Investment Highlights

• We are keeping our HOLD recommendation on Tenaga Nasional (TNB) with an unchanged fair value of RM13.50/share.

• We visited Tenaga Nasional’s 50MW solar power plant in Sepang yesterday. Solar accounted for 0.4% of TNB’s generation mix in 1QFY19.

• Currently, TNB Sepang Solar is the largest solar power plant in Malaysia. Construction of the plant started in July 2017. The plant began commercial operations in November 2018.

• The Sepang solar power plant sits on an area of 243 acres in total. Solar panels and convertors occupy more than 160 acres. There are 200,000 solar panels in Sepang solar power plant. The solar panels come from China and these can last for more than 25 years. Solar panels degrade by about 0.5% each year.

• The solar panels are tilted five degrees to the south at TNB Sepang Solar so that they can capture sunlight optimally. The solar panels are tilted to the south as Malaysia is tilted three degrees to the north, thus ensuring an optimum alignment.

• We understand that an important requirement to set up a solar power plant is the land area. The land area has to be large enough to accommodate all of the solar panels and close enough to the interconnection grid.

• We do not know the tariff rates for TNB Sepang Solar. Hence, reference rates stipulated under the LSS (largescale solar) tender provide an indication.

• Based on the reference rates stipulated under the LSS3 tender, which will close at the end of August 2019, the reference tariff rate is 32.4 sen/kWh. In comparison, the reference rate under LSS1 was 41 sen/kWh.

• We understand that there are many parties which may be bidding in the LSS3 tender. These include foreign companies such as Marubeni and Kepco. Hence, competition is expected to be stiff. However, we reckon that TNB stands a good chance due to its experience in operating TNB Sepang Solar.

• The bidding process for the RM2bil worth of 500MW large scale solar plants is anticipated to close in August 2019. The winners will be announced at the end of the year. The largest capacity that a party can bid for is 100MW.

Source: AmInvest Research - 19 Jul 2019