Marking 75 years of service, TNB continues to lead Malaysia towards a future powered by innovation and sustainability.
PETALING JAYA: Tenaga Nasional Bhd
(TNB) seems well positioned to benefit from a step-up in grid capital expenditure (capex) to accommodate the energy transition.
Its unit, TNB Power Generation Sdn Bhd, will also benefit from data centre-driven demand growth, said TA Research.
This is following the Energy Transition and Water Transformation Ministry’s (Petra) announcement that electricity tariffs will be maintained for the first half of financial year 2025 period, including current imbalance cost pass-through (ICPT) rebates and surcharges.
Petra also approved the base tariff for regulatory period-4 (RP4), which runs between Jan 1, 2025 until Dec 31, 2027.
It added that investors will adopt a wait-and-see approach following the announcement, pending actual details of regulatory period 4 (RP4) parameters.
However, at 5.9 times financial year 2025 enterprise value and earnings before interest, tax depreciation and amortisation, TNB is currently trading at a discount to historical mean of 7.2 times, TA Research said.
It has a “buy” call on the stock with an unchanged target price of RM17.30 a share.
The key risk to its call is unfavourable changes to the policy and regulatory framework.
TA Research said the key details regarding RP4 parameters such as approved capex, allowable returns and fuel cost parameters have yet to be disclosed.
In addition, the Energy Commission is in the midst of finalising a new tariff structure, which is said to be more reflective of electricity supply cost, targeted for implementation from July 1 next year.
TA Research also said high voltage non-domestic consumers are currently charged an ICPT surcharge of 17 sen per kilowatt hour (kwh), while low and medium-voltage non-domestic consumers are charged a 3.7 sen per kwh ICPT surcharge.
Domestic consumers consuming more than 1500kwh a month are charged an ICPT surcharge of 10 sen per kwh, no surcharge for domestic consumers with consumption of 600 to 1500kwh a month and a two-sen rebate is applied for domestic consumers with less than 600kwh consumption a month.
TA Research added that the powerhouse had previously indicated an increase in capex to RM90bil for the period 2025 to 2030 from RM45bil in the 2018 to 2024 period.
But questions remain as to whether TNB will be allowed to clawback part of its capex via system access charges under the Corporate Renewable Energy Supply Scheme and wheeling charges for renewable energy export via Energy Exchange Malaysia. Wheeling or access charges are meant to play a role in helping TNB with the planned capex
Another area of particular interest is RP4’s forecast annual demand as this is another key variable determining TNB’s allowable revenue for RP4.
It said RP3 annual demand growth was determined at just 1.7%.
But given the influx of data centres, actual demand has well exceeded this growth rate with demand growth as at nine months 2024, standing at 7.3%.
