Ladies and gentlemen, thank you for joining us here physically and virtually via Webex. To begin our session, let us watch a brief safety video to ensure everyone is well-prepared for any potential emergencies.
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Good evening, everyone. Thank you for joining TNB's Second Quarter FY 2026 Analyst Briefing. A very warm welcome to every one of you joining us here today. [Non-English content] Shamsul Ahmad, President and Chief Executive Officer of Tenaga Nasional Berhad, our Chief Financial Officer, Mr. Badrulhisyam Fauzi. I would also like to warmly welcome all of you joining us here today. We also have 60 attendees joining us virtually via Webex.
Today's session will be covered in two parts. Firstly, our CEO, [Non-English content] Shamsul, will provide an overview of TNB's second quarter FY 2026 performance, group strategy, and outlook, followed by our Chief Financial Officer, Mr. Badrul, who will present on details of TNB's second quarter FY 2026 financial performance. We will then open for Q&A before we end the session at 6:00 P.M.
With that, I'm pleased to invite [Non-English content] Shamsul Ahmad to kick off our session for today.
Thank you, Alvin. [Non-English content] and a very good evening to everybody, and thank you for joining us today. Everybody must be wondering, it's Friday afternoon, at 5:00, we are doing a business analyst briefing to all of us. Is there a catch for doing that or not? There's nothing that we are going to hide from you. We are going to be very transparent today. It's just that I'm traveling from Kuantan this morning for officiating our new PMU 500 kV from Paka to Kuantan. So that is another milestone as part of our expansion in improving and enhancing our grid expansion.
First and foremost, let us share some of our key performance highlights for the first half of our financial year. We are glad to inform you that we delivered a resilient performance underpinned by strong operational execution across our key business pillars. On a normalized basis, adjusting for ForEx translation and MFRS 16 impacts, our core PAT reached MYR 2.3 billion. Our regulated CapEx momentum remains firm with MYR 5.6 billion deployed into grid infrastructure to support accelerating electricity demand and enable our ongoing energy transition roadmap. Building on this stability, we are pleased to declare an interim dividend of MYR 0.25 per share, representing 63.2% payout on adjusted PATMI. This demonstrates our continued commitment to delivering sustainable returns to our shareholders while maintaining financial discipline.
Turning to our operational backdrop, electricity demand remains throughout the first half, primarily propelled by expanding commercial sector. This structural demand growth was demonstrated earlier this month when system peak demand scaled consecutive historical high, reaching 32,014 MW on 6 August 2026, and surpassing the previous record of 21,827 MW set just three days prior. This record peaks underscore the sustained growth in electricity demand across the country.
On asset execution, our clean energy roadmap, we achieved two key RE milestones. One is actually first, TNB Bukit Sidim Kulim Solar achieved COD, adding 45 MW peak to our operating RE portfolio, and Dinawan Energy Hub was awarded the Capacity Investment Scheme, strengthening our future RE pipeline.
We successfully hosted the TNB Energy Transition Conference, ETCon26, convening over 6,000 delegates and industrial stakeholders, from one of the major and good event that organized by us. More importantly, the platform catalyzed 15 strategic partnerships, cementing TNB's position as a preferred regional energy transition partner and unlocking long-term opportunities across grid modernization, clean generation, and cross-border interconnectivity. Overall, our first half performance demonstrates continued resilience across our core business, while we remain focused on expanding our renewable energy footprint and advancing the energy transition.
Building on our core demand momentum, total electricity units sold grew by 8% year-on-year. This growth was anchored by the commercial sector, which now comprise 59% of total sales volume. Commercial demand expanded by 13.7% year-on-year, driven by data centers, shopping malls, businesses, and accommodation-related services.
Looking specifically at the data center segment, actual energy consumption from operational data centers has more than doubled year-on-year, surging from 1 TWh-4 TWh . Furthermore, load ramp-up continues to accelerate, with demand reaching about 1.26 GW as of June 2026, indicating highly predictable volume scaling. While data centers represent our fastest growing load category, they currently account for relatively small 6% of total sales, highlighting the underlying diversification and resilience of our broader customer base.
Building on the strong momentum in actual data center consumption, let us look now at our secured pipeline and where this growth is concentrated. As of June 2026, our secured pipeline stands at 61 projects, representing 8.35 GW of maximum demand. Of these, 42 projects representing 5.65 GW are already in the system with actual load utilization reaching approximately 1.26 GW. This secured pipeline is progressively translating into actual electricity demand, providing greater visibility of sustained demand growth. Johor continues to strengthen its position as a leading regional data hub backed by distinct competitive advantages in the land and power infrastructure, as acknowledged across the industry.
We were informed Johor is actually the biggest data center clusters in the world. Whereas Malaysia is actually one of the top ten data centers clusters around the world. That bodes us well when it comes to data center business coming to Malaysia. As this project continues to progress into operations, our focus remains on ensuring grid readiness and reliability supply while maintaining disciplined capital deployment and working closely with data center developers.
Turning to our technical performance, our disciplined operational execution throughout the period directly underpins our core earnings resilience, providing a highly reliable foundation for the group's broader financial performance. Generation has turned around and now has produced a good performance for the first six months, where EF and equivalent availability factor have improved to 87.9%, up from 86.1% last year. The operational uplift reflects enhanced plant availability and proactive fleet maintenance.
Turning to transmission and distribution, network performance remain firmly at world-class benchmarks, ensuring grid stability and seamless power delivery despite expanding peak demand. Specifically for distribution, our SAIDI tracked at 23.45 minutes, well within our internal threshold of 47 minutes. This performance highlights the structural resilience and operational readiness of our network. Overall, the group's strong technical metrics reinforce our earnings quality, operational stability, and ensure we are fully equipped to serve accelerating national electricity demand while enabling the nation's energy transitions agenda.
