PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 30 Oct 2020, 10:22 AM


Tenaga Nasional Berhad - Acquire Another 5% in Vortex Solar

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Tenaga Nasional (TNB) announced that its wholly-owned subsidiary, TNB International Sdn Bhd (TNBI) has completed an acquisition of an additional 5% stake in Vortex Solar Investments S.a.r.l. (Vortex Solar) for a consideration of GBP11.0m (~RM59m). The acquisition will increase TNB’s equity interest in Vortex Solar to 55%, giving TNB a majority control. We view this positively as the acquisition will fit into TNB’s expansion plan to increase its renewable energy (RE) portfolio, though we believe this will not have a significant impact on TNB’s earnings in the near term and therefore maintain our forecasts. We retained our Neutral call on TNB, with unchanged target price of RM12.42, based on DCF valuation.

  • The acquisition. Vortex Solar is one of the largest solar platform in the United Kingdom with Renewables Obligation Certificate subsidy scheme, comprising 24 operational solar farms with a total combined capacity of 365MW. The remaining 45% stake in Vortex Solar is owned by Beaufort Investments S.a.r.l., a wholly-owned subsidiary of EFG Hermes Holding, a leading financial institution in the Middle East North Africa (MENA) region. To recap, TNB acquire 50% in Vortex Solar in January 2017 for a total cash consideration of GBP86.0m.
  • Impact to TNB’s earnings is unlikely to be significant in the near term. Based on this latest acquisition price, Vortex Solar is now valued at GBP220m (vs GBP172m in 2017). We believe the valuation (GBP11m) of this acquisition is fair, though slightly higher than the initial acquisition in 2017. The portfolio has performed positively, contributing GBP39.1m EBITDA in 2019 with EBITDA margin of 84% (vs 2018: 80%). We maintain our forecast for now.

Source: PublicInvest Research - 18 Sept 2020

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