---
endpoint: analytics
pattern: Power
status: done
latency_ms: 237586
conversation_id: 6d8f3fb8-d6ed-49a5-bdf0-c05d7266d4d2
citations: 13
created: 2026-05-31 20:12:35Z
---

# What catalysts could drive upside/downside for Tenaga in the next 12–18 months?

# Tenaga Nasional (TNB MK): Catalysts to Watch — Next 12–18 Months

CLSA rates Tenaga **O-PF** with a **DCF-derived TP of RM17.60** (vs. recent RM14.28, ~23% upside) [4]. Among Malaysian top picks, CLSA flags TNB as **"attractively valued, and should benefit from continued datacentre (DC) build-out in the country"** [7]. UBS upgraded to Buy in Mar-2026 with a MYR17 TP (vs Nomura's downgrade to Neutral / TP MYR12.90 in Dec-2025), framing the bull/bear spread at MYR12.90–18.00 [15][16]. Below are the discrete catalysts most likely to move the equity between now and FY2027.

---

## 1. UPSIDE CATALYSTS

### A. Data-centre demand acceleration (the dominant bull case)
- CLSA's investment thesis explicitly hinges on **"Rising demand from data centre [which] will require significant upgrades on national grid and transmission lines"** [3]. Tenaga is positioned as the **supplier of power to all DC players** [6][7].
- Channel checks with the largest live colocation operator in Malaysia indicate **planned total DC capacity of over 800MW by 2028 (vs ~300MW today)**, with strong end-customer demand "especially from Chinese companies" [8]. Construction tenders already awarded include Sunway's **RM1.2bn** US-tech DC build and Gamuda's **RM1.0bn** Negeri Sembilan enabling works [6].
- On the Q1 FY2026 call (May 2026), management **revised electricity demand growth guidance UP to 4.5%–5.5%** (vs. CLSA's modelled 4.5%), in line with Malaysia GDP of 4%–5% [9]. **Any further upward revision is the cleanest single-line upside catalyst.**
- Commercial-segment electricity demand grew **+5.1% YoY in 1Q25**, cushioning a -5.5% YoY industrial drag — confirming DCs are already pulling load [1].

### B. Contingent capex activation → RAB step-up
- Under RP4 (2025–2027), Tenaga earns a **guaranteed 7.3% net regulatory return on regulated asset base** [2]. RAB growth is the primary earnings driver.
- Approved **base capex of RM26.6bn** for RP4 is being deployed (RM2.79bn in 1Q25 alone, 10.5% executed); on top sits **RM16.3bn of contingent capex "likely to be utilised in 2026-27 should demand grow at a much faster pace"** [1]. This is upside NOT yet in CLSA's forecasts [1].
- Management reaffirmed **FY2026 group capex guidance of ~MYR 18bn (MYR 15bn regulated + MYR 3bn non-regulated)** with contingent capex pending government approval — every incremental contingent ringgit approved adds to RAB at 7.3% [9].

### C. New generation wins and energy-export optionality
- **1,400 MW CCGT win (Feb 2026):** Tenaga-Aurora Power consortium received Letter of Notification for a new CCGT plant; **"expected to be earnings accretive to TNB upon its scheduled commercial operation date"** with 3-year build [17].
- **Cross-border transmission optionality:** TNB clinched a deal for **power transmission from Laos to Singapore** (Jan-2026), opening a new revenue stream beyond the domestic regulated wheel [19]. CLSA's thesis already cites **"power sector reform and differentiated WACC for Regulatory Period 4 (2025-27) will pave the way for Tenaga to benefit from energy exports"** [3].
- **State Grid of China MoU (Oct-2025)** establishes a JV working committee — supports grid-modernisation execution and potential technology transfer [18].

### D. ICPT/AFA over-recovery and balance sheet de-risking
- 1Q FY2026 results showed **AFA over-recovery of RM861.7m** (vs. RM175.2m in 1Q25) — signal that fuel-cost pass-through is working in TNB's favour at current commodity prices.
- **Regulatory receivables collapsed from MYR 1.9bn (Dec-2025) to MYR 0.7bn (Mar-2026)** after a MYR 1.3bn ICPT settlement — management framed this as **"a reflection of the fact that government continue to honor what is the framework of the IBR"** [13]. Continued reductions remove a long-standing equity overhang.
- Active **MYR 10bn MPN Sukuk programme + MYR 1.05bn Green SRI Sukuk for LSS5** (Apr-2026) — funding cost achieved AAA-equivalent on AA project rating, signalling cheap capital availability to fund the capex cycle [12].