Moving to our strategic partnerships, we continue to expand our beyond kilowatt hour, an integrated energy footprint through a high impact, long-term commercial collaborations across clean energy, grid infrastructure, and energy efficiency solutions. In June, we hosted, as I mentioned earlier, our second TNB ET conference. It is truly a proud moment for all of us. Beyond convening these key regional stakeholders, the platform serves as a major commercial catalyst, culminating in 15 formal agreements. These span renewable generations, cross-border power integrations, grid developments, gas infrastructure, and technical capability building.
Highlighting some of them, our partnership with DayOne Data Centers to supply renewable energy for its data center operations under the CRESS s cheme. We have also collaborated with PETRONAS for the regasification terminal of RGT3 in Lumut. Through GSPARX, our subsidiary, we have secured a 25 MW peak rooftop solar project with EVE Energy. This represents GSPARX's largest single rooftop solar project to date.
We also continue to expand our integrated energy solutions through recent partnerships with Universiti Malaya and Air Selangor. First, TNB signed a 20-year cooling energy supply agreement with Universiti Malaya to modernize the cooling infrastructure at the UM's Wisma R&D. This demonstrates our capability to deliver reliable and cost-effective solutions that improve energy efficiency and support sustainable campus development.
We also signed a landmark dual agreement with Air Selangor to enhance the reliability and efficiency of Malaysia's critical water infrastructure. These agreements are electricity supply agreement for TNB to supply 180 kV power to the Sungai Rasau Water Treatment Plant and 20-year cooling energy supply agreement. TNB will provide gas district cooling services to Air Selangor's facility. Collectively, these strategic alliances strengthen TNB's position as an integrated energy solutions provider while creating long-term value beyond conventional electricity supply.
Moving to our non-regulated growth pillar, we are advancing a robust and diversified generation pipeline comprising about 12.7 GW of projects under construction and developments through 2033. In the first half of this year, we will commission an additional 30.5 MW from unit 1 of the Sungai Perak Hydro Life Extension Programme and our large-scale solar project in Sabah. Our commissioning trajectory accelerates in 2027, adding nearly 1 GW of RE capacity via Nenggiri Hydro and Large Scale Solar 5. This will be followed by over 3 GW peak in 2028, anchored predominantly by our flagship NETR development. 2030 will mark a pivotal year as we commercialize our 3 GW of diversified capacity spanning solar, hydro, and wind assets across both our domestic and international portfolios.
As we scale this high-efficiency clean capacity, TNB is executing a disciplined, phased decommissioning strategy, retiring about 6.6 GW of legacy assets by 2030. This allows us to progressively transform our portfolio, keeping an action and align with the energy transition while safeguarding the grid stability and customer supply reliability. Looking beyond our committed pipeline, TNB remains strategically positioned to capture high-value, accretive growth opportunities that align with Malaysia's long-term demand growth and decarbonization objectives.
The government recently unveiled two major national programs. First, the LSS6 program, targeting commercial operations by December 2029. We are currently assessing our participation based on its strategic fit and commercial viability. Second, the NEWGEN 26. The government is soliciting new combined cycle gas turbine capacity of high efficiency combined cycle block for Peninsular Malaysia to operate between 2029 and 2031. We are pleased to report that we have submitted our proposal on the 1st of July 2026, and we hope we will win the bid. Together, these initiatives ensure TNB is well-positioned to secure high-quality generation growth, reinforcing national energy security and drive long-term shareholder value creation.
With that operational and strategic overview, I will now hand it to our CFO, Badrul, who will walk you through a detailed background of our financial results for the first half of this year. Thank you. To you, Badrul.
Okay. Thank you, [Non-English content]. We will go into some of the slides to cover the financial highlights for our performance for the first half 2026, where you have seen that the numbers are quite good in the sense that the profit being stable, and this is actually driven by overall solid performance across all our business units. If you look at the revenue, it has actually grown by 7.5%, adding additional MYR 2.5 billion of additional revenue coming mostly from growth of electricity demand, as earlier explained by the CEO, driven mostly by commercial sector and of course, data center driving a lot of that demand very strongly.
Most importantly, if you look at our EBITDA, it has also increased around MYR 509 million to MYR 10.8 billion for the first half of 2026. Granted, we have there the EBITDA margin slightly lower at 30.8% compared to last year, but this is also the fact that we are definitely not spared from the cost pressure that is actually everywhere in the current business climate. We believe that this is being mitigated. We are looking at various ways to contain this cost, and this is actually not far off from our number in 2025, which was around 31.6%. We believe that at the end of the day, absolute amount of EBITDA is actually still growing. That shows that there is a positive momentum as far as the earnings of the company is concerned.
Most importantly, when it comes down to core PAT, after adjusting for ForEx and MFRS 16, we actually improved the core PAT by 5.3%, recording MYR 2.3 billion for the first six months. Granted, if you look at some of the news report as well, the reported PAT is actually lower because of the absence of the ForEx gain of almost MYR 370 million last year. That is why we believe that the more reasonable number is the core PAT. If you drill down into the numbers as well, this year, we do have lower finance income by almost MYR 160 million as a result of us optimizing our cash balance on the face of massive CapEx last year and this year.
Of particular interest to all of you as well, if you look at our effective tax rate for this year, so far on the six months, is at around 29.3%, which is just slightly lower than 29.8% that we recorded last year. As mentioned earlier as well, in the first quarter, the more moderate effective tax rate that we are targeting would still be around 24%, but that will only realize closer in quarter three and quarter four as we finalize all the incentive that is being available to TNB.
I have also noticed that in some of the reports that have gone out by the analyst today, there was also a lot of focus on our TNB Genco unit. So I am pleased to actually confirm that as far as we are concerned, TNB Genco is actually performing very well this year, operationally. But financially, we urge you to look at the numbers in terms of the whole six months, not just quarter two alone, because obviously, there are some non-seasonal item in quarter two, but we would like to confirm that there is no major one-off during the second quarter, but we do have a bit more higher, one-off cost in particular two items.
