‘Buy’ recommendation kept on TNB
Rising electricity demand from data centre projects and artificial intelligence (AI) will lift Tenaga Nasional Bhd’s (TNB) long-term profitability.
But they may have limited impact on TNB’s immediate earnings, according to Affin Hwang Investment Bank.
TNB has received 74 supply applications from data centre customers with total maximum demand in excess of 11,000 megawatts (MW) — 40.6 per cent of Peninsular Malaysia’s installed capacity.
“We do not expect all the projects to be implemented. TNB said the group delivered electricity for nine data centre projects with a total energy demand of up to 635MW last year,” said Affin Hwang in a note.
For 2024, TNB expects to connect to nine data centre projects with 700MW of total energy demand.
In the long run, TNB sees potential maximum demand from data centres in excess of 5,000MW by 2035 (18.5 per cent of Peninsular Malaysia’s installed capacity).
“We believe Malaysia will need to invest further in power infrastructure and this should improve TNB’s long-term profitability,” said Affin Hwang.
The International Energy Agency forecasts global electricity consumption of data centres, cryptocurrencies and AI to range between 620 terawatt hours (TWh) and 1,050TWh in 2026.
This should also benefit TNB’s non-regulated business units such as Allo Technology (fibre connectivity) and GSPARX (rooftop solar energy).
“We continue to like TNB, a direct beneficiary of Malaysia’s energy transition initiatives and indirect beneficiary of rising data centre and AI demand.”
It has maintained a “buy” call on TNB with an unchanged price target of RM12.80.