RHB Research said TNB should continue to benefit from the continuous upgrades of its T&D assets.
PETALING JAYA: The upcoming implementation of third-party access (TPA) framework is not expected to be a threat to the country’s sole electricity provider, Tenaga Nasional Bhd
(TNB), says RHB Research.
The TPA is expected to be implemented in September and will allow renewable-energy (RE) producers to use the national electricity grid to deliver their green energy to customers in the country.
RHB Research noted this is because TNB will still own the infrastructure and may have to incur capital expenditure (capex) to upgrade it. Moreover, the utility giant will also charge independent power producers a fee for using its grid infrastructure.
“The impact of the TPA framework on TNB’s transmission and distribution (T&D) arm will also be rather neutral, assuming the utilisation of T&D assets will be compensated for fairly with wheeling charges,” the research house said in a report yesterday.
It added that TNB’s current RE capacity remains largely unchanged quarter-on-quarter (q-o-q), at 4.3 gigawatt (GW) or about 20% of total capacity.
“There is currently 6.2GW of RE in secured capacity – including those in construction and development stages. The outcome of Regulatory Period 4 (RP4) for 2025-2027 is likely to be known by the end of 2024,” it said.
RHB Research maintained a “buy” call on TNB with a target price of RM16.10 a share. The research house believes TNB should continue to benefit from the continuous upgrades of its T&D assets, with energy demand supported by the mushrooming development of data centres.
MIDF Research, on the other hand, said the TPA, while possibly neutral to regulated earnings, could introduce more competition in the generation segment for incumbents.
It also noted that TNB’s valuations have run ahead of fundamentals at this juncture and that any weaker-than-expected capex in the upcoming RP4 determination is a valuation de-rating risk.
“The stock is now trading at 16 times forward price-earnings ratio for FY25, close to one standard deviation above the historical mean of 13.9 times reflecting already high expectations of future earnings.
“Our projections already assume a step-up in regulated-asset-base growth to a compound annual growth rate of 7.7% in RP4 (versus 4.2% in RP3) to reflect accelerated capex on the energy transition,” the research house said.