Operationally, we have minor demolition work in our Pasir Gudang in Putrajaya, and we do have a minor combustion and inspection exercise in play in quarter two. So that actually is part of the normal operating business for TNB Genco. Most importantly, if you look at year-on-year, the net energy generated is 10% higher year-on-year. So for us, it is about looking at the longer term rather than being too worried about one single quarter performance by TNB Genco. You have seen that as far as the six months number are concerned, it is tracking very positively. In short, we believe that the overall performance reflect the fact that increase in sale of electricity, higher consumption from commercial sector actually has improved the core PAT of the company, which is accompanied by improved operational profitability across all our businesses.
If you look at into capital management side of the company, obviously we are focusing on two important thing. The first one is the working capital management, as well as making sure we have proactive funding arrangement to make sure that we are able to utilize our strong credit profile to raise funds at very competitive cost. If you look at capital management from the trade receivable side, we ended the first half year 2026 at MYR 4.7 billion, which is actually lower than MYR 4.8 billion that we have six months last year, despite that we have much higher revenue.
So this is actually granted, you can say that it is higher than March and December 2025, but the seasonality do reflect that by the end of the year. Obviously, a lot of our receivables are settled so that everybody can show a nice P&L at the end of the year. So we do expect that seasonality to happen. But as far as collection is concerned, at MYR 4.7 billion receivable against much higher revenue compared to last year, this is a manifestation of the fact that we have now very comfortable proactive credit management of our receivable, where they are well below 30 days as far as receivables are concerned.
If you drill down further into regulatory receivables, this is even better in the sense that at the end of last year, we had MYR 1.9 billion of regulatory receivables. I am pleased to report that actually as far as ICPT for April- June 2025 of MYR 1.3 billion was already received in March 2026. That amount actually has gone down to less than MYR 1 billion as of June, and there are only two big components left here.
This webinar is being transcribed and summarized.
But you would recall that we have been enjoying an AFA rebate all the way up to until April 2026 before the fuel cost dictated that there is an AFA surcharge coming from May. The government actually has decided to come in and shield the [Non-English content] from the full brunt of this elevated fuel cost. That actually is the first time that government is utilizing KWIE's fund to shield part of the AVAS impact. That is why we are claiming it from KWIE already. But the process, because this is the first time we are starting this, the amount from May and June has already been claimed and July is coming soon. The amount is being processed in the beginning.
That is why it is a bit slow at the moment, but once that mechanism is finalized, it will be monthly payable to TNB. You will see a much lower amount from that. That is one part of it, and we also have around MYR 370 million of OpEx from year 2024, which half of it was already received already by now in July. Once these mechanisms are in place, you will be able to see that the regulatory receivable will be much lower. This is also the beauty of RP4, where under the new tariff mechanism, a lot has been done to make sure that TNB will be sheltered in terms of the cash flow risk from the uncontrollable factor. That is very important.
If you look at the next item on AVAS, as mentioned just now, almost MYR 400 million actually still to be recovered. But again, like I said, this is only a small portion of the overall cost pass-through. So a lot of it has been passed through the consumer, where TNB has been able to recover a lot of it from monthly basis. Only the one that is coming from KWIE that is a bit delayed in this sense because the early days governmentation. This is also the fact that government is making sure that [Non-English content] is not too affected by this current high elevated prices.
If you look at funding, obviously we have been an active issuer in the market this year. We have actually issued MYR 6.55 billion at current relatively low rate, making sure that we lock in our current borrowing at this current level over the next 25 years to match with our asset profile. If you look at the first one, we already issued MYR 4 billion for TNB. That is maturity between seven, 10, 15, 20, and 25 years. That is very well subscribed with blended average rate actually at around 4.22%.
The second one on the subsidiary, this is very unique. This is for our LSS5+ under TNB Renewables. This is very unique in the sense that, yes, it is just slightly above MYR 1 billion. We can probably get many banks interested to give us term loan. We actually went with an SRI Sukuk Wakalah, where we actually issued maturity of every year. It is like amortized loan, but [Non-English content]. Investors actually take a tenure of three, four, five, six, seven, eight, nine , all the way up to 19 years. We did that because of the appetite for very clean, renewable [Non-English content]. We got a very good rate. The blended rate between 3- 19 years is actually 3.99%. That is very competitive.
The third one under TNB Genco, we have our third issuance of MYR 1.5 billion. This is mostly to finance Nenggiri Hydro Project as well as Sungai Perak Life Extension. Again, that one is we do not want it to be short-term because this is long-term PPA, 20- 40 years. We issued 10, 15, 20, 25, and that actually got us blended rate of only 4.17%. You see that as far as borrowing is concerned, we must make sure that we are able to lock in a good rate on long term, and that is why today we have a competitive rate of cost of borrowing of 4.65%, and 96% of that amount are fixed long-term rate. In the event that there is upcycle of higher interest rate coming over the next many years, we would not be exposed under that environment.
We must be able to continuing doing this to make sure that we have a disciplined financial management so that we are able to continue having a strong credit rating, as demonstrated by RAM that have maintained our triple A rating. Yes, they are aware of our massive regulated asset investment case, but they are also aware of our massive investment in the generation power plant. They are convinced that as far as these new additional borrowing are concerned, it is for productive and profitable usage. This is also showing that we do have enough capacity to support the investment that we need to make over the next many years.
And if we move to the next one, to what we have done so far, obviously, if you look at our CapEx for first six months, we have spent MYR 7.1 billion, and you will notice that out of that, a lot of it is actually to strengthen our grid resilience as well as advancing our clean energy capacity on the non-regulated CapEx. If you look at our regulated CapEx that we will spend already this year, that is MYR 5.6 billion. That is more than last year's delivered at around MYR 4 billion. And if you look at our base CapEx in particular, that is already last year's MYR 10.6 billion plus this MYR 5.6 billion. We are already at around 58% of the RP4 base CapEx of MYR 26 billion.
