[RAM] RAM Ratings affirms TNB's AAA/P1 issue ratings, outlook stable

RAM Ratings has affirmed the AAA/Stable/P1 ratings of Tenaga Nasional Berhad’s (TNB or the Group) sukuk programmes (see table).



The ratings reflect TNB’s critical role as Malaysia’s national electric utility and its resilient operating and financial performance. In Peninsular Malaysia, it holds a near monopoly over power transmission and distribution, with ownership of more than half of total installed capacity, augmented by Single Buyer’s offtake of energy generated by independent power producers. TNB’s essential public service role and very strong relationship with the Government of Malaysia, evidenced by financial support, underscore our view of a ‘very high’ likelihood of extraordinary government support, if necessary. 

Last year, TNB recorded its highest earnings since 2018. Pre-tax profit nearly doubled to RM5.81 bil in FY Dec 2024, up from RM3.37 bil a year earlier, driven by higher revenue owing to increased electricity sales, lower finance costs as the Group pared down borrowings, and gains in foreign exchange translation from a stronger ringgit. In 1Q 2025, pre-tax profit surged 51% y-o-y to RM1.55 bil, underscored by the implementation of Regulatory Period (RP) 4. Stable coal prices and a continued strong collection trend aided TNB’s balance sheet and working capital management. 

The Group also fully recovered the total RM2.2 bil Imbalance Cost Pass-Through surcharge from the government for the January to June 2025 period. As at end-March 2025, total debts (one-third of which are lease liabilities) eased to RM90.33 bil, with gearing lower at 1.46 times (end-December 2023: RM93.21 bil and 1.53 times). The funds from operations debt coverage (FFODC) ratio improved to 0.22 times as at end-December 2024, in line with stronger earnings and lower debt levels (end-December 2023: 0.19 times). TNB has a leveraged balance sheet in view of the capital-intensive nature of its business. Large-scale generation projects, aggressive overseas expansion plans and an elevated fuel price environment could strain its liquidity position, although manageable in the current market conditions.

While the RP4 is pending the finalisation of a new electricity tariff schedule by July 2025, the overall impact on TNB is positive given the targeted 7.3% return on its growing regulated asset base, which stood at RM68.82 bil as at end-December 2024 (+6.0% year-on-year). The Group’s commitment to the National Energy Transition Roadmap, which involves hefty capital expenditure (capex), will be supported by a higher base tariff of 45.62 sen/kWh (RP3: 39.95 sen/kWh). As a key enabler in the country’s energy transition agenda, it is spearheading 3,000 MW of flagship projects. Our sensitised projections – adopting RP4 parameters and management’s indication of higher capex investments for 2025 – indicate still manageable gearing and FFODC of 1.54 times and 0.18 times, respectively, to support its ratings.  


Analytical contacts
Liew Kar Ling
(603) 2708 8216
karling@ram.com.my

Chong Van Nee, CFA
(603) 2708 8210
vannee@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my