KUALA LUMPUR: Tenaga Nasional Bhd (TNB) expects to set aside more capital expenditure (capex) under its fourth incentive-based regulation framework from next year due to rising energy demand including from data centres.
President and chief executive officer Datuk Ir. Megat Jalaluddin Megat Hassan said TNB's capex requirements are determined by the Energy Commission and decisions on its utilisation are made every three years through the IBR.
Megat Jalaluddin said its third IBR started in 2022, marking it as the final one for the year. TNB's capital investment for the third IBR amounts to RM21 billion or RM7 billion a year.
"Over the past two years, we have indeed utilised 100 per cent of the capex, and in this third year, we will fully utilise the remaining RM7 billion as well.
"When forecasting capex, the focus typically revolves around two main aspects - frstly, providing electricity to new users, and secondly, ensuring that aging assets are replaced with new ones.
"Discussions regarding the fourth IBR have commenced, and we aim to finalise it by the end of this year as 2025 is expected to mark the beginning of a new IBR period," he said at a press conference following the signing ceremony of a report on the "Enhancement Coordination and Management of Malaysia's Electricity Assets" here today.
In terms of electricity demand, Megat Jalaluddin said TNB has observed a strong increase in usage across the country post-Covid-19. Therefore, the increase in capex will accommodate this demand.
He also noted that TNB is committed to providing the best value and being proactive in improving practices for managing the assets entrusted to it.
He said through the advisory service provided by the Malaysian Anti-Corruption Commission (MACC), in collaboration with the EC as the regulatory authority, TNB is able to take more precise steps in managing electricity assets.
Meanwhile, analysts said Malaysia will need to invest further in the power infrastructure to meet rising electricity demand.
This should improve TNB's long-term profitability via higher capex under the IBR framework, they added.
Analysts at Affin Hwang Capital said TNB is a direct beneficiary of Malaysia's energy transition initiatives and indirect beneficiary of rising data centre (DC) and artificial intelligence (AI) demand.
The rising data centre (DC) projects should benefit TNB's non-regulated business unis such as Allo (fibre connectivity) and GSpark (rooftop solar), they said in a recent report.
"TNB expects maximum electricity demand from DC to exceed 5,000 megawatts (MW) by 2035.
In Malaysia, TNB has received 74 supply applications from DC customers with total maximum demand in excess of 11,000MW (about 40.6 per cent of Peninsular Malaysia's installed capacity)."
While not all the projects are expected to be implemented, Affin Hwang said TNB had noted that it delivered electricity for nine DC projects with total energy demand of up to 635MW in 2023.
"For 2024, TNB expects to connect to nine DC projects with 700MW of total energy demand and in the long run, it sees potential maximum demand from DC in excess of 5,000MW by 2035 (about 18.5 per cent of Peninsular Malaysia's installed capacity)," the firm added.
The International Energy Agency (IEA) has estimated that DCs, cryptocurrencies and AI consumed about 460 TWh of electricity worldwide in 2022, almost two per cent of total global electricity demand.
Looking forward, IEA forecasts global electricity consumption of DC, crypto and AI to range between 620TWh to 1,050TWh in 2026 (up 35 per cent to 128 per cent), with a base case of 800TWh, up 74 per cent from 2022.