MARC has affirmed Tenaga Nasional Berhad’s (TNB) issuer rating at AAA and the sukuk rating on TNB’s outstanding RM2.0 billion Al-Bai’ Bithaman Ajil Islamic Financing Bonds (sukuk) at AAAIS. The ratings carry a stable outlook.
TNB’s credit strength stems from its significant electricity generation capacity, lengthy and strong operational track record and a monopolistic position in electricity transmission and distribution in Peninsular Malaysia and Sabah. These factors remain key rating drivers. The ratings incorporate a two-notch uplift based on our assessment of a high likelihood of government support based on TNB’s critical role as the country’s principal energy provider, among other factors.
For 1H2021, TNB’s revenue rose by 6.1% y-o-y to RM23.9 billion on the back of a modest recovery in electricity demand as some economic activities resumed under less restrictive pandemic measures, compared to 2020 which had tougher lockdown measures implemented periodically. We expect electricity consumption to resume its uptrend in 2H2021 as more businesses reopen while pandemic concerns ease on high vaccination rates.
In 1H2021, cash flow from operations (CFO) rose to RM9.0 billion with CFO interest coverage and debt coverage improving to 7.86x and 0.16x (1H2020: 5.09x; 0.09x). Borrowings rose marginally y-o-y to RM49.2 billion and would potentially increase to part finance the group’s capex plan of RM9.5 billion in 2021. TNB’s annualised debt-to-OPBITDA stood at 2.53x (FY2020: 2.75x). Its sukuk principal of RM2.0 billion maturing in December 2021 will be repaid from internal funds and borrowings. Its consolidated cash and bank balances stood at RM5.3 billion as at end-June 2021, providing a strong source of liquidity.