---
endpoint: analytics
pattern: Power
status: done
latency_ms: 331928
conversation_id: eaf03fac-ac2e-4f2a-9386-1ad75c03d303
citations: 20
created: 2026-05-31 19:02:20Z
---

# Provide a one‑year narrative of Tenaga, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Tenaga Nasional (TNB MK / 5347) — A One-Year Narrative (May 2025 → May 2026)

Tenaga moved from a "fresh-start" regulatory reset into a tariff overhaul, a tax-court setback, a sequence of soft quarters, a senior management change, and finally a fundamental re-acceleration in earnings. Sentiment tracked that journey almost in lockstep — opening at consensus Buy, drifting to Neutral by year-end on weaker quarterly prints, then re-rating back to Buy after FY results and the CCGT contract win confirmed the data-centre demand thesis was real.

---

## 1) Starting Point — A "Fresh Start" Going Into Regulatory Period 4 (May 2025)

Tenaga entered the period priced at **RM14.28** with a 12-month CLSA target of **RM17.60** (+26% upside), market cap **US$19.3bn**, foreign shareholding ~19%, and Khazanah/PNB anchor holdings of ~21% each [3]. CLSA framed 1Q25 as the company "rolling into a new regulatory cycle with a decent set of numbers" — core net profit **RM1.18bn (+10.5% YoY, +28.1% QoQ)** on revenue **RM16.0bn (+17.6% YoY)** [1].

Beneath the headline, the operating mix was already shifting:

- **Commercial demand +5.1% YoY**, more than offsetting **industrial −5.5% YoY**, with data-centre offtake the clear marginal driver [2].
- **Regulated capex RM2.79bn in 1Q25 alone (~10.5% of the RM26.6bn base capex)** — and CLSA flagged a further **RM16.3bn contingent capex** that could be triggered in 2026–27 if demand kept accelerating [2].
- Generation EBIT margin expanded to **6.4% (vs 4.6% in 2024)** after Manjung 4 returned in November 2024 [2].

The investment case at this point rested on a **guaranteed 7.3% net regulatory return on the regulated asset base** — i.e., the more grid capex Tenaga deployed, the larger the earnings base.

**FY25 base-case financials (CLSA):**

| RMm | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---:|---:|---:|---:|---:|
| Revenue | 53,067 | 56,737 | **63,041** | 65,800 | 68,707 |
| Net profit | 2,771 | 4,697 | **5,197** | 5,294 | 5,211 |
| EPS (sen) | 48.7 | 82.6 | **91.4** | 93.1 | 91.6 |
| PE (x) | 28.7 | 16.9 | **15.3** | 15.0 | 15.3 |
| ROE (%) | 4.7 | 7.9 | **8.4** | 8.3 | 7.8 |
| Net debt/equity (%) | 69.9 | 60.4 | **59.0** | 56.2 | 51.0 |
| Dividend yield (%) | 3.3 | 3.2 | **3.4** | 3.7 | 3.0 |

Source: CLSA, May 2025 [4].

---

## 2) Data-Centre Buildout = The Core Bull Story (June 2025)

In early June, CLSA channel checks with one of the largest co-location operators in Malaysia (Cyberjaya / Bukit Jalil / Sedenak / Ulu Tiram, **~800 MW planned by 2028 vs ~300 MW live**) confirmed end-customer demand — especially from Chinese hyperscalers using Malaysia as a regional hub — was robust. The DC theme was monetised at Tenaga via grid/transmission upgrades, with **Sunway Construction awarded RM1.2bn (29-May)** and **Gamuda awarded RM1.0bn enabling works (5-May)** [5].

CLSA's framing: "**Tenaga remains inexpensive at 15.3x / 15.0x 25/26CL PE with potential for contingent capex to be triggered over the next 12 months**" [6]. In the firm's June 9 strategy piece, **TNB was listed alongside MISC and CIMB as "the most compelling among our top picks"** — flagged as attractively valued, with upside from continued DC build-out [7]. The comp table pegged Tenaga at 15.5x/15.3x FY25/26 PE, **8.4%/8.3% ROE, 3.4%/3.6% yield**, and EPS growth of +10.6%/+1.9% — a clean defensive-growth profile relative to Malaysian banks and consumer names [8].

