Company is seeking to emulate Enel, Iberdrola, Duke Energy; Tenaga sees renewables as essential to become top 10 utility

Tenaga Nasional Bhd, the only electricity distributor in Malaysia, bought a 50% stake in a group of UK solar assets with an enterprise value of £470mn ($605mn), marking the first step in an effort to turn itself into one of the world’s largest utilities.
“If you want to become global, you need to have renewable energy exposure,” said Nizam Bin Naharudin, head of global and property ventures in a phone interview. “We want to become a top-10 global utility player. We are number 18 now.”
With a market value of $18bn, Tenaga is seeking to follow in the footsteps of international companies that have invested in renewables, including Italy’s main utility Enel SpA, Iberdrola SA of Spain and Duke Energy Corp from the US. The Malaysian utility plans to invest $2bn to $3bn 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 honour the PPAs here,” referring to power purchase agreements that fix a price for electricity.
Tenaga’s push for renewables is part of a wider programme to spend $10bn on about 5 gigawatts of power plants outside of Malaysia. The remainder will be channelled 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 $750mn through a sukuk issue last October and is expecting to issue another $1.8bn 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 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 megawatts. The acquisition was made through Vortex Solar UK Ltd, a joint venture between Tenaga and Beaufort Investments.