MARC has affirmed Tenaga Nasional Berhad’s (TNB) issuer rating of AAA and sukuk rating of AAA_IS on TNB’s RM2.0 billion Al-Bai’ Bithaman Ajil Bonds. The outlook on the ratings is stable. 

The ratings continue to incorporate a two-notch uplift from TNB’s standalone corporate credit rating of AA to reflect MARC's assessment of a high likelihood of government support premised on, among other factors, TNB’s critical role as the country’s principal energy provider. The rating agency continues to view that the outcome of the ongoing group-wide reorganisation will not materially affect TNB’s credit profile. Post-reorganisation, TNB will retain its vital transmission and distribution (T&D) assets and maintain its monopoly in the T&D business. 

While the T&D assets will be made available to third parties under the Malaysian Electricity Supply Industry 2.0 (MESI 2.0), there is a potential risk of losing some market share in the generation and retail segments. Nonetheless, any such loss is not expected to have a material impact on TNB’s performance as the utility will continue to have a significant market share in electricity generation in Peninsular Malaysia, Sabah and Labuan. TNB’s power plants accounted for about 55.7% or 14,038 MW of total installed capacity in Peninsular Malaysia as at end-September 2019. 

In 9M2019, the group’s revenue increased by 2.4% y-o-y to RM38.7 billion but profit after tax was slightly lower y-o-y at RM3.9 billion, due to the impact from the MFRS 16 adoption on lease assets; excluding this impact, profit after tax would be RM4.1 billion. Its debt-to-equity (DE) ratio remains moderately high at 0.80x, partly due to continued capex spending. However, pressure on the leverage is likely to ease in line with the capex reduction for new generation capacity which fell to RM2.3 billion in 9M2019 from RM2.7 billion in the previous corresponding period. MARC expects the capex for new generation capacity to decline, in part due to the shift in government focus to renewable energy.

Contacts:
Chia Kah Yie, +603-2717 2961/ kahyie@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my