TENAGA NASIONAL BERHAD - 2021 |
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| Report ID | 60538900388 | Popularity | 1205 views 126 downloads | |||||
| Report Date | Nov 2021 | Product | ||||||
| Company / Issuer | Tenaga Nasional Bhd | Sector | Infrastructure & Utilities - Power | |||||
| Price (RM) |
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| Rationale |
Rating action MARC has affirmed Tenaga Nasional Berhad’s (TNB) issuer rating at AAA and the sukuk rating on TNB’s outstanding RM2.0 billion Al-Bai’ Bithaman Ajil Islamic Financing Bonds (sukuk) at AAAIS. The rating carry a stable outlook. The sukuk matures on December 13, 2021. Rationale The affirmed ratings are driven by TNB’s credit strength stemming from its monopolistic position in electricity transmission and distribution (T&D) in Peninsular Malaysia and Sabah, as well as its significant electricity generation capacity and strong operational track record. Its credit strength is tempered by the potential ceding of some market share in electricity sales upon liberalisation of the electricity industry. The ratings also incorporate a two-notch uplift based on MARC's assessment of a high likelihood of government support given its critical role as the country’s principal energy provider. Following a challenging 2020 due to measures imposed to control the pandemic, TNB’s revenue improved by 6.1% y-o-y during 1H2021 on the back of recovery in electricity demand as economic activities resumed. Electricity consumption is expected to continue its recovery as economic activities resume in line with increasing vaccination rates. Cash flow from operations (CFO) rose to RM9.0 billion in 1H2021 with CFO interest and debt coverages standing at 7.86x and 0.16x (1H2020: 5.09x; 0.09x). TNB’s annualised debt-to-OPBITDA stood at a healthy 2.53x (FY2020: 2.75x). Borrowings stood at about RM49.2 billion; TNB expects to repay its sukuk principal of RM2.0 billion in December 2021 with a combination of internal funds and borrowings. Its consolidated cash and bank balances stood at RM5.3 billion as at end-June 2021. Going forward, borrowings could increase further to part finance the group’s capex plan. In 2021, the group plans to spend RM9.5 billion, of which RM7.3 billion is meant for regulated capex. Rating outlook The stable outlook reflects MARC’s expectations that TNB’s business profile will be broadly maintained in the current economic situation and that the group will adhere to prudent financial management. Rating trajectory Upside scenario We don’t envisage any upgrade on the standalone issuer rating over the next 12 months. An upgrade would be considered if there is a sharp improvement in its cash flow metrics, particularly its debt and interest coverages. Downside scenario TNB’s issuer rating could come under pressure in the unlikely event of a change in its strategic role as the principal energy provider and/or if there is a weakening in cash flow or liquidity position. Key strengths • High likelihood of government support • Largest power transmission and distribution utility group in Malaysia • Significant electricity generation capacity Key risk • Potential competition in retailing from industry liberalisation |
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