J.P. Morgan: Malaysia’s CRESS power tariffs are below conventional supply; data centers represent an RM31bn engineering opportunity

What has this CRESS adjustment changed?

Malaysia’s CRESS acceleration scheme fixes the RM0.14/kWh system access charge (SAC) for 10 years, while the separate RM0.04/kWh charge is reviewed in each regulatory period. This eases the impact of fee volatility on project financing and power-supply cost estimates.
JPMorgan estimates that solar-plus-storage power with a stable output costs around RM0.45–0.52/kWh, about 12%–24% below the conventional data-center electricity tariff of RM0.59/kWh. This gives data-center operators a commercial cost advantage when procuring renewable electricity through the grid.

Of the 13 GW of data centers in JPMorgan’s tracked sample, around 6 GW is associated with RE100 companies, including Google, Microsoft and AirTrunk. These customers’ demand for renewable electricity makes power availability part of the competition to attract data centers in ASEAN.
Based on related data-center capacity of around 5.7 GW, a renewable electricity usage rate of 20% and 3.5 hours of sunshine per day, the required solar capacity is estimated at around 7.8 GW. Applying construction costs of RM4mn per MW implies a solar EPCC market of around RM31bn. The bank says projects of around 2 GW are in active negotiations, but this estimate remains a potential pool of engineering work, not signed orders.

CRESS projects must achieve commercial operation by the end of 2028. JPMorgan therefore expects order awards to be concentrated in 2026–2027, potentially supporting replenishment of engineering orders and upward earnings estimate revisions over the next 12–18 months.
There are early signs of commercial execution: GAM and Northern announced projects of 650 MWac and 189 MWac. However, the impact on engineering companies’ results still depends on contract signing, EPCC awards, project execution and revenue recognition.

JPMorgan believes Sunway Construction could secure around 15% of the market, drawing on its existing relationships with RE100 customers. This would represent around RM5bn of CRESS engineering opportunities, equivalent to more than 45% of its current order book of around RM11bn. This is potential order replenishment, not an increase already reflected in its existing orders.
According to the bank’s estimates, each RM1bn CRESS engineering order could, all else being equal, increase earnings by around 4% and 5% for FY27E and FY28E, respectively. The company’s experience with more than 180 MW of installed capacity across LSS4 and CGPP projects underpins the bank’s view that its execution risk is relatively manageable.