TNB’S capex to be on uptrend into 2030s

PETALING JAYA: Tenaga Nasional Bhd (TNB) expects its annual capital expenditure (capex) to increase between Rm10bil and Rm20bil in the 2030s, from Rm9bil and Rm14bil in the 2020s, with initial investments into new green technologies.

This comes as the utility giant stepped up its public energy transition plans which would be balanced against Malaysia’s energy equity and security.

Maybank Investment Bank (Maybank IB) Research said the group’s capex is expected to peak at Rm15bil to Rm24bil in the 2040s when these new green technologies become mainstream.

The research house noted that TNB has been articulating its energy transition plan after having unveiled its net-zero 2050 target last year.

“TNB has been publicising details of its transition plans in recent weeks.

“The initiatives are broadly categorised along four pillars – Power Generation (Genco), New Energy Division, Grid and Electric Vehicles,” pointed out the research firm.

Of particular interest, said Maybank IB, are the Genco initiatives which involve possible early retirement of selected coal plants, and the repowering of these plants with cleaner technology such as carbon capture units and hydrogen.

There is potentially an expansion into Asean in gas and hydro plants.

According to the research house, TNB is open to various funding options, including partial divestment of Genco in future via a listing, and allowing equity participation by technology partners in selected plants.

However, it said: “ESG or environmental, social and governance scrutiny on TNB has largely taken a backseat in the past year, in our view, as the market focuses on the sanctity of the pass-through mechanism.

“With coal prices remaining elevated, meaning the imbalance cost pass-through concerns will continue to take centre stage.

“By our estimate, a three sen per kilowatt-hour surcharge is required to cover every incremental RM100 per tonne of coal price above the tariff reference,” said the research house, which is keeping its earnings forecasts and RM8.70 target price on the stock.