On **16-June** the government confirmed Tenaga would lead the **national grid infrastructure upgrade** [9] — formalising the investment case underlying the contingent-capex argument.

---

## 3) The Tariff Reset and Regulatory Period 4 (Late-June → 1-July 2025)

The pivotal regulatory event came on **1-July 2025**, when Tenaga's revised electricity tariff schedule went live. Buy-side and sell-side broadly read it as **fair, transparent, and neutral-to-positive**: tariffs and system costs better aligned (reducing under-recovery of fixed costs), customers paying a fair share of infrastructure, rebates incentivising energy efficiency, and crucially **"the incentive-based regulation framework ensuring that the company ultimately earned the regulatory rate of return on the regulated asset base with full pass-through of fuel cost volatility"** [10]. The stock closed **+3.6% on the day**, outperforming the KLCI.

This drove a wave of rating upgrades the week before:

- **AmInvestment Bank** lifted the Malaysian power sector to Neutral from Underweight (24-Jun) [11], and upgraded TNB to Hold from Underweight with TP RM14.18.
- **UOB Kay Hian** upgraded to Buy from Hold, TP **RM16.30** (+14% upside) [12].

The CLSA analyst (Abdul Hadi Manaf) read the structure as "fairer, minimizing under-recovery of fixed costs… manageable for consumers, especially ultra-high voltage users such as data centres… [with] greater renewable energy penetration into the system" [10].

---

## 4) The Tax-Ruling Shock (2-3 July 2025)

A day later, sentiment cracked. **Malaysia's Federal Court ruled in favour of the Inland Revenue Board's appeal, reinstating a MYR1.81bn 2018 tax assessment (net MYR1.25bn after penalty remission)** [13]. The headline FY-impact was material, and the stock dropped **−4.1% on 3-July, closing at RM14.00** [14]. This was the period's largest single-day drawdown and reframed the upside narrative around a litigation tail risk that had previously been considered manageable.

---

## 5) Operational Soft-Patch — Quarterly Earnings Decline (Aug → Nov 2025)

The Q2 and Q3 prints were the period's biggest fundamental disappointment, eroding sell-side conviction even as revenue continued to grow:

| Reported | Revenue | YoY Rev | PBT | YoY PBT | EPS | YoY EPS |
|---|---|---|---|---|---|---|
| **Q2 (28-Aug-25)** [15] | RM16.84bn | +17% | RM1.60bn | (9%) | 19.9 sen | 24.9 → 19.9 sen |
| **Q3 (28-Nov-25)** [16] | RM17.25bn | +20% | RM1.21bn | **(36%)** | 15.1 sen | 24.9 → **15.1 sen** |

**Quality-of-earnings divergence:** revenue scaled +17–20% YoY (consistent with the tariff reset and DC volumes), but bottom-line margin compressed sharply. Q3's 36% PBT decline was the inflection point — it broke the "regulated-return floor" narrative for many investors, even though Tenaga guided **"performance to remain stable for 2025"** [16].

The interim dividend was held at 25 sen (Q2 [15]). On **2-December-2025, Nomura downgraded TNB to Neutral from Buy, slashing the target price to MYR12.90 from MYR16.60** — implying just 1% upside [17]. By that point Tenaga had drifted to RM12.74.

---

## 6) International / Renewables Re-positioning (Aug 2025 → Jan 2026)

Through the soft-quarter period, management leaned heavily into international and cross-border initiatives — a narrative cushion when domestic earnings were missing:

- **TNB International / Vantage RE / Spark Renewables**: International RE capacity rose to **1,285 MW (Sep 2025) from 1,183 MW (Dec 2024)**; total group RE portfolio at **4,609 MW = 22%** of capacity vs 21% in 2024 and 20% in 2023, with the stated goal of **"50% coal capacity reduction by 2035 and coal-free by 2050"** [18].
- **LTMS-PIP 2.0 Cross-Border Power**: Tenaga signed a tripartite Energy Wheeling Agreement Phase 2 under the Lao PDR–Thailand–Malaysia–Singapore corridor — **up to 100 MW of renewable energy from Laos to Singapore, with Malaysia as wheeler**; total cross-border capacity expands to up to **200 MW**, with **energy export of 10.5 GWh in 2025** [19]. This headline was carried into APAC daily themes on 16-January-2026 as Malaysia "clinches the Laos-to-Singapore transmission deal" [20].
- **State Grid Corp of China MoU (26-Oct-25)**: A joint working committee to drive collaboration on grid technology and possibly UHV transmission [21] — a strategic signal that Tenaga was leaning into the China grid playbook for its own ASEAN super-grid ambitions.
- **EV / Solar partnerships**: TNB-Perodua MoU (Feb-25) for charger deployment + solar integration; collaboration with Sime Darby Property under CREAM for the first NETR rooftop-solar project at City of Elmina (1.9 MWp pilot) [22].

