Tenaga Nasional Berhad - A Visit to TNB Sepang Solar

Date: 22/07/2019

Source  :  PUBLIC BANK
Stock  :  TENAGA       Price Target  :  14.12      |      Price Call  :  HOLD
        Last Price  :  13.78      |      Upside/Downside  :  +0.34 (2.47%)

We visited TNB Sepang Solar (TSS) recently with a few other analysts to gain better insights into the Group’s solar power operations. Currently with a generating capacity of 50MWac and the largest large scale solar (LSS) plant by installed capacity, TSS is located in Mukim Tanjung Dua Belas, Kuala Langat, next to a water treatment plant by Air Selangor. It started commercial operations in November 2018. Solar is currently making up 0.4% to the generation mix. While renewable energy-related (RE) potential is vast, overall contributions to TNB remain inconsequential at this juncture at 355MW of RE generations. TNB targeted to increase to 1,700MW by 2025. We maintain our Neutral call on TNB, with unchanged target price of RM14.12.

  • TSS commenced commercial operations on 23rd November 2018 and has a power purchase agreement (PPA) of 21 years. It has an installed capacity of 50MWac (i.e. 78MWdc), with 243,000 solar panels, 360 combiner boxes and 24 inverters. We understand that it is committed to supply annual energy of not less than 95,134MWh to the Grid System Operator (GSO), equivalent to 70% of its annual capacity, failing which penalties will be charged on the differences between energy output based on the same rate that it should be receiving. TSS sits on a land size of 243 acres, and is estimated to have an irradiation of 1,667.7 kWh/m² per year. To note, Middle East solar facilities can have about 2,200 kWh/m²-yr, while locations further up north Peninsular Malaysia (i.e. Perlis, Kedah) will have irradiations of 1,800-1,900 kWh/m²-yr.
  • Solar operations. Energy produced from the solar panel will be connected to the combiner box, which will then go through the inverters to convert the energy from direct (dc) into alternating current (ac) for usage, with voltage subsequently stepped up to 33kV. It is then connected to the switchgear and transformer which then further steps up the voltage to 132kV. The solar power will then be connected to the PMU Bukit Changgang substation which is located approximately 11.7km from the solar plant. The solar plant will automatically starts its operation around 7.30am and shuts down when there is no solar irradiation. We understand that its solar panel is tilted by 5 degrees towards the south to receive optimum solar irradiation.
  • Other RE projects. The TNB Bukit Selambau 30MW solar project in Sg Petani (Kedah) is on-going though still at early stages (i.e. already started civil works on-site). TNB is also looking at retail operations for the rooftop installations. To-date, it has signed-up around 7MW solar rooftop installations with various customers. In terms of small renewable energy (RE) assets, TNB is also looking at biomass, biogas, mini-hydro and waste to energy, with some projects are under evaluations and due diligence stage. Bidding submissions for the third round of LSS (LSS3) for a total of 500MW will be closed this August, with the highest bidding capacity at 100MW and expected to be commercially operational by 2021.

Source: PublicInvest Research - 22 Jul 2019

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