MARC has reaffirmed Tenaga Nasional Berhad’s (“TNB”) issuer rating of MARC-1/AA+, and corporate debt ratings of RM2.0 billion Al-Bai’ Bithaman Ajil Bonds at AA+ID, RM1.5 billion Murabahah Commercial Papers and Murabahah Medium Term Notes (MCP/MMTN) at MARC-1ID /AA+ID, RM1.0 billion Al-Bai’ Bithaman Ajil Notes Issuance Facility at AA+ID, and RM500 million Fixed Rate Unsecured Bonds at AA+. MARC continues to maintain a Developing Outlook on the above ratings.

The reaffirmation of the ratings reflects TNB’s strategic and important role in Malaysia’s economic growth and national security whilst retaining its dominant role in generation and monopolistic position in the transmission and distribution of electricity in Peninsular Malaysia coupled with the majority government ownership.

While MARC notes the somewhat positive development with regard to the 12% increase in tariff charges, TNB’s Developing Outlook reflects continued uncertainty regarding the outcome of proposed discussions between the Government of Malaysia (“GOM”) and the Independent Power Producers (“IPPs”) concerning possible reductions in the Capacity and Energy Charges imposed by the IPPs on TNB, as well as the potential renegotiation of gas prices under TNB’s gas supply agreement with PETRONAS.

In addition, the vulnerability to the fuel price trend, particularly coal price as demonstrated in the last fiscal year, may restrict TNB’s ability to pass through cost increase to end consumers, and the anticipation of further borrowings to finance its capital expenditure programmes are key developing factors to TNB’s ratings.

TNB accounts for about 61.5% of the country’s installed capacity and distributes substantially all of the electricity demand. Electricity sales in FY2005 continued on an upward trend, rising 6.4% to RM18.3 billion spurred by the growth in electricity demand. Going forward, electricity demand is projected to grow in tandem with the country’s economic growth underscored by continued industrialization programme and rising affluence of the masses. Driving electricity sales will be the commercial and industrial sectors, which collectively accounted for 77.5% of the utility’s total sales in FY2005.