These items helped sustain the long-term thesis through the weak quarters but did little to offset near-term earnings momentum.

---

## 7) The CCGT Win and the FY26 Result Inflection (Feb 2026)

Two events compressed into ten days **flipped sentiment back to constructive**:

- **13-February-2026**: The **Tenaga-Aurora Power consortium won the letter of notification for a 1,400 MW combined-cycle gas turbine plant** for Peninsular Malaysia's 2025–2029 capacity tranche. Three-year construction; project **expected to be earnings accretive to TNB upon COD** [23]. This was the first concrete monetisation of the regulated-capex-plus-generation pipeline investors had been buying for two years.
- **26-February-2026**: Tenaga reported **FY EPS 81.9 sen** — beating the FactSet consensus of 75.0 sen [19 est, 64.0–84.6 sen] — on **revenue MYR67.72bn vs MYR65.61bn estimate**, pretax income MYR6.18bn vs MYR6.01bn estimate, and **final dividend 28 sen/share (vs 26 sen prior year)** [24]. The full-year beat reconciled the optically weak Q3 against a strong 4Q recovery and confirmed the regulated-return mechanics were intact.

---

## 8) Management Change (27-February-2026)

On the same day as the results press cycle, **CEO Datuk Ir. Megat Jalaluddin bin Megat Hassan stepped down effective 28-Feb-2026** [25], with **Shamsul bin Ahmad (previously Chief Regulatory & Stakeholder Management Officer) appointed CEO effective 1-Mar** [26]. The choice signalled continuity on the regulatory file — Shamsul's prior portfolio sits at the heart of Tenaga's value drivers (RP4 implementation, tariff structure, NETR coordination), so the market read it as a regulator-friendly succession.

---

## 9) Re-rating: UBS Upgrade and the Period Close (2-March 2026)

**UBS upgraded TNB to Buy from Neutral on 2-March-2026** at **RM14.28**, raising the target to **MYR17 from MYR15 (+19% upside)** [27]. The FactSet consensus target had compressed to MYR16.32 (range MYR14.60–18) but was now pointing back up. The 12-month price arc closed materially above where it opened — and back at CLSA's original RM17.60 thesis level — despite the intervening drawdowns on the tax ruling and weak Q3.

---

## 10) Putting the Year Together — Why Sentiment Re-Rated Twice

| Phase | Sentiment | What Drove It | Stock Behaviour |
|---|---|---|---|
| **May–early Jun '25** | Constructive — "Fresh Start" | New regulatory cycle, 7.3% guaranteed return on RAB, DC capex visibility | RM14.28; CLSA O-PF RM17.60 [3][4] |
| **Late Jun–early Jul '25** | Most positive of the year | Tariff reset confirmed; UOB, AmInvest, CLSA all constructive | RM14.60; +3.6% on tariff briefing [10][12] |
| **2-3 Jul '25 (Tax shock)** | Reset lower | MYR1.25bn IRB tax ruling reinstated by Federal Court | −4.1% to RM14.00 [13][14] |
| **Aug–Nov '25** | Eroding | Q2 PBT −9%; Q3 PBT −36% on operating soft-patch | Drift to RM12.74; foreign-investor exit |
| **2-Dec '25** | Trough | Nomura downgrade; TP cut RM16.60 → RM12.90 | RM12.74 [17] |
| **Jan-Feb '26** | Rebuilding | LTMS Laos deal, State Grid China MoU, international RE growth | RM13.20–13.96 |
| **13-Feb '26 (CCGT win)** | Inflection | 1,400 MW CCGT consortium win — earnings-accretive at COD | RM13.96 [23] |
| **26-Feb '26 (FY results)** | Re-rate | FY EPS 81.9 sen beats 75.0 sen consensus; dividend up to 28 sen | RM14.18 [24] |
| **27-Feb '26** | Continuity | CEO transition; regulator-experienced successor | Neutral reaction [25][26] |
| **2-Mar '26** | Constructive again | UBS upgrade to Buy, TP RM17 (+19%) | RM14.28 [27] |

