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.
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