### E. FY2025 beat and dividend trajectory
- FY2025 EPS landed at **81.9 sen vs FactSet 75.0 sen** (range 64.0–84.6); revenue MYR67.72B vs Street MYR65.61B; **final dividend raised to 28 sen vs 26 sen** prior year — supportive baseline before the RAB expansion years [14]. CLSA models dividend payout climbing 53–55% in 2025/26 [11].

---

## 2. DOWNSIDE CATALYSTS / RISKS

### A. Cost-pass-through politicisation
- Base tariff history shows the **ICPT surcharge already at 18 sen/kWh in 1H25 (total tariff ~59 sen/kWh)** — politically sensitive levels at which government may intervene if commodity costs spike again [5]. Any pushback on full ICPT/AFA recovery directly dents earnings.
- CLSA's base case assumes implied tariff staying around **39.6 sen/kWh** — a regression here means an earnings hit.

### B. Coal/gas mix and fuel-cost shock
- TNB management confirmed **"we are not building any more coal plants, but we are building quite a number of gas plants, especially high-efficiency combined cycle gas plants"** [10]. The transition increases reliance on imported LNG/piped gas.
- The Q1 FY26 call flagged that **"the first impact" of ICPT challenges has been the increase in the gas price** — a meaningful gas price spike (Russia/Middle East shock) before the AFA mechanism passes it through would compress margins.

### C. Q3 FY2025 negative print (already realised, but watch the next two)
- **Q3 FY2025 PBT fell -36% YoY to MYR1.21bn** (revenue +20%) — a reminder that quarterly volatility from one-off items (impairments, fuel timing, ICPT timing) can still produce ugly headlines that overshadow regulated-business stability [21]. Nomura's Dec-2025 downgrade to Neutral with TP MYR12.90 was anchored on this earnings drag [16].

### D. Data-centre execution bottlenecks
- CLSA's DC channel check identifies **water supply as the stumbling block to growth** — one operator has resorted to wastewater treatment for cooling [6]. Any prolonged water/grid permit delay slows DC commissioning → slows demand pull-through to TNB.
- Note also: **government has not yet legislated local-supplier mandates for foreign DCs** [6] — protectionist moves could complicate hyperscaler customer relations.

### E. Management transition risk
- **CEO Megat Jalaluddin stepped down 28-Feb-2026; Shamsul bin Ahmad (former Chief Regulatory & Stakeholder Management Officer) succeeded 1-Mar-2026** [20]. Continuity of RP4 execution under a regulatory-background CEO is constructive but unproven through a full reporting cycle.

### F. Funding/gearing
- The MYR 18bn capex programme is being funded primarily through bonds and Sukuk; **management explicitly states "gearing is a major source of this funding"** as capex scales [12]. Cost-of-debt creep or a sukuk market dislocation would feed into the WACC anchor of CLSA's DCF (currently 7.2% WACC, 3% terminal growth) [11].

### G. WACC reset risk in RP5
- CLSA's investment thesis is anchored to the **differentiated WACC under RP4 (2025–27)** [3]. The next regulatory period reset (announced ~late-2027) could compress the allowed return; this is a 12–18-month overhang into the back-end of the window.

