MARC Ratings has affirmed its AAAIS rating on TNB Northern Energy Berhad’s (TNB Northern) outstanding RM1.08 billion sukuk with a stable outlook.
TNB Northern is the funding vehicle for TNB Prai Sdn Bhd, which operates a combined-cycle gas turbine power plant (comprising two power generation units — Unit 10 and Unit 20 — with an installed capacity of 535.715MW each) in Seberang Perai Tengah, Penang. TNB Prai is 100%-owned by TNB Power Generation Sdn Bhd (TPGSB), which, in turn, is wholly owned by Tenaga Nasional Berhad (TNB, AAA/Stable). TNB Prai has a 21-year power purchase agreement (PPA) with TNB until February 2037.
TNB Northern’s rating is aligned with that of its ultimate parent, TNB, reflecting TNB’s unconditional and irrevocable rolling guarantee to cover any shortfall in TNB Northern’s revenue account and its commitment, through TNB Prai, to retain full ownership of TNB Northern.
During the review period, the plant had no major outages. Unit 10’s unplanned outage rate (UOR) rose to 19.9% in March 2025 due to a generator rotor failure in February 2024, but it has decreased to below 4.0% since end-May 2025. Unit 20’s UOR has also largely remained below the 4.0% threshold. As a result of the Unit 10 incident, TNB Prai received a reduced capacity payment (CP) of RM170.1 million in 2024. As in prior years, the company could not fully recover fuel costs under the energy payment (EP) mechanism, as both units operated above the PPA heat rate threshold due to normal degradation and a narrow margin between actual and contracted rates.
Cash flow from operations declined to RM37.5 million in 2024, primarily due to lower CP and EP. To support liquidity and capex, immediate parent TPGSB injected RM200 million via preference shares during the year. As at end-May 2025, TNB Northern’s cash balance stood at RM35.2 million. In the event of a liquidity shortfall to meet its sukuk obligation, TPGSB is expected to provide capital support.