Upbeat outlook for PetGas’ Labuan power project

PETALING JAYA: Analysts are upbeat about PETRONAS Gas Bhd’s (PetGas) upcoming power plant project in Labuan.

MIDF Research noted that the ever-growing demand for energy security will always support the need for both conventional and clean fuels.

As such, it said PetGas’ new project is “appropriate to the times”.

“However, we also note the risks that come with natural gas – largely on the leakages – and how it would impact the operations of power generating plants and the consumers from the domestic, commercial and industrial sectors.

“Nevertheless, we believe that PetGas will continue to take precautions, more so with PETRONAS and the Sabah state government-linked companies overseeing the safety and regulations of Rancha Power plant.”

PetGas announced last week that it had entered into shareholders agreements with Sabah Electricity Sdn Bhd and Sabah Energy Corp Sdn Bhd to develop a new power plant with a capacity of 120MW in the Federal Territory of Labuan.

In a filing with Bursa Malaysia, PetGas said the project is pursuant to a letter of notification dated Feb 21 from the Energy Transition and Water Transformation Ministry.

“The parties intend to collaborate via a joint-venture company, namely, Rancha Power Sdn Bhd, for the design, development, construction, installation, testing, commissioning, ownership, operation and maintenance of the said power plant and associated facilities with target of commercial operation date no later than Jan 1, 2028.”

PetGas said the project aligns with its strategy to expand its presence in the energy sector and contribute to sustainable energy development in Malaysia.

“This project is expected to enhance the energy supply in Federal Territory of Labuan and Sabah as part of Sabah Energy Roadmap and Master Plan 2040. The project will be funded through internally generated funds and external financing,” it said.

MIDF Research said this new project is set to surpass the existing capacity of power plants in Labuan, including the Patau-Patau Power Station, which boasted a capacity of 113MW.

With PetGas’ involvement in the project, MIDF Research anticipates the main feeder for the power generation plant will be natural gas. “We are positive on this project largely for the use of natural gas, as it has low emissions of carbon dioxide and greenhouse gases.

“Additionally, the government had been encouraging the transition to a cleaner fuel for power stations, making this project on par with the National Energy Transition Roadmap and Malaysia Renewable Energy Roadmap,” it said.

It is maintaining a “buy” call on PetGas with a target price of RM18.67.