MARC Ratings has affirmed its AAAIS rating on TNB Northern Energy Berhad’s (TNB Northern) outstanding RM1.045 billion sukuk with a stable outlook.
TNB Northern is the funding vehicle for TNB Prai Sdn Bhd, the operator of a combined-cycle gas turbine power plant in Seberang Perai Tengah, Penang. The plant comprises two generating units (Unit 10 and Unit 20), each with an installed capacity of 535.715MW. TNB Prai is wholly owned by TNB Power Generation Sdn Bhd, which is, in turn, a wholly-owned subsidiary of Tenaga Nasional Berhad (TNB). TNB Prai operates the plant under a 21-year power purchase agreement (PPA) with TNB, which runs through February 2037.
TNB Northern’s rating is aligned with TNB’s, underpinned by TNB’s unconditional and irrevocable rolling guarantee covering any revenue account shortfall and its commitment, via TNB Prai, to maintain full ownership. These factors demonstrate strong legal, strategic and operational integration within the TNB group.
The plant recorded no major outages over the past two years, with the unplanned outage rate for both units remaining below 4.0% as at end-2025. This supported higher capacity payments of RM181.3 million in 2025 (2024: RM170.1 million). Nevertheless, capacity payments were below budget due to a RM22.2 million availability target penalty imposed for failing to meet the contracted average availability target for Block 3 over the 2022–2024 period, mainly because of an extended maintenance period.
Net energy output rose to 6,008.2 GWh (2024: 5,365.5 GWh), driving energy payments higher to RM1,473.4 million (2024: RM1,115.7 million). Fuel cost recovery, however, remained constrained as both units operated above the PPA heat rate threshold due to normal degradation and the limited buffer between actual and contracted heat rates.
Cash flow from operations rose to RM103.6 million in 2025 (2024: RM37.5 million), supported by higher capacity and energy payments. Nevertheless, cash flow generation was below expectations due to lower capacity payments. Sukuk repayments of RM119.1 million were partly funded through cash reserves, resulting in a lower cash balance of RM52.8 million as at end-2025 (2024: RM73.6 million). Liquidity is expected to improve following the anticipated receipt of a RM48.4 million insurance claim in 2026 related to the Unit 10 outage.
Although the base case average finance service cover ratio is projected at 1.50x, it is expected to fall below 1.0x in certain years. However, TNB Prai’s liquidity is supported by the parental guarantee from TNB.