Tenaga Nasional Berhad (TENAGA) Earnings Call Transcript

Good afternoon, everyone. Welcome, and thank you for joining TNB Investor Relation first webinar series. Today's session is titled Harnessing Malaysia Renewable Energy Potential, Hybrid Hydro Floating Solar, HHFS, and Hydro Life Extension Program, HLEP. This webinar forms part of our ongoing engagement initiatives with the investment community, providing a platform for you to hear directly from the subject matter experts and gain deeper insights into these 2 key renewable energy initiatives. We are pleased to have 2 representatives from TNB with us today. Allow me to briefly introduce them. Our first speaker is Puan Shahrina Abdullah, Project Manager for Hybrid Hydro Floating Solar at TNB Genco with over 25 years of experience across power generation, renewable energy and strategic project management. She leads the development and execution of TNB Genco's HHFS initiatives. Her extensive experience in project development, commercial strategy and renewable energy makes her well placed to share insight on TNB's approach to advancing Malaysia energy transition. Our second speaker is Technologist Norfaizah Mohamad Yusof, Head Project Management at TNB Genco. She currently leads the project management function where she oversees project planning, execution, coordination, performance monitoring, stakeholder engagement and project governance supporting the successful delivery of major power generation and energy infrastructure projects. She brings extensive experience in managing complex engineering and power generation projects with strong expertise in strategic project management, technical coordination, project delivery and stakeholder management. We are also pleased to have Puan Nura Nadia Abd Hadi, Head of Investor Relations. We are delighted to have all 3 of them with us today. Before we begin, just a quick note on the flow of today's webinar. We will first hear from both of our speakers, followed by a Q&A session at the end of the presentation. Throughout the session, we encourage you to submit your questions via Slido and we will address the question during the Q&A session at the end of the presentation. With that, it is my pleasure to invite Puan Nura Nadia, Head of Investor Relations, to deliver the opening remarks. Puan Nura Nadia, over to you.

Thank you, [ Terese ]. Good afternoon, everyone. Thank you for joining the meeting sessions of TNB's IR webinar series. We are delighted to have this opportunity to engage directly with investors and also we are taking today a closer look at the 2 pivotal renewable energy developments under TNB Genco, the Hybrid Hydro Floating Solar, HHFS project and the Hydro Life Extension Program, HLEP. Before we unpack these projects, let me offer a brief overview of TNB Genco and its strategic role within the broader group. As a core driver of TNB's power generation portfolio, Genco maintains a robust foundation across conventional and RE assets, anchored significantly by our hydro infrastructure. As Malaysia's energy landscape evolves, our Genco is uniquely positioned to spearhead the nation's ET while unlocking long-term value. We see clear momentum across several key avenues, expanding the renewable generation, optimizing our legacy assets, advancing energy storage and deploying energy -- clean energy solutions. This focus area allow Genco to leverage its existing infrastructure and technical expertise to meet growing national power demand while decarbonizing our fleet. HHFS and HLEP perfectly exemplify this dual strategy, building on our established operational strengths while pioneering sustainable generation models. We are privileged to be joined today by the subject matter experts directly leading these 2 initiatives, who will share deeper operational and strategic insights. I trust today's session will give you a clear view of how these projects advance the TNB Genco growth road map. Without further ado, let me pass the floor to our speakers. Thank you, and I hope you find the session insightful.

