Tenaga Nasional Berhad - Absorbing the Heat
Wed, 23-Sep-2026 10:27 am
by Research Team • Apex Research

Counter

TENAGA (5347)

Target Price (RM)

16.37

Recommendation

Buy

  • TENAGA will absorb the AFA surcharge, service tax and retail charges for domestic users up to 800kWh/mth (from 600kWh) through December 2026. This covers c.90% of households.

  • The move offsets higher bills from hot weather. Coverage under the old 600kWh threshold had slipped from c.85% to c.80%. 

  • The one-off cost is estimated at RM120–150m. It sits at corporate level, outside the regulatory framework, so regulated returns, WACC and the revenue cap are unaffected.

  • AFA remains a pure pass-through with recovery assured. Cost-sharing stays with the government via the KWIE fund, and dividend policy is unchanged.

  • The threshold reverts to 600kWh in 2027. The government is working on a permanent fix from January 2027, with the framework kept intact.

  • No changes to our earnings forecasts, as the impact is seen as minimal and offset by several factors.

  • Maintain BUY with an unchanged DCF-derived TP of RM16.37.

 

Following last Friday’s announcement that TENAGA will absorb AFA costs for households up to 800kWh, a briefing was called yesterday, and we came away with the following:

 

Recap. Last Friday, TNB announced that they are stepping in to absorb the AFA surcharge, service tax and retail charges for domestic users up to 800kWh/mth (lifted from 600kWh) through December 2026, protecting c.90% of households. It's a one-off relief costing an estimated RM120–150m. The AFA framework and dividend policy remain protected.

 

The decision was made as a relief on hot-weather impact on electricity bills, with the old 600kWh scheme slipping from c.85% to c.80% coverage as consumption rose, with the increase to 800kWh restoring the coverage. 

 

Potential Financial Impact. The absorption sits outside the regulatory framework at corporate level, hence the regulated return and WACC are untouched and there's no revenue-cap trigger. It trims group revenue but is partly offset by lower tax, and AFA stays a pure pass-through with recovery assured. No read-through to RP5 or the ratings given how small it is versus earnings. For scale, RM120–150m is roughly 6% of projected AFA, which can run north of c.RM800m/mth under the new threshold, and the cost-sharing stays with govt via the KWIE fund (c.RM435m historically) rather than reflecting any fund running dry. All cost forecasts were built with the buffer assumptions (coal c.RM237/MT, gas up to c.RM74/MMBtu, FX RM4.09) set deliberately above spot.

 

Beyond December. With the threshold reverting to 600kWh in 2027, the government is working on a more permanent fix starting January 2027, keeping the framework intact but possibly changing how costs pass through. 

 

Earnings Revision. We make no changes to our forecast at this current juncture, as the impact is seen as minimal and offset by several factors. 

 

Valuation and Recommendation. We maintain BUY with an unchanged DCF-derived TP of RM16.37 (WACC: 7.3%, g: 1.5%).

 

Risk. Further spikes in brent prices, policy risks, slower demand growth.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.059912 4.092391
EUR 4.674546 4.683843
CNY 0.608571 0.609185
HKD 0.517481 0.521624
SGD 3.182535 3.208138