TNB on track to be top 10 global utility by 2025

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) is on track to be the top 10 global utility by 2025 as it takes advantage of the emerging trends in the energy industry, said president and CEO Datuk Seri Azman Mohd.
To meet the 2025 target, its efforts will be guided by its Strategic Plan (2017-2025), where one key pillar focuses on expansion in key growth markets in Southeast Asia, South Asia and the Middle East, as well as other markets, in which it sees opportunities to add value to TNB’s non-regulated revenue portfolio. This also includes a focus on renewable energy (RE).
The group will also embark on providing more digitised and automated services that will make its electricity systems ready for customers to generate their own electricity through solar photovoltaic and sell the surplus to the grid, enabling higher productivity, system performance with better experience.
Investments will also go into digital technologies towards improving customer experience and unlocking opportunities beyond the sale of electricity.
Azman said electricity demand has begun to show moderate growth as expected, with unit electricity demand growth expanding just 1% in the financial year ended Aug 31, 2017 (FY17). He said while TNB has achieved much thus far, it realised it cannot remain where it is.
“As emerging countries grow into being less industrialised, they require less electricity, they go for services and we’re cognisant of this fact. Therefore we need to find a different path of growth. That’s why we’re not only maintaining our dominance in providing electricity to the domestic market, we need to expand overseas,” Azman told a press conference after TNB’s AGM today.
He added that in TNB’s present investments overseas, it is not a passive investor but a strategic one learning the ropes of operations there.
“Apart from board seats, we have management seats. We’re developing our talent into a global talent powerhouse. We find that going into global operations is not that difficult for us because utility has a lot of things in common,” said Azman.
He said TNB has no plans for a rights issue to finance its overseas expansion. As at Aug 31, 2017, its deposits, bank and cash balances stood at RM5.06 billion.
He also said TNB has no intention to downsize for next year.
“The growth factor that we’re embarking on requires resources. We’re using our existing resources to fuel this growth. We don’t see at this point in time any downsizing,” said Azman.
He added that TNB is predominantly looking at investments opportunities, including RE projects in developing countries, but has left some room for investments in developed countries as well. He said it is looking for investments with a strategic fit and yet conservative to TNB, which will not exceed its 55% optimum level of gearing.
CFO Datuk Fazlur Rahman Zainuddin said for the next few years until 2025, conventional power is still going to make up the bigger portion in its earnings, but noted that TNB wants to achieve conventional and RE contribution to earnings of 70:30, from 90:10 now.
TNB has earmarked a recurring capital expenditure (capex) of RM10.5 billion next year for transmission, distribution and energy generation purposes. In FY17, its capex was RM12.1 billion.
Meanwhile, when asked if TNB is selling its stake in Sabah Electricity Sdn Bhd (SESB), Azman said it is discussing with the Ministry of Energy, Green Technology and Water (Kettha), with hopes that Kettha and the government will come to an agreement next year “to see what is the best option”. TNB is of the opinion that SESB should undergo a tariff review to make it more sustainable.
“In terms of the cost to generate electricity versus the tariff, there are some sustainable issues and structural matters to be studied in Sabah, which we’re currently going through. Sabah is looking at the overall electricity industry structure from tariff setting, fuel mix, subsidies to operations. A lot of things need to be addressed before we talk about ownership,” said Fazlur.