Salam, and good afternoon to all, and a very warm welcome to the first of our Investor Relation webinar series for the year 2026, I guess, okay? And our team today is harnessing the Malaysia renewable energy potential. And we in TNB incredibly excited to share a landmark milestone in our journey towards sustainability where the development of our first Hybrid Hydro Floating Solar initiative featuring an integrated battery energy storage system. Specifically today, we will dive deep into the overall development framework and provide an exclusive status update for our flagship project that is Kenyir #1. Let me begin by looking at the bigger national picture that drives this ambition. Next. As many of you all know, Malaysia has set a bold and clear path forward under the NETR, National Energy Transition Road Map that is introduced by the Ministry of Economy way back in 2023, where our nation aspires to achieve 70% renewable energy mix by the year of 2050. The core goal here is a profound structure shift moving Malaysia from traditional fossil fuel based on economy towards the high-value green economy. To make a vision this large a reality, it takes massive action. With that, they have enlisted 10 flagship projects under energy transition projects under the NETR. We in TNB Genco, have been entrusted to spearhead the 2.5 gigawatt Hybrid Hydro Floating Solar initiative. By utilizing the private investment and strategic collaboration, we are creating a cleaner, more flexible and highly reliable alternative to the traditional coal conventional way, reducing our reliance on gas and balancing our water reservoir potential across both dry and wet season, right. Next, I'll be explaining on the -- our HHFS road map is designed to bridge the TNB legacy engineering infrastructure with our future net zero target. Here, to achieve our 2.5 gigawatt potential, we have thoroughly evaluated and shortlisted specific projects across 6 major reservoir in Peninsula Malaysia, that is in Temenggor, Kenering and Bersia, Nenggiri in Kelantan and Kenyir and Pua in Terengganu. By pairing floating solar arrays directly to our existing hydro power assets, we unlock unprecedented operational synergies. Today, we are focusing on our absolute frontrunner in this journey that is Tasik Kenyir. Next, we move into Tasik Kenyir potential. So Tasik Kenyir is the Malaysian largest man-made lake, making it perfect natural hub for a multiphase renewable energy development. When we look at the numbers, the sheer scale is very impressive, yet our environmental footprint remains incredibly minimal. Tasik Kenyir spans a total area of 36,900 hectares. The total project development area for our Kenyir 1 specifically requires just 1,100 hectares at large and 522 hectare specific area to the solar installation. That means we are utilizing merely 1.41% or less than 2% of the lake, total water body area. So that's how small we're going to embed the water body with the solar panel and then leaving the vast majority of the ecosystem completely untouched. This Kenyir #1 is targeting the commercial operation date in the year of 2028. We target in the quarter 4. Then it will deliver 595 megawatts AC of floating solar capacity backed by a massive 1,190 megawatt hour of battery energy storage to be co-located at site in Kenyir. Next, we move on to the project concept. So how does -- how exactly does this engineering model works? Okay. The core concept is to maximize underutilized space on our hydro dam water bodies, effectively eliminating the needs for extensive land clearing. We are looking for alternative rather than using the land. We are installing Tier 1 brands from OEM, highly efficiency solar PV modules mounted onto durable floating full grid platform. The direct current generated by this panel will flow to string inverters and converting it to the alternating current. From there, underwater and subsea power cable safely transport the electricity to onshore facilities and into the national grid. To ensure the system handles the natural movement of the water, a robust anchoring and mooring system, we secure the floating arrays firmly to the lake bed. Finally, our integrated battery -- BESS, battery energy storage will balance the energy output, making the solar power reliable and dispensable even when the sun isn't shining. We will share with you the project concept video. Just to give you a visual sense of how the hybrid hydro floating solar project will work and then this video will share -- will show you the concept from assembling the panels and float this on site right through the connection to green. [Presentation]

