Thursday 20, September 2018 by Bloomberg

Emerging Asia's top power firm considers M&A deals to go green


Tenaga Nasional Bhd., the most valuable listed utility company in emerging Asia, is looking to sell its gas-fired power plant in Pakistan as it pushes forward with a plan to rely more on renewable sources of energy.

Malaysia’s state-owned electricity producer wants to reduce reliance on fossil fuel, which accounts for about 70 per cent of its power generation, Chief Executive Officer Azman Mohd said in an interview in Kuala Lumpur. The company is also considering increasing its stake in Turkey’s Gama Enerji AS that produces electricity using water, wind and natural gas, he said.

“Our strategy is to invest in a combination of developed countries and emerging countries, contracted and market, fossil fuel and renewable—we are increasing our renewable,” Azman said in his first interview with international media since taking the helm in 2012.

Tenaga has a market value of nearly MYR 90 billion ($21.7 billion), beating publicly traded peers including India’s NTPC Ltd. and China’s Huaneng Power International Inc. The Malaysian company’s push toward sustainable sources of electricity aligns with the agenda set out by Energy Minister Yeo Bee Yin, who said this week that she’s confident of meeting a 20 per cent renewable energy target by 2030, from two per cent currently.

Tenaga wants to produce 1,700 megawatts from green energy by 2025, from 280 megawatts, according to a December investor presentation. That compares with the company’s total installed capacity of 24,139 megawatts, enough to power at least 1.6 million mid-sized homes.

Azman declined to give pricing details for the deals in Pakistan or Turkey as both are still in exploration stages. Tenaga owns 30 per cent of Gama Enerji with more than 1,100 megawatts of installed power in Turkey, as well as a 235-megawatt power plant in Pakistan’s Sindh province. The company seeks to build up its international investments, including its power assets in the UK and India, until they account for 20 per cent of earnings by 2025, according to its website.

“Shareholders’ returns are always paramount,” Azman said. “So, we are always looking at the gearing, and that’s why we are talking about monetizing certain things because we have to maintain the gearing at an optimum level.”

Tenaga has total debt of MYR 47.6 billion as well as cash and equivalents of MYR 14.6 billion as of 30 June, data compiled by Bloomberg showed.

Azman said utilities need to find better ways of offering electricity to customers and can’t afford to be complacent given technological advances. Tenaga is exploring the potential of using its network to deliver internet connection, with a pilot project started in the southern state of Malacca to assess the plan’s viability, according to a stock exchange filing last month.

The pilot is set to be completed this year and the company will be able to start seeking approvals from the government after that, Azman said.

“Technology is very disruptive, it’s changing the business model, it’s changing the way people operate,” he said. “So, on utility now, the thinking again is how to offer better electricity than you can generate on your own.”

Features & Analyses

Economics Adapting to a new era

  Abdullah Al-Fozan, Chairman of KPMG MESA and KPMG Saudi Arabia, provides an exclusive commentary on the Kingdom’s business… read more