### The Valuation Discipline That Kept the Story Alive

The whole arc only makes sense if you give weight to the **incentive-based regulation** mechanism. The tariff revision in July 2025 created a perception (validated by the FY26 beat) that Tenaga's earnings are not really exposed to fuel-price volatility or one-off industrial demand softness — they revert to a regulated return on a *growing* asset base. The market briefly lost faith on the Q3 print, but FY-26 results, the CCGT contract win, and the structural data-centre demand thesis [5][6][7] reconfirmed the core compounding mechanic. The **net debt/equity glide from 69.9% → 51.0% (2023→2027CL)** [4] further reinforced that capex-heavy growth could be funded without compromising balance-sheet quality.

### What Drove Investor Sentiment Most

1. **Bull case anchored on data-centre-driven contingent capex** — RM16.3bn potential trigger over 2026-27 [2], and the RP4 framework guaranteeing returns on incremental investment [1].
2. **Bear case crystallised around quarterly earnings volatility and the IRB tax tail** — Q3 PBT −36% [16] and the RM1.25bn court ruling [13] dominated the August-December sell-off.
3. **Re-rating catalyst was the CCGT contract win + FY26 beat** [23][24] — converting "pipeline visibility" into "actual contracted earnings accretion."
4. **Long-duration thesis cemented by international RE growth and ASEAN grid leadership** — Vantage RE, Spark Renewables, LTMS-PIP 2.0 [18][19], State Grid China MoU [21] — repositioning Tenaga from a domestic utility into a regional grid/RE operator.

---

**Sources**

[1] Tenaga – O-PF (Fresh start) — CLSA (27 May 2025) — 607960696LinqAlpha.PDF
[2] Tenaga – O-PF (Fresh start) — CLSA (27 May 2025) — 607960696LinqAlpha.PDF
[3] Tenaga – O-PF (Fresh start) — CLSA (27 May 2025) — 607960696LinqAlpha.PDF
[4] Tenaga – O-PF (Fresh start) — CLSA (27 May 2025), Financials at a glance — 607960696LinqAlpha.PDF
[5] Malaysia Strategy (Data centre channel check) — CLSA (6 June 2025) — 607961433LinqAlpha.PDF
[6] Malaysia Strategy (Data centre channel check) — CLSA (6 June 2025) — 607961433LinqAlpha.PDF
[7] Malaysia strategy (1Q25 results: outlook not as dire) — CLSA (9 June 2025) — 607961581LinqAlpha.PDF
[8] Malaysia strategy (1Q25 results), Top picks comp sheet — CLSA (9 June 2025) — 607961581LinqAlpha.PDF
[9] StreetAccount Themes APAC Headlines (16-Jun-25)
[10] Street Takeaways – Tenaga Nasional Revised Tariff Structure — StreetAccount (3 July 2025)
[11] AmInvestment Bank upgrades Malaysian power sector to neutral — StreetAccount (24 June 2025)
[12] Tenaga Nasional upgraded to buy from hold at UOB Kay Hian — StreetAccount (24 June 2025)
[13] Malaysia Federal Court allows IRB appeal vs Tenaga (MYR1.25B) — StreetAccount (2 July 2025)
[14] StreetAccount Summary – SEA midday trading (3 July 2025): TNB −4.1% on tax ruling
[15] Tenaga Q2 EPS 19.9 sen vs 24.9 sen YoY — StreetAccount (28 August 2025)
[16] Tenaga Q3 EPS 15.1 sen vs 24.9 sen; PBT −36% — StreetAccount (28 November 2025)
[17] Tenaga downgraded to Neutral from Buy at Nomura; TP cut MYR16.60 → MYR12.90 — StreetAccount (2 December 2025)
[18] Tenaga Nasional Berhad, Q4 2025 slides — International RE portfolio
[19] Tenaga Nasional Berhad, Q3 2025 earnings call — LTMS-PIP 2.0
[20] StreetAccount Themes APAC Headlines (16-Jan-26)
[21] Tenaga formalises MoU with State Grid Corporation of China — StreetAccount (26 October 2025)
[22] Tenaga Nasional Berhad Q1 2025 Earnings Call (28 May 2025) — TNB-Perodua / Sime Darby partnerships
[23] TNB-Aurora consortium wins 1,400 MW CCGT bid — StreetAccount (13 February 2026)
[24] Tenaga FY EPS 81.9 sen vs FactSet 75.0 sen; final dividend 28 sen — StreetAccount (26 February 2026)
[25] CEO Megat Jalaluddin steps down 28-Feb-26 — StreetAccount (27 February 2026)
[26] Shamsul bin Ahmad appointed CEO effective 1-Mar-26 — StreetAccount (27 February 2026)
[27] Tenaga upgraded to Buy from Neutral at UBS; TP MYR15 → MYR17 — StreetAccount (2 March 2026)

