Kuala lumpur: The newly launched sixth cycle of the Large-Scale Solar programme (LSS6) is anticipated to stimulate between RM13 billion and RM15 billion in private investments, thanks to an expanded tender quota of 2.65 gigawatts (GW) from the previous 2.0 GW.
According to BERNAMA News Agency, Kenanga Investment Bank Bhd (Kenanga IB) highlighted in a research note that this expansion implies a blended investment intensity of RM4.9 million to RM5.7 million per megawatt (MW) of solar capacity, inclusive of battery energy storage systems (BESS). This figure significantly surpasses the conventional benchmark of RM3 million per MW for utility-scale solar developments, attributed to the additional costs of battery cells, power conversion systems, energy management systems, and grid integration.
Kenanga IB noted that the massive capital landscape suggests LSS6 tariffs will likely remain competitive, supported by bulk procurement economies of scale. The bank expects LSS6 to drive higher absolute contract volumes, even though net profit margins for project developers and engineering, procurement, construction, and commissioning (EPCC) contractors may not see improvement due to ongoing pricing pressure.
Additionally, the inclusion of BESS is expected to intensify upfront procurement requirements and project complexity. Typically, LSS developments require contractors to finance equipment procurement and construction costs before receiving milestone payments. Consequently, EPCC contractors with stronger balance sheets and proven execution capabilities are likely to secure these technically demanding packages.
Kenanga IB anticipates that assuming a six-month tender process, substantial LSS6 EPCC contract flows will emerge from the second quarter of 2027 onwards, with earnings contributions progressively building through 2028. Beyond solar EPCC, there are strong opportunities for specialised electrical infrastructure contractors, as large solar-plus-storage projects will necessitate sizeable grid interconnection facilities, substations, and high-voltage engineering works.
Despite the significant increase in projected contract values and investment intensity under LSS6, Kenanga IB has decided against adjusting its sector valuation and corporate earnings forecasts at this time. As a result, the bank maintains its 'overweight' stance on the sector.