What Makes Malaysia a Strong Data Centre Hub, According to Moody’s?
Moody’s says Malaysia’s advantage stems from competitively priced, readily available power and supportive government initiatives. Chelsia Ng, assistant vice president – ratings at Moody’s Ratings, said the policy framework already focuses on data centre efficiency.
Eligibility for tax incentives under the Digital Ecosystem Acceleration (DESAC) scheme is linked to power and water efficiency benchmarks. Johor, which houses most of the country’s data centre capacity, also applies more stringent requirements for project approvals.
How Much New Power Does Malaysia Need by 2035?
Moody’s Ratings estimates that 14 GW to 17 GW of additional generation capacity will be required by 2035 to meet incremental demand in Peninsular Malaysia. Based on government projections, data centres could account for around 31 per cent of Peninsular Malaysia’s total electricity consumption by 2035.
- Extra generation capacity needed by 2035: 14 GW to 17 GW
- Investment required: RM80 billion to RM95 billion, by TNB and independent power producers
- Data centre share of electricity consumption: 31 per cent by 2035, up from 4.0 per cent in 2025
- Expected demand growth: compound annual rate of around 5.8 per cent over the next decade
Ng said the growth will underpin structural electricity demand, but the scale and pace remain subject to market and execution risks. Those risks are why the numbers are worth monitoring rather than taking at face value.
What Does TNB’s Capex Mean for TENAGA 5347 Shareholders?
Ng said TNB’s annual capital spending is likely to rise to around RM18 billion, driven by grid infrastructure and generation capacity. Its regulated transmission and distribution investments benefit from a cost-recovery framework that underpins revenue growth.
Unregulated generation projects carry greater risk because they take longer to build before generating cash flow. The elevated spending will also raise financial leverage during the development phase. Moody’s Ratings still expects TNB to have sufficient financial headroom to manage sizable capital spending over the medium term.
Where Do Gas and Solar Fit in Malaysia’s Power Mix?
Ng said firm baseload capacity for data centres will keep gas relevant as a transition fuel. She cited new and extended gas-fired capacity procured under NewGen25 and NewGen26.
Malaysia must still phase down coal generation while replacing retiring capacity over the next decade. Ng called this an added layer of investment and execution risk to the energy transition.
Solar can be deployed relatively quickly, and data centre operators have their own net-zero targets. In June, the government said all future solar projects under the sixth large-scale solar (LSS) programme must include battery energy storage systems (BESS). Ng cautioned that intermittent renewable generation and current battery technology are unlikely to fully meet data centres’ round-the-clock power needs in the medium term.
Disclaimer: This article is for information only and does not constitute investment advice. Do your own research and consult a licensed professional before making any investment decision.
Key Takeaways
- Moody’s Ratings says Malaysia is well positioned as a regional data centre hub if it keeps its power price advantage.
- RM80 billion to RM95 billion of investment is needed by TNB and independent power producers by 2035.
- TNB’s annual capex is likely to rise to around RM18 billion, with execution and funding risks.
- Moody’s expects TNB to have sufficient financial headroom over the medium term.
Frequently Asked Questions
Is Malaysia a good data centre hub according to Moody’s?
Moody’s Ratings says Malaysia is well positioned to be a key regional data centre hub if it maintains its competitive advantage. That advantage rests on competitively priced, readily available power and supportive government initiatives.
How much will TNB need to invest for data centre demand?
Moody’s Ratings estimates RM80 billion to RM95 billion of investment will be needed by Tenaga Nasional Bhd and independent power producers. TNB’s annual capital spending is likely to increase to around RM18 billion.
What is the DESAC scheme for data centres in Malaysia?
The Digital Ecosystem Acceleration (DESAC) scheme links tax incentive eligibility to power and water efficiency benchmarks. Johor, which houses most of the country’s data centre capacity, also applies more stringent project approval requirements.
How much of Peninsular Malaysia’s electricity could data centres use by 2035?
Based on government projections, data centres could account for around 31 per cent of Peninsular Malaysia’s electricity consumption by 2035. That compares with 4.0 per cent in 2025.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.
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