## Citations

- [9] **Tenaga Nasional Berhad, Q3 2025** · external
- [10] **Tenaga Nasional Berhad Q3 2025 Earnings Call Dec 01 2025.pdf** · external
- [11] **Tenaga Nasional Berhad, Q4 2025** · external
- [12] **Tenaga Nasional Berhad Q1 2025 Earnings Call May 28 2025.pdf** · external
- [13] **StreetAccount Themes APAC Headlines (16-Jun)** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4300655&_doc_date=2025-06-16&_doc_product=SA>
- [14] **Tenaga Nasional upgraded to buy from hold at UOB Kay Hian Securities** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4305653&_doc_date=2025-06-24&_doc_product=SA>
- [15] **AmInvestment Bank upgrades Malaysian power sector view to neutral** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4305759&_doc_date=2025-06-24&_doc_product=SA>
- [16] **Malaysia's Federal Court allows Inland Revenue Board's appeal against Tenaga Nasional to reinstate 2018 tax assessment** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4312196&_doc_date=2025-07-02&_doc_product=SA>
- [17] **Street Takeaways - Tenaga Nasional Revised Tariff Structure** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4312537&_doc_date=2025-07-03&_doc_product=SA>
- [18] **Tenaga Nasional reports Q2 EPS 19.9sen vs year-ago 24.9sen** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4387160&_doc_date=2025-08-28&_doc_product=SA>
- [19] **Tenaga Nasional formalises MoU with the State Grid Corporation of China** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4434951&_doc_date=2025-10-26&_doc_product=SA>
- [20] **Tenaga Nasional reports Q3 EPS 15.1 sen vs year-ago 24.9 sen** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4488993&_doc_date=2025-11-28&_doc_product=SA>
- [21] **Tenaga Nasional downgraded to neutral from buy at Nomura** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4492010&_doc_date=2025-12-02&_doc_product=SA>
- [22] **StreetAccount Themes APAC Headlines (16-Jan)** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4522068&_doc_date=2026-01-16&_doc_product=SA>
- [23] **Tenaga Nasional-Aurora Power consortium receives letter of notification as successful bidder for 1400 MW CCGT power plant** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4558622&_doc_date=2026-02-13&_doc_product=SA>
- [24] **Tenaga Nasional reports FY EPS 81.9sen vs FactSet 75.0sen** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4575989&_doc_date=2026-02-26&_doc_product=SA>
- [25] **Tenaga Nasional CEO Megat Jalaluddin bin Megat Hassan steps down, effective 28-Feb** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4579180&_doc_date=2026-02-27&_doc_product=SA>
- [26] **Tenaga Nasional appoints Shamsul bin Ahmad as CEO, effective 1-Mar** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4579184&_doc_date=2026-02-27&_doc_product=SA>
- [27] **Tenaga Nasional upgraded to buy from neutral at UBS** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4583892&_doc_date=2026-03-02&_doc_product=SA>
- [28] **StreetAccount Summary - Southeast Asia midday trading update (3-Jul)** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4312836&_doc_date=2025-07-03&_doc_product=SA>

