PETALING JAYA: State-controlled Tenaga Nasional Bhd
(TNB), which produces the bulk of its electricity from dirty fossil fuels, has been shoring up its environmental, social and governance (ESG) profile.
Hong Leong Investment Bank (HLIB) Research said TNB’s ESG ratings have improved in 2023-2024, indicating the power giant’s commitment in managing and transparently reporting on ESG matters.
“The group’s continuous engagement with ESG rating agencies has provided insights on its ESG efforts and the group leverages on these ESG assessments to improve on its sustainability strategies and operational frameworks.
“TNB has shown its utmost commitment with the establishment of the board sustainability and risk committee, as well as chief sustainability officer to develop and implement the group’s sustainability pathway towards achieving net-zero emissions by 2050,” HLIB Research said.
TNB has been ranked first in Malaysia for ESG transparency reporting by the Global ESG Monitor.
In 2023, about 8.3% of the total electricity generated by TNB came from renewable energy (RE) sources, although it fell from 8.7% in 2022. That said, over 83% of the total electricity sent out in 2023 was generated from coal and gas sources, indicating that TNB has a long way to go to achieve clean power generation.
HLIB Research noted that TNB aims to lower carbon emissions through cleaner generation capacity, increased RE capacity and enhanced operational efficiency across the value chain.
TNB is gradually phasing down coal-fired generation capacity in stages, which will reduce the Scope 1 greenhouse gas emissions.
“TNB seeks to repower coal power plants with cleaner technologies such as hydrogen ready gas power plants, as well as carbon capture and storage technology equipped gas power plants.
“Currently, TNB is collaborating with Mitsui & Co to study the viability of co-firing coal with biomass and ammonia,” according to the research house.
The power giant has secured 4.4 gigawatt (GW) RE capacity in domestic and international markets in 2023, marking a 16% growth from 2022. The group is targeting to achieve 8.3GW RE capacity for both domestic and international markets by 2025 and accelerate its RE investment by 2050.
While increasing RE capacity, TNB is also enhancing its grid system to support the variability of RE. TNB aims to allocate 3.5% of its after-tax profit for research and development or R&D activities. In 2023, it invested 1.07%.
“We are overall positive on TNB’s ESG commitments and contribution to Malaysia’s net-zero 2050 aspiration, while at the same time identifying growth opportunities from this.
“However, we maintain our ‘hold’ rating on TNB with an unchanged target price of RM13.30, as we believe the current share price has already priced in the potential earnings growth and dividend yield has become relatively unattractive,” it stated.
