KUALA LUMPUR: Tenaga Nasional Bhd (TNB) may raise more than RM10 billion in new debts as early as next year to finance its energy transition, analysts said.
Together with raising its debt level, TNB is also expected to lower its dividend payment to pay for the energy shift.
Analysts at Affin Hwang Capital said TNB could raise its gearing level to 55 per cent from 51 per cent currently. This means TNB should be able to raise at least RM11 billion in borrowings.
TNB recently announced an ambitious capital expenditure (capex) plan to transform the group for a coal-free future.
The group told a media briefing last month that it planned to invest around RM20 billion annually over the next 28 years to fast track its energy transition plan to reduce its emissions intensity to net zero by 2050.
President and chief executive officer Datuk Indera Baharin Din said the investment would pave the way for TNB's journey towards its net zero aspiration and open opportunities in more than doubling its earnings.
Affin Hwang said TNB was looking at some new avenues for fresh capital including exploring the possibility of an initial public offering (IPO), but not in the immediate term, possibly post-2025.
"TNB should be able to raise its gearing level to 55 per cent from 51 per cent currently, translating to at least an additional RM11 billion in borrowings. As such, there is a risk of a lower dividend payout moving forward as TNB needs to reprioritise cash deployment," it said.
MIDF Research likes TNB's long-term decarbonisation initiatives, but it expects near-to-mid-term "transition pain".
TNB would likely endure in earnings impact from early coal plant retirement and stake dilution from CCUS (carbon capture, utilisation and storage) incorporation, as well as cost impact from potential carbon pricing introduction, said MIDF Research which kept iots "Neutral" call on the stock at unchanged target price of RM8.45.
Affin Hwang believes that TNB will continue to operate in a tough environment due to the global increase in fuel costs.
The firm expects TNB's earnings to be supported by the robust demand for electricity especially from the commercial and industrial sectors.
Affin Hwang maintained its "Hold" call on TNB with an unchanged target price of RM8.30.
"Key upside risks to our view are better-than-expected financial performance. Downside risks to our view are lower-than-expected financial performance and unplanned power outages at its power plants," it said.