Can we move on to the next slide. In the next slide, we will take a closer look at the layout and delivery scope of the Kenyir 1 project, which is officially now the first utility scale Hybrid Hydro Floating Solar and the first and the largest in Southeast Asia to date. This project is integrated with BESS, as I mentioned before. This project will operate under CRESS, Corporate Renewable Energy Scheme framework. To give you idea on the -- how extensive on the logistic delivering and installing later on, this project, we were dealing with 1.1 million of solar panel. This one to cater for 595-megawatt AC, 785-megawatt peak and 1,190 megawatt hour battery. Adding to that is 1.1 million floating unit which arranged into -- which will be arranged into 64 distinct floating island. Technically, this will be put in the 522 hectares of Lake area. With that, we need 1,700 string inverters, 9,000 anchors and mooring blocks to be dropped into the water and 210 specialized battery containers with 6-megawatt capacity each. Geographically, the project is divided into 5 distinct zones. Zone 1 is primarily floating solar area covering 5 to 2 hectares. Zone 2, housing the onshore plant interface and BESS facility, about 6.14 hectares. Zone 3 will handle the 275 kV plant interconnection over 53 hectares of land, which will hook directly into the Zone 4 into the PMU Hulu Terengganu. So this Zone 3 and Zone 4 will require about 56 hectares of land. Zone 5, lastly, consists of 6 hectares of dedicated to temporary facilities and observation deck and our JT laydown and launching platform. This Zone 6 will be given back to the state government after the project completion. Next is the project structure and the milestone. For this project -- project of this magnitude require a world-class collaboration framework, and we have brought together the ideal mix of public strength, corporate commitment and technical expertise into this project. The SPV for this project is called TI TNB Genco Solar Kenyir 1 Sdn. Bhd. or short form is TTSK1. That is the SPV for this project. This is a powerful joint venture combining TNB Genco technical capabilities with Terengganu Incorporation's local strength and state support. For this project, we got TI to be on board with us with 70-30 equity portion, 70% to TNB Genco and 30% to TI. This project operates on a 100% energy payment take-or-pay model via our CRESS mechanism where this providing us with rock solid, highly predictable long-term revenue. It's 21 years, yes. Then on the engineering front, a full turnkey EPCC contractor has been -- contract has been awarded to a known and experienced consortium composed of Cypark Renewable and Fabulous Sunview Sdn Bhd. with a 24-month execution time line. As you can see from the milestone, we moved from our initial MOU in 2023, where we first started talking about the potential of developing of such project in Kenyir. Then we moved through the master collaboration agreement in May 2025 and then recently, we signed our shareholders' agreement in June 2026 this year. With our BESC and EPCC documents fully executed at the KL Convention Center recently, Kenyir 1 is now officially moving into full steam ahead into its operational delivery space -- pace. Going to the next. Now I am at the end of my presentation. As we conclude, let's summarize why Kenyir 1 is such a vital asset for our portfolio and for many -- for Malaysia as a whole. First, as a flagship project, this project Kenyir 1 established a world-class reference point for large-scale utility solar with hybrid combination with BESS. Secondly, it directly support the NETR goals, keeping Malaysia firmly on track for 70% RE by 2050. Thirdly, it brings incredible socioeconomic benefits, generating clean energy jobs and empowering local contractors right here in Terengganu. We have spare at least 15% to 30% of the job for local Terengganu. Nationally, it advances our energy security and position Malaysia as clean energy leaders within the Asian region. From the investment perspective, it strengthened our long-term financial performance by generating sustainable, recurring profitable over 21 years operating life. Finally, the environmental impact is profound, and Kenyir 1 will avoid approximately 650,000 tonnes of CO2 emission annually while generating clean, green electricity for roughly 242,000 households if you convert into household usage. This is more than just an energy asset, a blueprint for the future of sustainability -- sustainable infrastructure. With that, thank you very much for your time and your continued trust in TNB Genco as we power the nation's green transition, and I'll see you in FAQ later. Thank you.

Thank you, Puan Shahrina. We will now move on to our second presentation focusing on the Hydro Life Extension Program, HLEP. With this, I am pleased to invite Technologist, Norfaizah Mohamad Yusof for your presentation.

