• Tenaga Nasional (TNB) has received a letter of motification from the Ministry of Energy and Natural Resources to develop a 300MW hydroelectric power plant at Mukim Ulu Nenggiri, Gua Musang, Kelantan.

• The hydroelectric power plant is estimated to take five years to be completed.

• The scheduled commercial operating date is expected to be 1 June 2027. The project is estimated to cost about RM5bil. TNB will use debt and equity to finance the hydroelectric power plant.

• We view this development positively. The 300MW Nenggiri hydroelectric power plant would increase TNB’s renewable assets portfolio to 3,706W from 3,406MW currently.

• TNB’s objective is to achieve a renewable assets portfolio of 8,300MW by FY25F. TNB also plans to reduce its coal generating capacity by 50% by FY35F and be coal-free by FY50F.

• We do not expect the Nenggiri hydroelectric power plant to contribute significantly to TNB’s earnings in the immediate term as the power plant would take five years to be completed. Also, the size of the power plant is small at 300MW.

• As at end-FY20, TNB’s effective generating capacity stood at 13,857MW. In FY20, hydro accounted for 3.8% of Peninsular Malaysia’s generation mix while solar accounted for another 0.7%.

• We maintain BUY on TNB with a fair value of RM12.10/share.

Source: AmInvest Research - 8 Sept 2021