And if you look at the contingent CapEx, yes, we spent last year MYR 1.7 billion, this year another MYR 740 million. But we are not really concerned about the mix between the two anymore. As mentioned in the first quarter briefing as well, you should focus on the total regulated CapEx, both base and contingent, because we are on track to deliver the MYR 13 billion regulated CapEx this year, which will reflect in our income irrespective of base or contingent.
If you look at what we have spent this year, MYR 5.6 billion, we can categorize it into three main categories: security of supply, MYR 2.6 billion; to cater for demand growth, MYR 2.3 billion, that would be all the data center that CEO mentioned just now. All those needs to be strengthened to make sure that we are able to supply those. And around MYR 600 million was spent on energy transition. Sometime it is very difficult to get a color of exactly what are we spending on because you are talking about the grid.
Today we are lucky CEO was saying he just came back from the PMU in Kampung Awah. That is our 500 kV line. That is groundbreaking ceremony. I have seen the photos of him with the shovel just now, putting the ground away. In the next few quarters, you will be able to see PMU Kampung Awah in the CapEx that we do under network reinforcement. But so far, in the first quarter, in the first half, that would be the one that we did in Sedenak West and Seri Iskandar West, plus the upgrade of our underground cable from Pantai to Salak South.
These are specific major projects, but actually it is a lot more with smaller projects across the country where we do proactive asset replacement initiative to make sure that the network are able to deliver the number that you see just now, 0.001 minutes and all. These are effectively being done all the time. And you have got specific project, for example, this year, ECRL, where we had a 10 feeder station supplying 132 kV bulk supply. That is already 97% completion.
And on energy transition, obviously, we have our flagship San-tong battery energy storage system that was already operating since the second quarter of this year. And if you look at the sum of the energy transition project that we are doing, smart meter, which is a key project for us to enable time of use for all our customers. Year-to-date, we have achieved around 351,000 meters installed. That would be, target this year is around 1 million. By the time we finish year-to-date, that is already close to 6 million customers having smart meters.
Of course, we need also on our distribution network, we are actually investing in distribution automation to make sure that we are able to reduce downtime remotely to ensure supply reliability. So far, 53% of the target set work has already been completed. I am dwelling a bit more here so that the communities actually understand that, yes, it may sound big, MYR 7 billion, MYR 5 billion and all, but if you break it down, there are key components and theme that we are delivering across these three pillars to make sure that we are able to support the demand that is coming in.
On the other side of the slide, if you talk about non-regulated CapEx, yes, investment in the grid and the regulated business is important, but non-regulated CapEx is equally important to make sure that at the end of the day, there is power to be delivered over the grid that we are upgrading. So far, we have spent MYR 1.5 billion already for the six months, and this is on the future growth platform. You have seen there, the Nenggiri Hydro Project that CEO mentioned just now, that is 76% completion already. Ready for operation second quarter next year. We have got the Sungai Perak, 36% already. The first unit coming on stream by year-end. The one that we did a financial close just now, that is LSS5, that is 686 MW peak. That is on progress, so we can start construction, the funding is already in place.
One of the project CRESS that CEO mentioned just now, we signed around 1,050 MW of CRESS project with DayOne that is split into two. The first 500 MW , which is 785 MW peak, is the Hybrid Hydro Floating Solar Kenyir, which is progressing very well, where EPCC has already awarded. Hopefully the next quarter, we should be able to tell you that the other 500 MW ground-mounted solar will also be coming on stream. These are all part of the massive generation capacity that is coming on stream over the next many years, as detailed out by the CEO in the previous slide.
Yes, that is pretty much hopefully the details of what we have spent and invested on over the many years. Obviously, if I do not talk about dividend, all that I mentioned just now will not matter much to all of you. We are pleased to actually show that as far as the performance of the company is concerned, we are maintaining the absolute amount of MYR 0.25 dividend payout to reward our shareholders for the first six months. At MYR 0.25, yes, that will be similar to what we paid interim dividend for 2024 and 2025.
Do not worry so much about the payout ratio, obviously, because as far as the company is concerned, that is not much off from the 60% payout. We do expect to sustain the current trend of dividend payment, which will be determined by the end of the year when the full year numbers are in place.
With that, I pass back to CEO to talk about the outlook and guidance for the rest of the year.
Okay, thank you, Badrul. Ladies and gentlemen, the last three years, this has been very exciting to us and also to the whole ecosystem. Plenty of exciting things happening, driven mainly by the energy transition. We also see that many things are being driven by the robust macroeconomic fundamentals that accelerate load expansion and increase demand from data centers especially. We are revising our electricity demand growth upward between 5%-6%, and this aligns with Malaysia's projected GDP growth of 4%-5% this year.
To support this expanding electricity demand, and execute our strategic decarbonization commitments, we maintain our total group CapEx deployment for the year to be approximately MYR 18 billion. Of this, MYR 13 billion will be allocated to our core regulated business, with the remaining MYR 5 billion will fund for our non-regulated growth pillar.
As we deploy this growth capital, TNB remains anchored to strict financial discipline. We will actively optimize our capital structure, leverage competitive funding sources, and preserve robust balance sheet liquidity to safeguard our investment-grade credit ratings.
Finally, underpinned by our resilient operation cash flows, we reiterate our firm commitment to our established dividend policy, delivering consistent, sustainable distribution and long-term value to our shareholders. Alongside delivering sustainable shareholder returns, sustainability remains fully integrated into our long-term value creation strategy. Our focus is to expand our core business while supporting Malaysia's energy transition and solidifying TNB's position across the evolving regional energy landscape. In line with this commitment, we have published our latest sustainability report, which is very thick in nature, very heavy, close to 2 kg report. Just to impress everybody how serious we are in ESG, which highlights our group progress, the operational milestones, and ongoing initiatives.
