KUALA LUMPUR, Feb 8 (Bernama) -- A more competitive power sector is expected to benefit Tenaga Nasional Bhd (TNB) and efficient independent power producers (IPPs), said HwangDBS Vickers Research.

In a note today, the research firm said the Energy Commission targeted 4,500 megawatts of new power supply agreements by 2016 to replace gradually expiring first-generation power purchase agreements (PPAs) and cater to future demand.

"This could create stronger competition between IPPs and attract new players.

"TNB will gain the most from lower capacity payment pricing and larger supply," it said.

HwangDBS said existing IPPs could also bid for the new supply agreements which included supply from existing and new-generation capacities.

"Hence, more efficient IPPs like YTL Power and Malakoff would have the competitive advantage, as economies of scale at existing plants will keep total generation costs relatively low," it said.

It said the new power plants were crucial to address Malaysia's declining reserve margin.

The research firm said the reserve margin currently was estimated at 40 per cent, but would drop to 20 per cent by 2015 based on estimated average power demand growth of three per cent yearly.

HwangDBS Vickers said the bids might attract players with power- and utility-related operations and track record such as Petronas Gas, Ranhill and Mudajaya.

It said the new initial public offerings (IPOs) might also draw interest towards the power sector. Among the planned IPOs is Gas Malaysia, which is slated for March-April 2012 and re-listing of Tanjong and Malakoff possibly by 2013.

"Existing players may be re-rated if these IPOs offer more attractive valuations," it said.