Assalamualaikum and good afternoon to all. Thank you [ energy ] committee for inviting me to present this first ever webinar series. Before I continue with the presentation, let me just introduce myself again. My name is Norfaizah Mohamad Yusof. I'm the Head of Project Management in TNB Genco. Basically, my role is as PMO, overlooking several projects in Genco covering projects under execution and also projects that is still under development. Let me just proceed with my presentation. Today, I will present on the Hydro Life Extension Program also known as HLEP for SSJ Sungai Perak. I intend to walk you through starting from touching a little bit about the power station and followed by the project covering the scope, the technology international for the project and the project key time line, basically the unit COD buyers until its full completion. I will also highlight the benefit of this project in terms of the investment. They acquired power station that operates under SSJ Sungai Perak scheme, which are involved in this life essential program, namely Temenggor, SJ Temenggor, SJ Bersia, SJ Kenering, SJ Chenderoh and SJ Sungai Piah. Temenggor contributes majority of the megawatt, which is approximately 350 megawatts from the 4 generating units. The station has already been in operation up to 40 years. On the PPA, the original PPA has expired in August 2022, and we have been given 5 years extension until August 2027. Let me proceed with the project itself. As previously highlighted, the HLEP Perak project in 5 stations under Sungai Perak scheme cascading along the Sungai Perak namely Temenggor, Bersia, Kenering, Chenderoh. And for Sungai Piah upper and lower station is flows into the Kenering reservoir prior to the flow to the Sungai Perak. There are a total of 18 generating units covering 648 megawatts. The pre-assessment of the asset was done in 2017. Then the ECS has been appointed. ECS, the Engineering Consultant Services has been appointed in 2019 to further assess the condition and come up with the technical requirement and also estimate the cost for EPC contract. The project has commenced in November 2024 and the contractor has been awarded based on the packages. Why now? First and foremost is to sustain the RE generation utilizing hydro assets. For that, it is a need to address the aging and obsolete system and equipment and also to improve the performance. The project will be delivered unit by unit. It is planned based on each unit outage plan, a total of 648 megawatts, about 190 megawatt will be delivered in 2028 and then 430 megawatts in 2030 and finally 648 megawatts in 2033. The main scope for HLEP project is to replace and rehabilitate the key generating equipment and also improve the civil and structural works. The turbine technology used in each of power plant, which are carbon persists and carbon type. Then what is the value and benefit of green life essential programs to us. Basically, it is supporting the NETR and also the TNB net zero emission 2050 aspiration by producing green electron through hydro system. By extending the PPA, we can continue producing green electron for another 40 years. For that, we need to address the aging plant, including generating units and civil structure to ensure the operability and maintainability of the plant, increase the safety and reliability of the dam and also the equipment and to increase the performance and efficiency. Lastly is to ensure the compliance to the grid code requirement and also regulatory obligation. This is the last slide. The whole idea of the investment is in this program is sustained long-term generation of green electricity and at the same time, contributing revenue to TNB Genco and Group. We expect to continue producing power for another 40 years under the new PPA. As of June 2026, you can see the progress is about 36%, and we are targeting the first unit to be COD in December 2026. That's all for now. I pass back the session to [indiscernible].

Thank you for the presentation. Also thank you, Shahrina and Technologist Norfaizah for your presentation. This brings us to the final segment of today's webinar, the Q&A session. We have received a number of questions from participants during the registration process, and we will begin by addressing the pre-submitted question first. Allow me to go through the question. The first question from Ahmad Maghfur Usman from Nomura. What is the project IRR for the solar asset?

Maybe I can take that. It's quite common questions from our investors and analysts really. The EIR for our RE projects basically is always on high single-digit range. That is our guidance.

Okay. Thank you, Nura Nadia. The second question is from Mohamed Reza Abduraman from BIMB Securities. Expansion plan to other hydropower plant, including plant for BESS, inclusive, for example, tariff, fixed cost variable, commercial structure?

Okay. For the TNB Genco, we are exploring on the opportunity to expand the HHFS technology to other suitable hydro reservoir, as mentioned before, we are talking about Temenggor, Kenering, Bersia and Nenggiri. Then the integration of BESS for now is part of CRESS and it is a requirement from CRESS. It will be considered -- must be considered where it needs to -- the application or the installation will be enhancing the flexibility and reliability of the overall renewable energy system. The commercial structure, including the applicable tariff and offtake arrangement will be determined based on the prevailing regulatory framework and project economics and also direct may go with the green consumers.

The next question is from David from Hong Leong Investment Bank. David has 2 questions. First is, is HHFS considered part of the LSS program?

Okay. Generally, yes. But for this LSS6, they already outlined, if you read clearly in the LSS 6 document, they already outlined the interconnection that allowable to be connected for LSS6 and also they focus on the region for the installation. For now, they focus in the Southern region and also Central region. So with that, since our HHFS potential already located in the Northern and also Eastern region, so we will not join the LSS6 program.

