Malaysia utilities sector backed by solar surge, nuclear plans in energy overhaul

UOB keeps "overweight" view on utilities as structural re-rating narrative builds in sector.

The utilities sector in Malaysia maintained its “overweight” rating, supported by expected capacity expansion in solar and potential nuclear power development as the government reshapes the national energy mix, according to a UOB Kay Hian report.

Malaysia has embedded nuclear energy into its 13th Malaysia Plan, with an affirmative policy decision scheduled for consideration after 2030, as part of a broader strategy to phase out coal-fired power generation by 2050 and target a 70% renewable energy mix.

The Energy Commission and the Ministry of Energy Transition and Water Transformation continue to manage the energy trilemma of security, affordability, and sustainability.

Nuclear power is positioned as a baseload source to complement intermittent renewable energy such as solar, the report said.

MyPower Corporation Malaysia serves as the Nuclear Energy Programme Implementing Organisation under the ministry.

The government has also implemented the Atomic Energy Licensing Act (Amendment) 2025, effective 25 December, which establishes regulatory control over nuclear materials, radioactive waste, radiation generators, and nuclear-related facilities across the full lifecycle.

The report outlines a potential development pathway in which nuclear plant design and construction would take place over around a decade following a policy decision.

It states a preference for conventional nuclear technology due to its operational track record, safety profile, and continuous generation capability.

Small modular reactors remain at an earlier stage of global deployment, with limited commercial operating experience.

Baseload requirements remain central to the system. Nuclear plants are assessed to operate with capacity factors above 90%, compared with coal at around 75% and solar at about 25%, supporting grid stability as renewable penetration increases.

Fuel price exposure has increased amidst global market volatility. Liquefied natural gas prices have risen 110% year to date (YTD), whilst coal prices are up 10% YTD, reinforcing the case for nuclear power as a source of stable long-term fuel costs.

The report expects the government to lead nuclear development, with Tenaga Nasional identified as a potential offtaker and possible participant in asset ownership.

Nuclear projects require capital expenditure of $4b to $10b per 1,000 MW unit, with operational lifespans of 60 to 80 years and an estimated payback period of around 25 years.

Combined-cycle gas turbine plants are cited at $800m to $850m per 1,000 MW unit, with operational lifespans of 25 to 30 years.

Malaysia’s nuclear framework is aligned with International Atomic Energy Agency conventions, supported by the amended legislation, which enables oversight across planning, operation, and decommissioning phases.

At a regional level, ASEAN countries remain in early stages of nuclear development, focused on regulatory preparation and feasibility studies. Vietnam and the Philippines are identified as potential early movers.

The report also highlights continued growth in solar capacity, which is expected to exceed 6.5 GW between 2026 and 2029.

It estimates engineering, procurement, and construction opportunities of $3.25b (RM13b) to $5.75b (RM23b) linked to renewable energy projects.

Sector top picks include Tenaga Nasional, Solarvest Holdings, Pekat Group and Northern Solar.

(US$1 = RM4.00)