TNB’s 2Q profit down, but sees progress from turnaround efforts

This augurs well for TNB as we continue to drive transformation efforts ahead of the pending industry reforms to the MESI 2.0, says CEO


TENAGA Nasional Bhd’s (TNB) turn-around efforts are beginning to pay dividends despite noting weaker profitability for its recent quarter as the company readies itself for impending changes to the domestic electricity market.

Its president and CEO Amir Hamzah Azizan said the national utility is beginning to see progress from these turnaround efforts after five challenging quarters for its international division.

“This augurs well for TNB as we continue to drive transformation efforts ahead of the pending industry reforms to the Malaysia Energy Supply Industry (MESI) 2.0,” he said in a statement last week.

“In tandem with transformation initiatives to better manage our core businesses, we are sharpening our focus on ensuring TNB’s international portfolio continues to add value to the group.”

TNB’s international assets include a 30% stake in India’s GMR Energy Ltd and Turkey’s GAMA Enerji AS, as well as a 50% stake in Vortex Solar Investments SARL and an 80% stake in Tenaga Wind Ventures UK Ltd — UK-domiciled renewable-energy companies.

The company is also in the middle of transferring its domestic power generation and electricity retail businesses to two newly-incorporated, but wholly owned subsidiaries.

The exercise is expected to be completed in the third quarter of next year (3Q20).

This is in anticipation of a more liberalised electricity market in Malaysia and Amir Hamzah said the restructuring is a key enabler of TNB’s five-year corporate strategy to bring the company to the next stage of growth at the global level.

“In Malaysia, TNB will continue to work closely with the government and our regulator to facilitate a gradual and managed change through the MESI 2.0 framework, taking into consideration the key interests of all stakeholders — in particular, everyday consumers,” he said.

For 2Q19, TNB’s net profit contracted 9.7% year-on-year (YoY) to RM1.12 billion on regulatory adjustments and the adoption of new financial standards.

The former is now accounted for every month, while the company also adopted the Malaysian Financial Reporting Standards 16 Leases. Note that the latter is a non-cash adjustment to the group.

Revenue grew 3% YoY to RM12.88 billion, largely driven by higher electricity sales.

For the first half of the year, TNB’s net profit fell 20.5% YoY at RM2.67 billion, while turnover rose 5.4% YoY to RM26.12 billion.

The company declared a 30 sen dividend for 2Q19, which will amount to a total payout of RM1.71 billion.

TNB closed 16 sen or 1.16% higher last Friday at RM13.96, valuing the power utility at RM79.4 billion.