Friday 29 Mar 2024
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KUALA LUMPUR (Aug 17): Tenaga Nasional Bhd (TNB) on Wednesday (Aug 17) announced it will invest around RM20 billion per year over the next 28 years as capital expenditure (capex) for initiatives to fast-track TNB’s Energy Transition Plan aimed at reducing its emissions intensity to net zero by 2050.

“The investment will pave the way for TNB’s journey towards its net zero aspiration and will open opportunities in more than doubling its EBIT (earnings before interest and tax).

“This Responsible Energy Transition journey will bring positive business growth to the group, even as we accelerate our efforts to decarbonise,” said TNB president and chief executive officer Datuk Baharin Din in a statement via the group’s Bursa Malaysia filing.

Baharin said the company will grow its regulated asset base to RM100 billion by 2050 as TNB continues to invest in the “Grid of the Future”.

Earlier this month, TNB announced initiatives to accelerate its sustainability agenda, which was initially announced in August last year, and shared the progress on its energy transition plan.

“We will pursue regional interconnection that will allow for a wider reallocation of renewable energy resources that will help decarbonise the Asean power system as well as strengthen the security of supply. The grid will provide the group with potential earnings of RM7 billion by 2050,” he said.

Baharin also said that TNB is accelerating its sustainability agenda and this required the group to undertake major shifts across the value chain in meeting its environmental, social and governance (ESG) commitment while ensuring sustainable business growth.

“Backed by a stable domestic market, our energy transition aspiration will provide us with the added capabilities, technologies and capital that are vital for a sustainable future.

“Our fast-tracked initiatives along this transition are driven by a deep sense of responsibility given TNB’s footprint in the country’s energy landscape, as well as a sense of urgency to ensure the sustainability of our business,” he said.

Baharin said apart from the National Grid, TNB is taking three other initiatives to fast-track its sustainability agenda. These involve its wholly owned TNB Power Generation Sdn Bhd (TNB Genco), TNB’s new energy division (NED), and electric vehicles (EVs) under its project management office.

On TNB Genco, he noted that the acceleration of TNB’s decarbonisation plan will increase the enterprise value of TNB Genco for the possibility of an initial public offering (IPO).

Baharin’s remarks come after sources close to the matter told Reuters that the electricity utility giant plans to begin the process next year for a potential US$1 billion (RM4.44 billion) listing of its power generation business.

In what would be the country's largest IPO in a decade, TNB Genco, could be valued at about US$4 billion, the sources said, declining to be named owing to the confidential nature of the matter.

TNB Genco aims to capture an estimated RM40 billion in revenue from the domestic generation market by 2050. In addition, TNB is exploring gas and hydropower projects in Asean with a target share of approximately 800 megawatts (MW) capacity by 2050.

In expanding its RE portfolio, TNB said NED is targeting 14.3 gigawatts (GW) capacity by 2050 with an estimated equity investment of US$7 billion.

NED’s strategy is to increase investments in large-scale solar as well as onshore and offshore wind with a focus on existing markets in Malaysia and the UK, and new markets in Spain, Ireland, France, Thailand, Philippines, Vietnam, Australia, Taiwan and Korea, said the utilities giant in the statement.

Baharin added that TNB’s focus is on developing the EV ecosystem as part of efforts to bring consumers along the energy transition journey.

“We are committing to invest RM90 million over the next three years in order to spur the adoption of EVs, reaching 500,000 cars by 2030 that will contribute RM1.25 billion in annual electricity revenue,” he said.

Meanwhile, TA Securities in a note on Wednesday said the research house is mostly positive on all the ambitious environmental initiatives by TNB, with the firm expecting investors to likely favour these measures in view of current sustainability trends that boost ESG ratings for companies.

“However, we believe that the long-term execution of these strategies remains fluid given that it is still early days at this juncture.

“In particular, the comprehensive decarbonisation and energy transition strategies by Genco will likely boost sentiment on its upcoming IPO.

“Additionally, the setup of [NED] paves the way on its future funding and enables TNB to leverage on its growth without severe strain on its balance sheet,” said the firm’s analyst Kylie Chan Sze Zan.

On the other hand, Chan, who maintained a "buy" recommendation on TNB with an unchanged target price of RM10.70, is more sceptical about the smart city solutions.

“At this moment, we believe there are limited monetisation opportunities for this project. Furthermore, the required investment outlay on this initiative will likely be substantial.

“Nevertheless, given that it is still early days, we await further details before turning pessimistic,” she added.

At noon break, TNB’s share price was up three sen or 0.34% to RM8.92, bringing a market capitalisation of RM51.3 billion.

Edited ByLam Jian Wyn
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