TNB set to expand renewables in Australia
PETALING JAYA: Tenaga Nasional Bhd 's (TNB) push into Australia's renewable energy (RE) sector is set to give the Malaysian utility a strategic foothold in one of the world's most ambitious energy transition markets.
The move positions the group to capture opportunities from Australia's drive to raise RE generation to 82% of its national mix by 2030, from around 39%.
In its report, TA Research, which recently participated in a technical visit to TNB's Australian operations under Spark Renewables Pty Ltd, said it is positive on TNB's expansion into the Australian energy market.
Additionally, the national utility company in 2023 acquired Spark, which owns the operational 120 megawatts Bomen Solar Farm in Wagga Wagga, New South Wales, and is building a pipeline of greenfield projects.
'Spark provides a strategic platform for TNB to gain exposure to Australia's aggressive energy transition given a national target of an 82% RE generation mix by 2030,' it noted.
According to the research house, Spark complements the other two subsidiaries within TNB's New Energy Division, namely Vantage RE, which operates in the United Kingdom and Ireland markets, and TNB Renewables Sdn Bhd, which houses the group's domestic RE portfolio, with a collective target of achieving 14.3 gigawatts (GW) RE capacity by 2050.
Rather than focusing on acquiring ready-made, operational assets, TNB's strategy with Spark marks a shift towards greenfield development, which can potentially offer higher returns.
The company's expansion comes as Australia accelerates coal plant retirements – 90% of its 21GW coal capacity is due to be phased out by 2035 – requiring vast new solar, wind and storage capacity, as well as 4,000km of additional transmission lines over the next decade.
'Furthermore, the learnings from these more developed markets are valuable in shaping Malaysia's own energy transition, both from a technical as well as policy and regulatory standpoint,' TA Research added.
The research house, however, highlighted that Spark's near-term earnings contribution will be 'relatively small given TNB's large earnings base from its regulated and generation business domestically'.
TA Research kept its forecasts intact, saying, 'we make no change to our earnings estimates at this juncture while our 'buy' call and discounted cash flow-derived target price are maintained at RM17.30, notwithstanding the overhang from the ongoing additional tax assessment by the Inland Revenue Board.'
It also pointed out that, following a Federal Court decision on a 2018 tax case, 'the total resubmission, consisting of close to 70,000 individual projects, will be scrutinised by the Finance Ministry before approval – in the best case, we reckon the resubmission could offset TNB's RM7.2bil (RM1.23 per share) cash exposure to the tax liability.'
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