The next question from David also. What are the CapEx and OpEx for HHFS versus ground-mounted solar?

Okay. When you're talking about CapEx and investment required for floating solar, generally, it's always slightly higher than ground mounted. Because it requires more equipment and such as floaters, anchoring and mooring and this floating solar generally new technology still on learning curve. The price is still on the high side. If in percentage, normally, it ranges around 10% to 15% higher than ground mounted. For OpEx, the expenditure depends on the technology adopted, project configuration and also site-specific requirement. Ultimately, the CapEx and OpEx comparison will vary from project to project, and we assess the overall economic based on the specific types and configuration.

Okay. We have the last pre-submitted question from [ Asin ] Group. Is there any local player experience enough to undertake large-scale HHFS projects without an overseas partner?

When you talk about a large-scale HHFS, this is the first, as mentioned before. Everybody knows that overseas EPCC players mainly, what we call dominating the EPCC for this HHFS before, mainly from China. But then we have our local player, a few local players actually that already involved in installation of hybrid and also large-scale small-scale floating solar. As you all know, the EPCC awarded for this Kenyir 1 project also to local players. Both of them are local players. One, they have experience with small local floating and the other one is the prominent EPC in -- for solar project. So with the combination of both, we will work for this Kenyir 1 project.

Okay. That is all for the pre-submitted question. We will now move on to the question received through Slido during the session. Without further ado, let's move on to our first question. We received a question from Hazmy Hazin from CLSA. Day 1 is the first DC who embarked in this solar program with TNB. Is there any push for other DCs to follow suit? Any requirement imposed to upcoming DCs to have renewable energy as part of their projects?

I think this one I can take. Hazmy, thanks for the questions. Basically, yes, there is growing push for the new DC operator to come and incorporate [ iem ] basically. There's a new policy for data center by our DCTS just recently, the usage must be at least 30% of green, right, for the data center. So they have options to participate in that program such as CRESS and also on-site generation.

Okay. Hazmy also have a follow-up question. The second question. Any other sites in Malaysia that are feasible to implement the hybrid floating solar as well?

You mean other than the sites that I already mentioned, we have other smaller, means below 100-megawatt potential based on due diligence. But later on, we will explore those smaller capacity hydro dams and hydro areas for the development as well.

Okay. Thank you for the response. Moving on to our next question. We have a question from [ Geeta Ravindran from EPF ]. The question is, could you expand on the biodiversity impact of the hydro floating solar? And how is the TNB mitigating the negative impacts of floating solar such as lower dissolved oxygen levels and reduced sunlight penetration in the lake?

Okay. Geeta from EPF. Thank you for the questions. I would like to put you into different perspective rather than looking into the negative impact of this. I'll bring you the key benefit of having floating solar on the hydro dams based on our EIA studies. This is not a pickup from sky, but this is based on studies. Okay. Technically, the -- what we call the key benefits, we have about 5. One is [Audio Gap] particularly on the dissolved oxygen level and reduced sun penetration in the lake, okay? If you are talking about the fish -- impact to the fish or impact to the underwater flora and fauna. It has been, what we call, studies and result that there's a positive impact rather than negative impact for the fish, the amount of fish and the size of fish in the lake as compared to the negative impact to the fishing in the lake. The other one is the plus point on the zero land conflict. This one, no-brainer. You put the stand-alone solar, you require vast piece of land and then when you put on the underutilized water surface, you are optimizing and preserving the land ecosystem entirely. So that's my answer for this.

All right. Next, we have a question from [indiscernible]. The question is on the HHFS does day 1 existing signed CRESS project qualify to mitigate or be migrate or admitted into the CRESS acceleration package, for the same kilowatt hour SAC?

Okay. There's one statement or conditions under -- for the CRESS acceleration package. The project must be delivered by end of 2028. As of today, the COD targeted is matched with this CRESS acceleration package, but then it all depends on the latest COD date. As you all know, this CRESS acceleration package is to what we call to -- what we call that is the -- to expedite and see if there is any projects which has potential for faster COD than 2028.