Kinergy powers up

PETALING JAYA: Kinergy Advancement Bhd is emerging as a new name in Malaysia’s independent power producer (IPP) space.

Having built its reputation as a clean energy contractor, the group is now pushing deeper into asset ownership, including by bringing a decommissioned gas-fired power plant back to life.

That royalty-backed move places Kinergy alongside names such as YTL Power International Bhd, Malakoff Corp Bhd and Ranhill Utilities Bhd, while leaving it as the only stock with IPP exposure that has a market capitalisation of below RM1bil.

Kinergy’s entry into the IPP space is taking place at a time when Peninsular Malaysia’s existing generation capacity faces growing pressure to keep pace with demand.

Last year, Kinergy took a calculated risk by fully acquiring Jati Cekerawala Sdn Bhd, which in turn controls an 80% equity interest in Teknologi Tenaga Perlis Consortium Sdn Bhd (TTPC).

TTPC is the actual owner of the power plant. The remaining 20% stake in TTPC is owned by Tenaga Nasional Bhd (TNB).

The energy asset owned by TTPC is a 650-MW power plant situated on a 37.5-ha coastal site in Perlis.

It was decommissioned in March 2024 after completing its 21-year power purchase agreement (PPA).

Kinergy is planning to redevelop the 650-MW plant into a large-scale gas power facility with a capacity of up to 1.5GW, placing it among the top 10 largest gas-fired plants in Malaysia.

It will also be one of the five gas-fired power plants that Malaysia plans to build by 2030 to achieve more than 6GW in new gas-fired capacity.

Phase one of this project is expected to begin commercial operations by end-2029 with a capacity of 700MW to 750MW. Phase two’s scheduled development of the remaining 700MW to 750MW is expected to commence upon phase one’s completion.

The redevelopment is likely to be completed faster than many similar gas-fired power plants, largely because some infrastructure for transmission, gas and water treatment is already in place.

However, the main power plant that has been decommissioned will need to be “torn down” and a new facility will be built on the site, Kinergy executive deputy chairman and group managing director Datuk Lai Keng Onn told StarBiz recently.

The redevelopment is going to be a costly affair. Lai says the average cost will be US$1.2mil per MW.

That works out to US$1.8bil or more than RM7.3bil at current exchange rate.

So, the natural question is: Can Kinergy, a company with a market capitalisation of RM830mil, undertake such a major project?

Bloomberg data on its financials show that Kinergy is in a net debt position, sitting on a cash pile of RM97.1mil against total debt of RM242.9mil.

To pull off this project, Kinergy brought in two partners, forming a consortium to redevelop the gas-fired power plant.

The partners are B.Grimm Power and Sirage Holdings Sdn Bhd.

B.Grimm Power is Thailand’s leading energy player, which currently operates around 62 power plants with a total installed capacity of 4GW. Its diversified generation portfolio includes gas-fired and cogeneration plants, solar, hydro, wind, and hybrid energy.

The participation of B.Grimm Power, a regional heavyweight in energy investment, adds weight to the Perlis development—and reaffirms Malaysia’s energy sector as fertile ground for foreign investment.

It also follows on from B.Grimm Power chairman Harald Link’s 2025 announcement of plans to invest up to US$1bil in Malaysia’s energy future, a move aligned with the country’s progressive regulatory environment.

Meanwhile, Sirage is 20% owned by Raja of Perlis Tuanku Syed Sirajuddin Jamalullail, according to StarBiz’s check with the Companies Commission of Malaysia.

The Ruler’s brother, Datuk Seri Diraja Syed Razlan Ibni Syed Putra Jamalullail, has another 20% while Sena Capital Sdn Bhd controls a 60% equity interest.

Sena Capital is in turn 70%-owned by one Mohamad Zukhairi Abdull Rahim and 30% by Asrul Muniff Azizan.

Lai says Kinergy will be leading the consortium and that the group, together with Sirage, will collectively own at least 51% of the consortium.

“The local partners within the consortium will have the controlling stake since this is a national project.”

He also assures shareholders that the project has strong bankability, with TNB being the offtaker of the electricity to be produced.

The project would be funded by the consortium on the basis of 80% debt and 20% equity.

“For the debt portion, the funding can come in the form of sukuk, financing or bridging loan.

“As for the equity side, there will be a pool of funds from the consortium partners.

“We are still finalising the structure,” according to Lai.

When asked about the new PPA for the power plant, Lai says it is likely to be signed in the third quarter of this year, but stopped short of explaining further.

However, channel checks by StarBiz showed that the Energy Transition and Water Transformation Ministry has issued the Initial Letter of Notification (ILON) last month for the project.

The ILON allows the consortium to begin the development of a new combined-cycle gas turbine (CCGT) power plant.

On Jan 8, Kinergy announced that the consortium has formalised a Gas Turbine and Generator Supply Agreement with GE Vernova.

“With the supply agreement in place, the consortium has reached an important execution milestone that underpins Phase One planning and procurement activities.

“Kinergy expects this development to support value creation during the construction phase while establishing a strong foundation for future large-scale power projects,” the group said in a statement.

Kinergy is set to benefit from the power plant project not just as an asset owner, but also from the engineering, procurement, construction and commissioning (EPCC) works.

The group has prior experience in undertaking EPCC works for renewable energy (RE) projects.

In the traditional power generation space, Kinergy also played a role as PETRONAS Gas Bhd’s local technical partner and main EPCC contractor for a 72MW Sipitang Oil and Gas Industrial Park gas engine power plant as well as a 120MW Labuan gas engine power plant development led by Rancha Power Sdn Bhd.

“In the RE space, the competition for EPCC works is getting more intense with the increase of new players.

“Kinergy wants to make a mark for itself in a more niche segment, hence the increased focus on EPCC works for gas-fired power plants.”

According to Lai, the EPCC works for the Perlis power plant is set to start in the first quarter of 2027, with Kinergy partially benefiting from the contracts.

“Revenue contributions from the Perlis CCGT project (for Kinergy) are expected from 2027 to 2029 onwards, in line with construction and commissioning timelines.

“During the construction phase, we expect to benefit from EPCC activities, while the longer-term IPP component will provide recurring earnings once the plant is commissioned,” he added.

Lai also pointed out that Kinergy’s current earnings profile is already visible, with annual profit in the region of RM20mil, and a realistic growth trajectory of 30% to 50% per annum for “at least for the next five years”.

In the first nine months ended Sept 30, 2025, Kinergy’s net profit rose to RM20.6mil, almost similar to RM21.5mil made in the entire financial year of 2024.

“Growth over the next few years will be supported by the existing order book and ongoing projects,” said Lai.

ENDS