KUALA LUMPUR: Tenaga Nasional Bhd’s internal restructuring to split its power generation and retail businesses into RetailCo and GenCo could lead to two separate listing entities under the two segments.
Kenanga Research said the restructuring may also pave the way for market reforms that will see new players in the electricity supply industry.
TNB on Monday announced that it would set up two new wholly-owned subsidiaries to house the domestic power generation business (GenCo) and the electricity retail business (RetailCo).
The structure for the remaining businesses such as transmission and distribution network, international business and corporate centre remains unchanged at the group level.
The reorganisation is expected to be completed by September this year.
It was to prepare for the upcoming reforms in the electricity supply industry with the government expected to reveal the Malaysia Electricity Supply Industry 2.0 next month, Kenanga Research said.
“As the retail business is highly anticipated to open up for new comers, RetailCo is prepared to improve efficiency to increase customer collection rate, which is currently slightly less than one sen per kiloWatt hour (kWh).
“At the same time, it will involve rooftop solar generation as well as pushing beyond energy offerings such as multi-utility bundling and billing, Fibre-to-the-Home broadband, or sales of third parties’ products,” the firm said in a report.
Meanwhile, GenCo is aiming to improve renewable energy generation through participation in large scale solar scheme, besides conventional capacity.
Kenanga Research said for assets size indication, the pro-forma financial year 20F18 book value for RetailCo was RM1.84 billion against the group’s book value of RM59.05 billion while GenCo had a book value of RM12.14 billion.
The firm maintained that the fears of open competition against TNB was overplayed given that RetailCo would only contribute less than three per cent to group earnings.
“Contributions from these two entities are fairly small for the moment, with RetailCo’s earnings before interest and taxation (EBIT) of RM200 million only making up less than three per cent of the group’s FY18 EBIT of RM6.7 billion, while GenCo’s RM1.6 billion accounted for 5.4 per cent of group earnings.”
Kenanga Research added that TNB had targeted EBIT of RM13.0 billion by 2025 with RetailCo earnings growing to RM700 million and GenCo to RM2.6 billion.