Malaysia Power Report Q4 2012

BMI View: We expect Malaysia’s electricity sector to grow modestly over our five-year forecast period,driven largely by a rapidly growing population and increasing prosperity. However, we highlight that thesector is set to become more competitive, as the government attempts to rein in electricity prices andsubsidies while keeping a larger share of natural gas resources for domestic use.

We expect total electricity generation in Malaysia to reach 122TWh in 2012, representing an increase of4.3% from 2011 levels. Thermal generation will be the main driver of growth, underpinned by stronggrowth in coal and natural gas generation (5.5% and 4.0% in 2012 respectively). An abundance of naturalgas resources in the country has made it the dominant fuel for electricity generation, and we expect it toaccount for 63.0% of total electricity generation in 2012.

We expect total power generation in the country to grow at an annual average rate of 4.7% from 122TWhin 2012 to 184.6TWh in 2021. Thermal power generation will remain the most dominant form of energyin the country, increasing its share of total power generation from 92.0% in 2012 to 92.9% in 2021. Coalpower generation is set to grow at an annual average rate of 5.2% from 33.4TWh in 2012 to 52.3TWh in2021. Natural gas power generation is set to grow at an annual average rate of 4.7% from 76.9TWh in2012 to 117.0TWh in 2021. Key trends and recent developments in the Malaysian electricity marketinclude:

The government has recently given the go-ahead to begin identifying suitable sites for thecountry’s first nuclear power plant. A budget of US$7bn has reportedly been allocated to thenuclear scheme, which, according to Peter Chin Fah Kui, minister of energy for greentechnology and water, is expected to start operations in 2021.

The country’s energy sector is set to become more competitive, following the ElectricityCommission’s decision to hold a new power generation tender exercise to replace PPAs withfirst generation IPPs expiring in 2016/17. The PPAs would be awarded and renewed based onthe lowest cost of electricity generation, and only 50% of existing PPAs would be renewed.

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