Utility firm to explore options on SESB

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) is currently engaged with the Government to explore options to address the structural challenges faced by its Sabah Electricity Sdn Bhd (SESB).

The national utility company said whether the resolution would ultimately result in a change of ownership at SESB would be decided by the Government upon review.

TNB owns an 80% stake in SESB. According to TNB president and chief executive officer Datuk Seri Azman Mohd, TNB is in the early stages of discussion with the Energy, Green Technology and Water Ministry and the Energy Commision on the fate of SESB.

He hopes a final resolution can be reached by next year.

“It’s about time we review the situation at SESB to make it more sustainable. We are still discussing the options ... we are not saying we are going to sell our stake in SESB, but we need to study the situation,” Azman told a press conference after TNB’s AGM.

“We hope the Government will come to an agreement by next year to see what’s the best option for SESB,” he said.

TNB chief financial officer Datuk Fazlur Rahman Zainuddin conceded that there were sustainability issues at SESB that had to be addressed, particularly in view of the high cost of electricity generation in Sabah vis-avis the tariffs in the state.

Meanwhile, TNB said it would continue to invest in the renewable energy (RE) capacity locally and abroad. It would also continue to bid for tenders in 2018 with a focus on solar and wind projects.

Azman noted that overseas expansion was part of the group’s long-term growth strategy, particularly in view of moderating electricity sales in the domestic market.

“Electricity consumption is very much linked to the country’s gross domestic product (GDP). However, in recent years, the correlation between electricity consumption and GDP growth in Malaysia has become increasingly disconnected,” Azman said.

Azman explained that as the country became more industrialised and moved more into the services industry, the electricity requirement could moderate.

Hence, the need for TNB to find a different path of growth, and that is expanding overseas and venturing into RE.

He, however, stressed that any overseas investment remained subject to the company’s guidelines of 70% in developing markets and 30% in developed markets.

He added that the company would remain cognisant of its borrowings, and would ensure its gearing would not exceed the “optimum” level of 55% in pursuing its expansion plans.

Fazlur said rapidly evolving trends such as the rise of disruptive technologies on energy sources and the evolving regulatory landscape had compelled TNB to venture overseas. “We want to make sure that the investment can give us the right kind of returns. It must be able to create value for our shareholders,” he said.

According to Azman, TNB’s future efforts would be guided by its Strategic Plan (20172025), which is anchored on key pillars designed to achieve continued and sustainable growth.

“First, we will pursue future-generation sources. This global expansion drive will focus on key growth markets in South-East Asia, South Asia and the Middle East, as well as other markets in which we see opportunities to add value to TNB’s non-regulated revenue portfolio and serve the wider global population,” he said.

Next, in building the grid of the future, Azman said the introduction of smart meter/ advanced metering infrastructure facilities would make TNB’s systems ready for customers to generate their own electricity through solar photovoltaic systems and sell the surplus to the grid.