We submitted two reports, a sus statement of almost 100 pages and report also close to 100 pages. Everybody said, "Where is your ESG? You printed almost close to 2 kg of report." Okay, probably next year we'll do it better. Limited printing. She always correct me. That's my CSO .
With that, I'm glad that today's presentation I made to you, very honest, very transparent, and I hope there will be a lot of questions and answers after this. We do look forward for your continued support and attention. To that, I hand over back to you, Alvin.
Thank you, [Non-English content] Shamsul and Mr. Badrul, for your presentation just now. Let us now move to the Q&A session. We will begin by taking questions here from the attendees in the room, followed by those joining us on Webex. With that, I open the floor for questions. Please feel free to raise your hand and our staff will pass the microphone to you so that you can ask your questions. Kindly introduce yourself and share your questions.
Just to remind everybody, this is Friday afternoon.
Hi, Danny from Hong Leong. A few questions here. First thing is on your regular CapEx, you guided MYR 13 billion for the full year and then MYR 5 billion for the non-regulated, but you are first half only done MYR 5.6 billion for regulated and MYR 1.5 billion for non-regulated. We are subtracting all this to accelerate towards second half of the year.
Another question is that on the MYR 5.6 billion regular CapEx already spent, how much of it actually part of this so-called contingent CapEx? If it is already spent on the contingent CapEx for your first half, has this actually started to flow into your first half earnings?
I will take that one. The short answer to the first question, yes. I have my Senior Chief Network Officer here who are very committed, and they do tell me that they work better under pressure, so they will deliver the number according to the plan. Yes, internally, we have guided for this MYR 13 billion unregulated CapEx for the first quarter, and we know that the first half we have only delivered MYR 5 billion of that. A lot of it, in a normal construction project, you do spend a lot of time building the foundation and the groundwork to make it moving. But once it gets moving, you get to progress very quickly. So we are confident still to deliver the regulated CapEx, in particular, according to that progress.
Yes, as far as non-regulated CapEx, much lower, but those are tied to the commitment that we have in terms of a COD of those projects. We will be delivering that. If you notice our guidance for CapEx second quarter and first quarter has not changed. Internally, yes, we had the same question. Based on six months progress, can we do it towards the end of the year? The answer that I got was yes, and we will deliver this CapEx this year.
As far as contingent CapEx recognition is concerned, yes, so far MYR 700 million of that contingent CapEx has been recognized this year. Yes, it has already flowed into our income for six months this year already. That is around MYR 160 million already.
Sorry, MYR 160 million PAT at the bottom line or for first half?
Yes.
If you exclude this one, basically, your earnings did not really grow. I mean, first half compared to first half last year, if you exclude this contingent CapEx earnings, which is additional, then your year-on-year basis would not have much growth.
Yep. That's why I said, as far as we are concerned, we look at the regulated earnings overall for six months this year against six months last year, which is growing as a result of both base and contingent CapEx. It is growing. That's what contributing towards the overall core PAT growth of the group.
Okay, just to make things clear here. When you guide the CapEx spending of MYR 13 billion, that is based on cash flow, right?
Capitalized under accounting principle, so that it goes into our regulatory financial statement, then the regulator can approve that amount as due to us.
Okay. How can you differentiate? Y ou provided MYR 13 billion for this year, you mean capitalized. When you say capitalized, it means already approved or already signed off by the engineer, but cash flow may not go out yet.
No. Okay, cash flow, you have the cash flow going out, and some of them goes under what we call CWIP, work in progress. The projects need to achieve certain milestones. Of course, if you COD, that one is easy. But you have certain milestones before you are able to capitalize it. Once you capitalize it, then you can earn the return on base and contingent CapEx. But this is ongoing all the time. You have projects are being spent and being capitalized. So it is rolling numbers all the time. But what we are guiding is what we will going to capitalize under the balance sheet, which will be tied to the earnings that we are going to get, which is the 7.3%.
If a project, for example, the project is halfway this quarter and halfway done WIP, work in progress, only done by 70%, and then the engineer and contractor already say that it has been done, certified 70%, but has not COD yet. Will you actually start to recognize these earnings?
No.
You still have to wait till COD first of the project, right?
Yes. That is why when I showed the project just now, under the network side, it is very unique in the sense that you really have to define one project on its own or how do you define it. Let us say you are building a cable between two PMU, that is 100 km long. You can say it is one project, you need to wait until 100 km here, but you can capitalize. If you award it under two package, 50 km, 50 km, 150 km here, that is one project that you can capitalize already. There are a lot of nuances to it. What we are saying is, yes, it has to be capitalized, and what we are guiding is what will go into our balance sheet.
I see. My follow-up question is that, for the next two, three years until 2027, the RP4, has it actually allocate some of the budget for the ASEAN Grid? We can only expect the ASEAN Grid CapEx to only flow in 2028 for RP5?
I think we better use the manual one. It is a lot. There are some CapEx being allocated in RP4, but will not be covering the whole project of APG. For example, there are CapEx for land acquisition, which has been actually budgeted under RP4. There will be some minimum CapEx allocation that we will see under RP4 IBR period. Okay. It is not totally the whole APG project later. It depends. For example, for the project APG, land acquisition is one of the key that we need to do it first, then it allows about a few hundred millions over there for the land acquisition. Those are the things that we see under RP4.
The likelihood is actually when we go under RP5, there will be slightly major allocations under RP5, simply because there is a lot more clarity in terms of the project. Okay. Meanwhile, it is just bare minimum of allocation being allocated under RP4. All right. Any more questions?
Yes, one question. Max from RHB.
Max, yes.
Can you share in terms of the new ESA that was signed in first quarter and second quarter? I just want to get a sense of what is the progress. If I check, if I remember, if I see the slide correctly, I think it is about 0.9 GW, right?
0.9 gigawatt, five ESAs so far. Yep.
What is the split between 1Q and 2Q?
Kamal, you want to take that one?
