Kuala lumpur: The robust expansion of data centres (DCs) is set to significantly drive electricity demand in Malaysia, substantially increasing the need for power generation and gas consumption, as highlighted by Kenanga Investment Bank Bhd (Kenanga Research). The investment bank’s research indicates a substantial growth in electricity demand recorded by Tenaga Nasional Bhd in Peninsular Malaysia, with a 6.2 per cent year-on-year increase in 2024, primarily propelled by the DC-led commercial segment, which itself experienced a 9.2 per cent year-on-year growth.
According to BERNAMA News Agency, actual load utilisation for data centres reached 405 megawatts (MW) by the end of 2024, rising from 100 MW in March 2024, and further escalating to 485 MW by March 2025. This growth spans across 21 projects totaling 2.8 gigawatts (GW). An additional 17 projects, amounting to 2.9 GW, are under construction, with five projects (0.7 GW) having signed energy supply agreements, culminating in a total data centre pipeline of 43 projects with a combined maximum demand of 6.4 GW.
Kenanga Research predicts that Malaysia will need to add between 6 GW and 8 GW of new generation capacity by 2030 to accommodate the rising demand. The recently announced revised base tariff under Regulatory Period 4 (RP4), effective from July 2025, introduces an average tariff rate of approximately 60 sen per kilowatt-hour (kWh) for the new ultra-high voltage category, which is believed to be targeted at data centres. With this, Kenanga maintains an “Overweight” call on the utilities sector, with Tenaga Nasional as its top pick due to its prolonged exposure to DC-driven demand growth.
In another development, YTL Power OWR is forecasting a 21 per cent tariff hike for Wessex Water under its new regulatory period starting in April. The group is also set to launch a 20 MW Nvidia-powered AI data centre in July, with operations for the 40 MW Phase 4 JDC4.1 co-location facility scheduled for delivery between August and September.
The investment bank continues to favour the utilities sector for its earnings resilience, supported by regulated assets and recurring cash flows that offer attractive dividend yields of up to six per cent, notably from Gas Malaysia Bhd. It further notes that gas utilities Petronas Gas Bhd and Gas Malaysia have fully resumed operations since July 1, following temporary disruptions due to the Putra Heights fire accident.
Earnings normalization for Petronas Gas and Gas Malaysia is anticipated in the second half of 2025. The new water tariff and the commencement of the 60MW data centre in operation for YTL Power are expected to cushion any earnings softness at PowerSeraya. Despite the new base tariff being earnings-neutral to Tenaga Nasional, a strong recovery in demand following a seasonally weak first quarter of 2025 is projected to enhance plant efficiency and profitability in the second half of 2025.