Malaysia’s Tenaga Nasional Bhd, the only electricity distributor in the country and the largest power company in Southeast Asia, has taken the first step in its plan to become one of the world’s top 10 utility players by investing in renewable energy.
The energy company has bought a 50% stake in a group of UK solar assets with an enterprise value of £470million (US$605million).
In an interview, Nizam Bin Naharudin, head of global and property ventures, said renewable energy exposure is necessary to become a global utility player. Tenaga is aiming for a spot in the world’s top 10 utility companies. They are currently at number 18, he said.
With a market value of US$18billion, Tenaga is seeking to follow in the footsteps of international companies that have invested in renewables, including Italy’s main utility Enel SpA, Spain’s Iberdrola SA, and Duke Energy Corp from the US. The Malaysian utility plans to invest US$2billion to US$3billion on renewable energy portfolios globally through to 2020.
Tenaga is taking advantage of a drop in the value of the pound after Britain voted to leave the European Union. It’s joining investors from across Asia and the Middle East who see the currency’s decline as putting a discount of about 16% on assets. Naharudin sees the UK as a stable market and does not anticipate that Brexit will change that stability.
“We are in the right business, electricity is essential to the economy,” Naharudin said. “I think the UK government will honor the PPAs here,” referring to power purchase agreements that fix a price for electricity.
Tenaga’s push for renewables is part of a wider program to spend US$10billion on about 5 gigawatts (GW) of power plants outside of Malaysia. The remainder will be channeled into natural gas and coal projects. It will be financed through a combination of Islamic bond issues, known as sukuk, and project finance.
Tenaga raised the first US$750 million through a sukuk issue last October and is expecting to issue another US$1.8billion by 2020.
The utility is looking to invest in both emerging and developed markets, and is seeking to establish partnerships for both. Tenaga is considering India as its next market. It also won a bid to build a 50-megawatt (MW) solar plant in the Sepang district near the capital city of Kuala Lumpur.
“You must come out from the traditional utility thinking into new technology, renewable energy and into distributed generation,” Naharudin said.
The UK solar portfolio has a total capacity of 365 MW. The acquisition was made through Vortex Solar UK Ltd, a joint venture between Tenaga and Beaufort Investments.