West Asia Crisis: Fuel Cost Spike 'Neutral' For Malaysia's Utility Players - Kenanga IB

KUALA LUMPUR, April 7 (Bernama) -- The recent spike in fuel costs due to the West Asia crisis is expected to be “neutral” for most utility players, given the established fuel-cost pass-through mechanisms, according to Kenanga Investment Bank Bhd (Kenanga IB).

It said a rising coal price may actually favour utility players as the moving-average price used for reporting typically stays higher than the actual application coal cost during such periods.

“This timing difference results in a net gain, or a positive fuel margin, for the GenCo (power generation) segment.

“At this juncture, given that the magnitude of price movement remains small compared to the volatility seen in 2022-2023, we do not anticipate any immediate material earnings impact,” it said in a note today.

Kenanga IB said that as for Gas Malaysia Bhd, the impact of rising gas prices is immaterial because its “cost-plus” formula ensures a stable profit spread based on the Malaysia Reference Price (MRP), rather than direct exposure to price volatility.

“In addition, a higher MRP (which lags Brent crude oil by three months to six months) impacts non-regulated retail margins, which are calculated as a fixed percentage (one per cent to two per cent) over the selling price.

“Based on our financial year 2026 (FY2026) estimates, a 10 per cent jump in MRP would only add RM6 million (1.5 per cent) to our FY2026 net profit forecast of RM406.8 million,” it said.

Meanwhile, the investment bank said industry players’ focus has shifted to the “New Generation Capacity in Year 2029 to 2031” (NEWGEN26) cycle to meet a target of 6,000 megawatt (MW) to 8,000 MW of new capacity by 2030.

It said the NEWGEN26 tender was released in late February 2026 with a July 2026 tender submission deadline, with Tenaga Nasional Bhd and Malakoff Corporation Bhd remaining strong contenders due to their existing land banks, while YTL Power Corporation Bhd is reportedly partnering with a landowner for new bids.

“Malakoff has already secured four units of gas turbines and generators capable of supporting two new 1,400 MW plants, and we believe the six gigawatts (GW) to eight GW pipeline provides sufficient scale for all major players to participate meaningfully,” it added.

-- BERNAMA