---

## 3. Catalyst Calendar Summary

| Window | Catalyst | Direction | Key reference |
|---|---|---|---|
| Each quarter | Commercial/DC demand growth print (above 5.5%?) | Up | [9][1] |
| 2026–2027 | RM16.3bn contingent capex approval & deployment | Up | [1] |
| 2026–2027 | New CCGT 1,400 MW build progress milestones | Up | [17] |
| 2026 | Laos–Singapore transmission financial close | Up | [19] |
| H2 2026 | ICPT/AFA review cycles — tariff politics | Down risk | [5] |
| Ongoing | Regulatory receivable balance reduction below MYR 0.7bn | Up | [13] |
| Late 2027 | RP5 WACC / RAB framework announcement | Either | [3] |
| Each quarter | Gas/coal price pass-through timing | Down risk | [10] |
| 2026 | New CEO first full strategic plan rollout | Either | [20] |

---

## 4. Bull / Base / Bear Triangulation (the Street's spread)

- **Bull case (UBS, Mar-2026): TP MYR17, +19% upside** — premised on DC demand and capex acceleration [15].
- **Base case (CLSA O-PF): DCF TP RM17.60, +23.2% upside** — 4.5% demand growth, 7.3% guaranteed regulatory return, contingent capex NOT modelled [4][1][2][8].
- **Bear case (Nomura Neutral, Dec-2025): TP MYR12.90, ~1% upside** — anchored to Q3 FY25 weakness and tariff-political risk [16].

The 12–18-month outcome hinges on whether (a) contingent capex unlocks and (b) DC load materialises at the upper end of the 4.5–5.5% demand band, against (c) tariff/regulatory pushback and fuel-pass-through politics.

---

**Sources**

[1] CLSA — Tenaga – O-PF (Fresh start) — 27 May 2025 — 607960696LinqAlpha.PDF
[2] CLSA — Tenaga – O-PF (Fresh start) — 27 May 2025 — 607960696LinqAlpha.PDF
[3] CLSA — Tenaga – O-PF (Fresh start) — 27 May 2025 — 607960696LinqAlpha.PDF
[4] CLSA — Malaysia Strategy (1Q25 results: outlook not as dire) — 9 June 2025 — 607961581LinqAlpha.PDF
[5] CLSA — Tenaga – O-PF (Fresh start) — tariff history table — 27 May 2025 — 607960696LinqAlpha.PDF
[6] CLSA — Malaysia Strategy (Data centre channel check) — 6 June 2025 — 607961433LinqAlpha.PDF
[7] CLSA — Malaysia Strategy (Data centre channel check) — 6 June 2025 — 607961433LinqAlpha.PDF
[8] CLSA — Malaysia Strategy (1Q25 results: outlook not as dire) — 9 June 2025 — 607961581LinqAlpha.PDF
[9] TNB — Earnings Call, Q1 FY2026 — May 2026
[10] TNB — Earnings Call, Q1 FY2026 — May 2026
[11] CLSA — Tenaga – O-PF (Fresh start) — DCF and valuation — 27 May 2025 — 607960696LinqAlpha.PDF
[12] TNB — Earnings Call, Q1 FY2026 — Sukuk and funding programme — May 2026
[13] TNB — Earnings Call, Q1 FY2026 — Regulatory receivables — May 2026
[14] StreetAccount — TNB FY EPS 81.9sen vs FactSet 75.0sen — 26 Feb 2026
[15] StreetAccount — UBS upgrades TNB to Buy, TP MYR17 — 2 Mar 2026
[16] StreetAccount — Nomura downgrades TNB to Neutral, TP MYR12.90 — 2 Dec 2025
[17] StreetAccount — TNB-Aurora Power wins 1,400 MW CCGT — 13 Feb 2026
[18] StreetAccount — TNB MoU with State Grid Corp of China — 26 Oct 2025
[19] StreetAccount — APAC Headlines: TNB Laos–Singapore transmission — 16 Jan 2026
[20] StreetAccount — TNB appoints Shamsul Ahmad as CEO — 27 Feb 2026
[21] StreetAccount — TNB Q3 EPS 15.1 sen vs y-a 24.9 sen — 28 Nov 2025

## Citations

- [9] **Tenaga Nasional Berhad, Q1 2026** · external
- [10] **Tenaga Nasional Berhad, Q1 2026** · external
- [11] **Tenaga Nasional Berhad, Q1 2026** · external
- [12] **Tenaga Nasional Berhad, Q1 2026** · external
- [13] **Tenaga Nasional Berhad, Q1 2026** · external
- [14] **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>
- [15] **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>
- [16] **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>
- [17] **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>
- [18] **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>
- [19] **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>
- [20] **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>
- [21] **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>

