identified CRESS projects have been publicly disclosed thus far (Tenaga with 600MW DayOne CRESS contract and the Gamuda, SD Guthrie, and Gentari consortium’s announcement of a 680MW CRESS contract). Against this backdrop, we believe Solarvest, Pekat and Northern Solar will have to finalise CRESS projects within the next two months. Based on the terms of the CRESS Acceleration Package, the plant must be commissioned by 31 Dec 28. Construction period takes 18-24 months.