Proposed internal reorganisation credit neutral to TNB’s AAA/stable rating

Published on 02 Aug 2019.

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RAM Ratings opines that Tenaga Nasional Berhad’s (TNB or the Group) proposed internal reorganisation exercise will not have any credit impact on the AAA/Stable rating of its RM5 bil Islamic MTN Sukuk Wakalah Programme (2017/2067). On 29 July 2019, TNB announced that its board of directors had approved a proposed internal restructuring, which will see the Group carving out two of its core business divisions – generation (GenCo) and customer services (RetailCo) – into separate subsidiaries, with TNB retaining full ownership.   

Post-restructuring, GenCo will house the local power-generating units (conventional and renewable energy plants) while managing the operation and maintenance business. RetailCo will emerge as the frontline service provider with added focus on green energy solution services, beyond meter products and beyond energy offerings. While the latter will be exposed to the risk of retail market liberalisation in the medium term, the impact on the Group’s business and financial profiles is perceived to be minimal. This is supported by TNB’s long-established presence and the minimal financial contribution from this segment (2.6% of the Group’s base tariff). 

Although each entity will have its own board and management team, the Group’s business and financial profiles remain unchanged from a consolidated perspective. TNB will retain its near-monopoly on the transmission and distribution (T&D) infrastructure across Peninsular Malaysia. The Group’s continued ownership of critical T&D assets anchors its strategic foothold as Malaysia’s national electricity company. Through GenCo, the Group is also expected to control the lion’s share of Peninsular Malaysia’s generating capacity – 49.9% as at end-December 2018. In addition, TNB is the sole off-taker of electricity produced by independent power producers (IPPs) in the peninsula. The Government of Malaysia (GoM), apart from owning a 65% stake in TNB through its various agencies, holds a special share in the Group. 

While the reorganisation of TNB could be a precursor to the further liberalisation of the power segment, we envisage the Group to maintain significant control over the power supply value chain in Peninsular Malaysia. As such, we believe that there is a very high likelihood of extraordinary government support for TNB in the event of financial distress, as defined in RAM’s methodology for the rating of government-linked entities.


Analytical contacts
Chu Jia Ying
(603) 3385 2519

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Padthma Subbiah
(603) 3385 2577


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