The new ESA signed between 1Q and 2Q.
[inaudible]
Currently, for the first half of the year, we have signed five ESA, which is totaling about 862 MW. We are actually projecting 11 throughout the whole of the year. We are already halfway through. I will give you the detail with respect to first quarter and second quarter.
Okay. Thank you.
Yeah.
Hi, good evening. This is Isaac from Affin Hwang.
Hi, Isaac.
I have two questions, please. Number one, just now you have shown your plans for the capacity expansion over the next couple of years.
May I know that those new power plants subject to further approval from the Suruhanjaya Tenaga. Is this going to be under the current NEWGEN26, or is that separate?
Just to answer you, Isaac, all projects must be approved by Suruhanjaya Tenaga. Also PETRONAS. The process is actually, they issue you an Initial Letter of Notification for you to do the necessary preparations. Once you receive that, basically the project is given to you, but you need to comply to certain governance regulations or policies and procedures of the government. Then after that, we need to submit for levelized study, and some negotiations with ST, then you lock the deal.
Just plenty of exciting projects because we see, moving forward until 2021, 2022, there's a good growth in terms of electricity demand. What we see is actually our existing facility remains the same. All right. There is a risk now, to actually plant up quickly in order for us to meet those rise in demand. That is where NEWGEN25, NEWGEN26 has recently been floated. You see LSS6 coming to the picture also, which is supposed to be closed sometime in November, if not me second. The NEWGEN26 also is supposed to be closed sometime in November. Correct me if I'm wrong. Sharif, NEWGEN26 have it?
Everybody's talking about November to catch 2029, 2030, and 2031 growth. We bid for NEWGEN26 for an open cycle gas turbine, combined cycle gas turbines, and there are quite a number of other participants also. They are all lined up to meet that expected demand due to the rise of the legacy group.
Sure. I think you have secured some of the ILONs already for those you have fleshed out, maybe the Paka, the Paka repowering.
We received quite a number of ILON actually, but I don't want to really excite the whole market now because until we really, okay, we received an ILON. Can I say it? ILON. Public. Public, yeah. We received an ILON for Paka 2, Paka 1. 1,400 MW Paka 1, for 1,200 MW Paka 2. ILON for Paka 2 coming. ILON for Paka 1 coming. LON for Paka 2, we received already. That is 2008. We received an ILON for our pump storage Ulu Jelai of 700 MW, and we also received Kapar ILON for 2,100 MW. That is a confirmed ILON and LON that we have received for now. That one, probably expecting close to about more than MYR 50 billion over the next five years that we'll be expanding our CapEx. Yeah.
All right. Thanks. Just another question.
Okay.
This is on the CRESS versus the LSS. I see that you have both. In terms of the preference, is there any particular which one of these are you prioritizing? In the DayOne deal that you have, who will be there for the participation in the SAC? Is that your part or is that their part? Thanks.
Zari, you want to take that? This is my expert on CRESS and LSS.
Okay, thank you for the questions. On the first one, whether we prefer CRESS or LSS? Short answer is no. Both offers opportunities in terms of benefits and return. On the CRESS, I am not sure whether it is public information, but there is a risk transfer that we have agreed, and most of it will be borne by the off-taker.
That is all good. Thank you.
Do not worry about the SAC, Isaac. SAC cannot go up, it can only go down. If you are all ears, I will happy to. Okay, please do not quote at me. I hope that. Okay, anyone? Yes.
Hi, [Non-English content]. Hi, Badrul. It is Colin from Macquarie. Just wanted to understand a bit on the regulator CapEx side of things, because you are saying the base CapEx and continuing CapEx, we should just look at it as a one item regulator CapEx, right? Just going into 2027, which is your last year of the RP4, how would that look like, your regulator CapEx? Would that be on a similar level? Or should we expect more contingent CapEx to ramp up significantly as a result? Just cover some of that too.
Yeah. As mentioned yesterday, if you look at our base CapEx with MYR 4 billion that we spent this year and MYR 10.5 billion we spent last year, that is already 58% of the MYR 26 billion base CapEx. We have a three-year CapEx plan for regulated. We have guided that to be at around 70%-80% of the allocated MYR 43 billion. Last year, we spent MYR 12 billion. This year, we are guiding for MYR 13 billion. You need close to another MYR 13 billion, MYR 14 billion, MYR 15 billion in next year. Yes, contingent CapEx has to make up most of the CapEx in 2027.
That is much easier to justify because of the fact that most of the base CapEx will have already been spent. When there is demand, there is supply, and there is a need for energy transition to cater for all these LSS projects and CRESS and all. That is how we are positioning it so that we are able to get timely approval for the contingent CapEx. It has to come in because of the demand, because of the energy transition needed to cater for the solar projects. Yes.
Okay, understood. Thank you.
All right. Any more questions, please?
Hi, this is Noah from Khazanah.
Khazanah, yes.
Just a question on TNB Genco. You mentioned that we should look at the first half results rather than quarter-on-quarter, and you said that 10% net energy generated year-on-year. How do you expect that performance for TNB Genco for the rest of the year on net energy generated?
From the TNB Genco, you want to take up or you want me to take up?
Suddenly I got to take up also. We'll see a very strong performance. I am very happy to look at the performance of TNB Genco this year. We have turned around the organization. We are hitting the numbers we were expected to hit. I am really hoping that with a strict discipline of doing the necessary maintenance, the net megawatt sales out of TNB Genco is going to be very consistent towards the end of the year. There will be patches of my maintenance here and there, but overall, thank God, cross my finger that nothing will happen big time. Small things do happen from time to time, but no major incidents that we are going to see a very strong performance from TNB Genco this year, [Non-English content]
Right. Thank you.
Hi. Hazmi here from CLSA. Just a couple of questions. Just on cost items, I think on second quarter, we can see some elevated bit, of course, on the fuel OpEx, but also on the non-fuel OpEx part. Can you comment a little bit, especially surrounding any staff IT costs and all that? Will it still remain elevated going into second half? If there are any details about that. Thanks.
