TNB’s proposed restructuring has no immediate impact on A3 rating — Moody’s

Tenaga Nasional Bhd’s (TNB) proposed restructuring has no immediate impact on its A3 senior unsecured rating, as it would not materially affect the company’s baa2 baseline credit assessment (BCA), says Moody’s Investors Service.

In a statement yesterday, Moody’s said it expects TNB’s BCA to remain broadly unchanged, given that the organisational changes were primarily administrative in nature and not impact the group’s fundamental operations.

“Excluding any one-off transaction-related costs that might arise, the restructuring is also unlikely to have a material long-term impact on TNB’s financial metrics,” it said.

Moody’s vice president and senior analyst Spencer Ng said it also expects the proposed restructuring to not weaken TNB’s strategic importance to Malaysia’s power sector, as it would remain the owner of the transmission monopoly and distribution network, as well as the country’s largest power generator by generation capacity.

“As such, Moody’s believes there is a very high likelihood that TNB would receive support from the Malaysian government in times of need. The credit profiles of TNB and the government will continue to exhibit a high level of dependence.

“These factors result in a two-notch uplift to TNB’s A3 rating from its BCA of baa2,” he added.

Moody’s said over the longer term, the reorganisation could have a positive impact on TNB’s operations, if it results in a sustained improvement in the transparency of performance of the company’s business units.

It added such transparency should foster a further improvement in the group’s operating efficiency and agility, ahead of upcoming reforms to Malaysia’s power market, such as the introduction of retail competition and the shift to decarbonisation.

On July 29, TNB announced its plan to transfer the domestic generation and retail businesses to two new wholly-owned subsidiaries.

Upon completion of the restructuring, TNB would continue to hold and operate the regulated transmission and distribution business and the group’s international investments. — Bernama