KUALA LUMPUR: CGS-CIMB Equities Research is positive on Tenaga Nasional Bhd (TNB) as the regulatory risk from the energy sector reform seems to be low, as the power giant will likely maintain its monopoly in the transmission and distribution segments.
The research unit said in its latest report that TNB is one of the cheapest big cap counters in the market with a decent dividend yield of about 4% for financial year (FY) 2019-FY21.
“Our target price of RM15.40 is based on the sector average CY2020 P/E of 15 times,” it said.
Last week, TNB organised a site tour for 16 sell-side analysts to the TNB Sepang Solar plant in Selangor.
The 50MW large-scale solar plant is currently the largest one in Malaysia, awarded under the first round of large-scale solar photovoltaic (LSS1) plants bidding. The plant is located 20km north-west from the KL International Airport.
The TNB Sepang Solar plant started operations in November 2018, with a 21-year LSS power purchase agreement (PPA) signed with TNB. The plant has a land size of 243 acres and about 243,000 solar PV modules were installed.
TNB Sepang Solar plant purchased the solar PV modules from Canadian Solar, a China-based company due to lower costing.
“Locally produced solar PV modules usually cost around 25% more than those from China,” it said.
The solar PV modules are positioned facing southward to get the most exposure to sunlight during the day, and tilted by about five degrees to ensure maximum energy generation and easier maintenance.
The tariff for package three (including TNB Sepang Solar) under LSS1 was 40-43 sen/kwh versus the average generation tariff of 27.05 sen/kwh under the current incentive-based regulation mechanism.
TNB has 75MW renewable energy (RE) capacity installed as of March 2019, which is about 0.6% of its total installed generation capacity. “We believe TNB will likely expand its RE portfolio, in line with government’s focus to increase the national installed RE capacity to 20% of total installed capacity by 2025,” CGS-CIMB Research said.
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