Sounds like cost is my part of the- Anything money apart, I look at it. Yes. I have seen a lot of concern as well on the energy side, on the elevated cost non-fuel in second quarter in particular. I think as earlier mentioned, there is a lot of it are coming from repair and maintenance actually for our bigger asset base. Yes, you are right. There is also attribution to computer licenses, trainings, as well as overall staff costs.
I think it is important to note that as far as staff costs are concerned, yes, you have seen that for RP4 in particular. We have scaled up our CapEx delivery from MYR 9 billion and MYR 10 billion a year now to MYR 13 billion and MYR 14 billion, going to MYR 15 billion. Obviously for 2025, the first-year operation, we do push our people under a lot of pressure to deliver those kind of CapEx. But of course, during the course of the time, we have been hiring as well. So that is a reflection of the fact that it is a much bigger scale for CapEx delivery for our regulated business.
But if you look at TNB Genco as well, just now, those projects that is going to get us another 12.7 GW over the next few years, those come with people that have to deliver the project now, but earnings will come earlier, three, four years down the road. So there is a bit of a mismatch there that as far as we are concerned, that we have to deliver to make sure that the earnings comes later.
And in second quarter, in particular, obviously there is this annual performance cycle that happens as well. So that is something that we have to take in. So we do expect that as far as non-fuel OpEx costs, third and fourth quarter, we are managing that, and we expect that to moderate in the quarter three and four. But I would have to say that at the end of the day, when additional people is being employed to deliver those business cases, so it does flow through to the additional licensing, IT costs, training costs, and all those. So yes, it is high on our list, and it is a bit elevated in the second quarter, but should moderate quite the third and fourth quarter based on those trending.
Just to piggyback on that, going with all this inflationary pressure and going into RP5 kind of like discussion as well, the question then backs is 7.3% still a good run rate for the IBR, or how do you guys look at it?
That sounds like CEO's question.
Yeah. We got to wait until RP5. When we submit our proposal, we want to submit at 7.8%, but most of the time, there is a real pushback from the government. We'll let's see and wait for the RP5 proposal, then we come back to you, Hazmi, probably in the next one. Difficult for me to to tell you that we love 7.3%. They have been maintaining 7.3%. We hope that we're going to enter the negotiation with 7.3%. Let's see how it goes when we are ready with all the proposals by the regulatory teams.
On top of that, I just want to add on CFO 's comment. We see a growth in the company. There are plenty of projects. You need more people right now. We are also very supportive of the government's call for the minimum living wage. You see that being included also in part of our effort to actually improve the basic living wage for people. Instead of having it one lump sum, we spread it over three years period. This is where you see there'll be some gradual increase over the period of three years, where you see our overhead costs will slightly go up in nature. All right?
Okay, thanks. Just two last ones.
Sure.
On the KWIE fund, can you remind me again, how much do they owe you and also how much of remaining buffer that they have left?
KWIE fund is actually confidential. Only they know, but we also track because we always pay. I think it is enough for them to cover, and the government has been KWIE, do they owe us any more, or no?
That is MYR 900 million.
MYR 900 million.
Out of which we have received around MYR 180 miilion ICPT last year.
Right.
That will be around MYR 380 million for AFA for the three months.
Right.
Plus all the contingent CapEx recovery and all those.
To tell you, they have enough to cover us. On top of that, we are very concerned because of the high surcharge period that the whole country is experiencing. I am truly glad that the government has just come forward to actually alleviate the surcharge by taking a portion of it to be absorbed by the KWIE. That is great by elevating whatever the surcharges that being actually supposedly to be passed through to the whole consumer, are being absorbed through the KWIE fund by the government. That is a great news, but people may not realize it. I think, initially, they have a lot of buffers there, but being buffers, as long you consume, it is going to deplete someday. I think that is where ST is actually looking it diligently and prudently, how do actually they expense the KWIE fund.
Okay, thanks. Next question on data centers. I think on the plan of the five ESA, how is it in terms of progress compared to last year? I am referring to on data center task force. Is it getting tougher now to get more data center application and all that?
Good news is, actually, we had a good meeting with [Non-English content] Baharin bin Din. They approved 19 two weeks ago, and recently they want to approve another 33. So all in all, the workload is going close to more than 5 GW coming to the system. That is the good news for the industry. That is what I can tell you. For the next three years, they projected close to 8 GW coming from data center facility.
So that 5 GW is on top of the 8 GW that you show in the slides just now?
5 + 8. 5 + 8. Yeah.
Thank you.
Okay. Any questions?
Hi. Can I follow up some questions here? Just now you were guiding that in second quarter there were no major one-off for your power generation side, but if there are some demolition works and minor combustions, all this. So this actually hiked up your cost during the second quarter and then compared to your first quarter, is it?
For TNB Genco performance?
Yeah.
Yes. At TNB Genco.
It will be roughly around MYR 200 million kind of total cost here? And then it is just happening this quarter, it may not actually continue in the coming quarters, or anything?
I don't think it is MYR 200 million, but I need to look at the details. But I don't think it is MYR 200 million out of these few things that we have looked at.
Because I'm looking at your numbers actually dropped from MYR 300 million to less than MYR 100 million in second quarter. If there's no major one-off all this, but your numbers performance drop, revenue continue to improve. In the middle, unless your interest cost or depreciation charges go up, there shouldn't be a much difference to explain the MYR 200 million, unless you're talking about the tax. They have a higher tax expense.
Not at TNB Genco. The tax expenditure, the major portion is actually at TNB, not at TNB Genco. Yeah.
Because I was trying to find out, compare your first quarter and second quarter, what are the major difference here? If you are looking at from the TNB Genco side, the difference is roughly about MYR 200 million compared to your first quarter and second quarter .
