• Tenaga Nasional (TNB) announced that it has acquired a 49% stake in an offshore wind company, Blyth Offshore Demonstrator Ltd (BODL), from EDF Renewables, a subsidiary of the French utility company, Electricite de France (EDF).

• Currently, BODL owns offshore wind assets off the coast of Blyth, Northumberland, England.

• BODL’s assets include five turbines with a total installed capacity of 41.5MW and further development rights for a floating offshore wind project of up to 58.4MW, which will be located off the coast of Northumberland. The wind farm has been in operations since 2017.

• Although the investment in BODL is only an associate stake, we view it positively. The acquisition of a 49% stake in BODL would help expand TNB’s exposure to renewable assets and improve its expertise in managing wind companies.

• Including the 300MW Nenggiri hydroelectric power plant, which was secured in September 2021, we estimate TNB’s renewable assets portfolio to be 3,706MW (excluding the 49% stake in BODL as it is only an associate).

• TNB did not disclose the purchase consideration for BODL. However in March 2020, we estimate that TNB paid about £3.6mil per MW to acquire the balance 20% stake in its wind assets in the UK.

• Based on the cost of £3.6mil per MW, we estimate the purchase of a 49% stake in BODL to be about £73.2mil or RM420.2mil.

• We do not expect BODL’s earnings contribution to be significant as TNB’s shareholding is only 49% and BODL’s capacity is small at 41.5MW. As at end-FY20, TNB’s effective energy generating capacity stood at 13,857MW. In FY20, hydro accounted for 3.8% of Peninsular Malaysia’s generating mix while solar accounted for another 0.7%.

• Currently, TNB has close to 450MW of renewable energy assets in the United Kingdom. We maintain BUY on TNB with a fair value of RM12.10/share.

Source: AmInvest Research - 21 Oct 2021