TNB delivers strong 3Q results, drives transformation agenda

The performance is driven by focus on delivering results across core businesses


TENAGA Nasional Bhd’s (TNB) net profit jumped 140% year-on-year (YoY) on reduced costs and the company expects a stable 2019 despite reforms of the country’s domestic power market.

For the third quarter ended Sept 30 this year (3Q19), Malaysia’s national utility company saw its profit more than double to RM1.2 billion from the RM501 million managed recorded in the corresponding quarter last year.

The jump was largely contributed by the lower operating expenses which dropped 9% YoY at RM10.65 billion, while fuel cost was significantly lower during the quarter.

Turnover, however, dipped 3.3% YoY to RM12.64 billion on regulatory adjustments which came into effect on 4Q18.

For the nine-month period, TNB’s net profit was almost unchanged at RM3.88 billion due to the new regulatory adjustments and financial reporting standards which increased finance costs.

Associate company also contributed to the higher operating income. Revenue for the period, meanwhile, was up 2.4% YoY at RM38.76 billion on higher electricity sales.

The return from the company’s regulated business under the Incentive-Based Regulation framework, primarily consisting of the transmission and distribution businesses, came in at RM2.39 billion.

Malaysia’s largest power company is engaged in the generation, transmission, distribution and sales of electricity.

The company said Malaysia’s economic growth is expected to be within projections in 2019, with the pace of growth to be sustained going into 2020.

“TNB has recorded a resilient YoY performance, driven by our focus on delivering results across both our core businesses, as well as our international investment portfolio,” said TNB president and CEO Datuk Seri Amir Hamzah Azizan (picture) in a statement.

“As we progress TNB’s strategic business plan and the parallel transformation initiatives to realise the plan’s 2025 targets, it is important that we maintain this focus to ensure operational excellence and continuous improvements to our efficiency levels,” he said.

Amir Hamzah said that the group’s UK portfolio performed better than anticipated, while its investment in Turkey showed signs of recovery following a turnaround plan implementation.

TNB owns two renewable energy companies in the UK — Vortex Solar (50% stake) and Tenaga Wind Ventures (80% interest), and a 30% equity interest in GAMA Enerji in Turkey.

“TNB will leverage on its existing UK assets and market experience to build up a sizeable renew-able-energy portfolio by 2021, through acquisition of both brown and green field projects,” he said.

He also said in accordance with a corporate restructuring exercise announced in July 2019, two wholly owned subsidiaries have been incorporated, namely TNB Power Generation Sdn Bhd (TPGSB) and TNB Retail Sdn Bhd (TRSB).

“The restructuring is a key enabler of TNB’s current strategic business plan to strengthen the company’s position in anticipation of pending reforms to the Malaysian Electricity Supply Industry.

“We are on track with the legal processes of asset and liability transfer for the two new subsidiaries, and expect to complete them by July next year,” he said.

The country’s economy, mea-sured by the gross domestic product, is expected to expand by 4.7% this year and 4.8% next year despite the prevailing external headwinds. A robust domestic economy means a higher utilisation of electricity to support the growth.

According to a recent Bloomberg report, TNB is reportedly considering setting up a RM10 billion Islamic bond programme to fund its expenditure, investments and working capital ahead of impending reforms to Malaysia’s electricity market.

These reforms will see the opening up of the electricity retail market to new players in a move to bring down costs for consumers, while creating a more competitive and sustainable market.

In July this year, TNB announced that it will transfer the assets and business undertakings of its domestic power generation and electricity retail divisions to two newly-incorporated but wholly owned companies respectively.

TPGSB and TRSB are geared towards the upcoming reforms in Malaysia’s electricity supply industry.

As part of the changes, domestic power generation and electricity retail will operate as standalone business entities under the purview of a separate board and management team.

TNB announced last week that the Finance Ministry approved the company’s proposed internal reorganisation which is expected to be completed by the third quarter of 2020.

TNB’s shares closed 16 sen or 1.2% higher at RM13.56, valuing the power company at RM77.16 billion.