Ample Opportunities For Utilities Firms In Esg Space, Says Cgs-cimb Research

KUALA LUMPUR, July 26 (Bernama) -- CGS-CIMB Research sees growth opportunities arising for utilities firms from increasing focus on the three pillars within the environmental, social, and governance (ESG) space, which is likely to result in rapid adoption and growth in renewable energy (RE) capacity. 

In a research note on Wednesday, the financial services firm said the growth in RE capacity would cater to higher electricity demand in the future due to digitalisation and additional investments in grid systems to facilitate energy transition. 

“We expect the utilities companies under our coverage with better ESG disclosures, ratings and action items to tackle ESG risk to appear more attractive to investors as ESG continues to gain traction,” it added. 

CGS-CIMB Research said utilities players have started to actively pursue expansion into RE capacities. 

“We expect these investments to start contributing to earnings, thereby gradually improving the earnings mix of utilities companies towards cleaner energy,” it added. 

Meanwhile, the Malaysian government will set in motion the National Energy Transition Roadmap (NETR) tomorrow, which ultimately aims to outline key initiatives, regulatory reforms and policies for the country to achieve its 70 per cent RE capacity target from the current 24 per cent, alongside reaching carbon neutrality by 2050. 

The government guided that the programme would entail investments worth an estimated RM637 billion, and key areas of focus include solar (with greater emphasis on rooftop solar) and hydrogen/ammonia. 

CGS-CIMB Research said Tenaga Nasional Bhd is a key beneficiary of the NETR-driven cross-border electricity exports. 

It said the national utility firm might benefit from incremental revenues from wheeling charges for the usage of the group’s transmission grid network, while increased RE plant-ups domestically could accelerate the group’s energy transition ambitions.

Meanwhile, YTL Power International Bhd’s entrenched market position in Singapore and strategically located unique green energy data centre in Johor would also be well-positioned to benefit. 

-- BERNAMA