MARC is issuing this update on Tenaga Nasional Berhad (TNB) following the group’s recent announcement to undertake a proposed internal corporate reorganisation in line with its strategic transformation plan. Among the key changes under the proposed reorganisation are the formation of two new wholly-owned subsidiaries, GenCo and RetailCo, into which TNB will transfer its domestic power generation and electricity retail businesses. The national grid operations and electricity distribution will be maintained by TNB.

MARC views the proposed reorganisation will have no material impact on TNB’s overall credit profile. TNB will maintain its monopoly status in electricity transmission and distribution in Peninsula Malaysia and Sabah and have significant electricity generation capacity through its subsidiaries. MARC also notes that post-reorganisation TNB would own a significant portion of group’s regulated assets and generate the majority of group profitability. TNB will maintain its single buyer status.

MARC continues to impute a high likelihood of government support due mainly to TNB’s role as principal energy provider in the country and the government’s indirect majority ownership in the company. These factors support a two-notch rating uplift from TNB’s standalone corporate credit rating to AAA while its RM2.0 billion Al-Bai’ Bithaman Ajil Bonds is rated AAA_IS. The list of other TNB-related entities rated by MARC is appended below. The outlook on all ratings is stable.

Contacts:
Lim Chi Ching, +603-2717 2963/ chiching@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my