Yeah. There is also provisions that we have to do, in terms of the regulatory charges from the state entities in particular. There are a few items that is being charged where we are in the process of finalizing the recovery. You know that we operate in many different states, and some of the charges are being imposed by the state in terms of water usage and all that. So different states have different charges, and sometimes they are being charged to us, and some are being negotiated, some are being disputed and all. But some may need accounting provisions already. So we do have a bit of that in the second quarter as well.
This is on the power gen side?
Power gen side, yes.
I see. Okay. Another question. Just now you mentioned that the air subsidy service, you are trying to recover MYR 400 million from the KWIE fund or from the government?
AFA?
AFA.
Yes.
Correct.
That one, it is not we are trying to recover. Actually, when we do the projection for AFA, government has decided that they do not want to pass through the whole amount to the r[Non-English content]. That is why CEO was saying government want to alleviate some of the pain. So KWIE says they will cover part of that AFA.
I see.
Because AFA is fuel cost, supposed to be neutral for TNB.
Yeah.
It should have gone to all of us, but government decided some part of it, government will take. The one that is being passed to consumer, I get it within 30 days. The one that is being covered by KWIE, because this is a new process, so it started in May. May and June, we have submitted our claim for May and June already, and July is being processed. That amount is not yet paid to us. That is around MYR 380 million that I have in the slide just now. That is part of the overall MYR 900 million regulatory due from government entities.
This only affects your cash flow, but does not affect your P&L, because your P&L, you will accrue account it.
Yes.
All right. Thank you.
Hello.
Yeah.
I believe we have taken a lot of questions from the floor today. We now would like to proceed to last two questions from the participants from Webex. We have two persons with a couple of questions here. First, Rachael Tan from UBS. You may proceed to ask your question.
Hi. Good evening, and thanks for taking my question. I have a couple. In terms of the cost, are there steps you can take to manage the cost inflation that you talked about earlier? Also, given that you are ramping up staff cost ahead of execution, should we be expecting a bit more compressed EBITDA margins going into the full year and maybe next year?
Yep. Okay. Sorry, the first question is about the cost, right?
Yes.
As far as the new non-fuel OpEx, yes. We talked about the staff cost just now, but there is also an R&M cost that has came in as a result of the higher capitalization. What this means is that basically, for example, 2025, we capitalize MYR 13 billion new assets. This goes into our balance sheet, and once it goes into our balance sheet, the R&M work for those assets actually become OpEx for 2026 already. That is why a lot of that cost pressure actually because of higher asset base. This is something that the team is also looking very closely in the sense that we are trying to push a lot more towards preventive maintenance, so that the more expensive corrective maintenance can be reduced. This is part of the overall effect to make sure that we continue to protect our margins. That is the first question.
Okay. Yeah.
Yeah. Yeah, go ahead, Rachael. Yeah.
My next question will be, given the higher electricity growth forecast for the next couple of years as well as, you are talking about 8 + 5, what is your sense on the RP5 CapEx for now? Because last quarter, you suggested that it could potentially be lower.
We've got to wait until the team finalize the RP5 proposal. Right now, what the team is doing is they are now compiling all the projections, reports and everything, so that we have a good proposal to the government. That will take into account all these demands, forward forecast and all those things. Definitely, whenever you see sales increase, definitely it will also affect the profitability of the company.
Going to your number three, the cost inflation, what we are currently doing is actually we're looking into various initiative to look into our productivity improvement. Currently in distribution network, there is a project to look how do we manage and improve our maintenance costs now by deploying a lot more predictive maintenance, risk-based maintenance, rather than a corrective-based maintenance. We are looking at it, and we are making good progress, and we hope that we'll have a good result, but towards sometime end of the year and towards early next year.
We are also looking at how do we do productivity, efficiency, effectiveness, cost optimization or savings initiative, that are currently ongoing, being led by our CSBO strategy division. How do we capitalize on our strength while minimizing the cost. Those are all in the pipeline, Rachael. Be assured, we are working hard on it so that in order for us to manage this cost inflation moving forward towards end of the year.
Okay.
All right. Thanks, Rachael, for the question.
Okay. We have one last participant on Webex with questions. Fong from CIMB. You may proceed to ask your questions.
Hi. Good evening, [Non-English content] Shamsul and to Badrul. Two questions from me. Firstly, just going back to the non-fuel OpEx. I note the comments earlier around repair and maintenance and staff costs due to the scaled up CapEx delivery under RP4, as well as the comments on the general cost inflation. This is covered by the 7.3% regulated return under the IBR, right? Am I right to say that this shouldn't affect the EBITDA margin ultimately? If anything, it is just timing differences between cost incurrence and perhaps recovery in the later quarters. Maybe I'll start off with that question first.
Yeah. The return under the regulated IBR framework as 7.3% assumes certain level of OpEx. Obviously, when you get approvals, you have to keep it within that budget. Not every OpEx item would fall within the approved. If some of the amount does exceed the approved amount, then it will eat into the profitability in term of the EBITDA margin. You cannot just generally say that everything under regulated business would be met at 7.3%. There are cost elements that is not part of the overall regulated return as well.
Then in terms of OpEx, right? That's under the regulated business. In terms of how it's trending so far, are we still within the OpEx budget, under RP4, or are we starting to reach a level where we are starting to perhaps exceed some of this budget that we have been allocated for?
We are within budget.
Okay. If it's within budget, then it should be no issue, at least at this point in time.
Yes. That's why I'm not concerned.
Okay.
Because it's within budget. If it's not, then very difficult for me.
Okay. Understood. On TNB Genco, [Non-English content] Shamsul, any guidance on the adjusted PAT for TNB Genco for the full year so that we know first half has been pretty strong, and you're saying that the performance will be strong for the full year. But any number that you can guide us on?
Oh, okay. We hit MYR 400-
20.
MYR 420 million in the first-
Six months.
Six months. They set their own KPI is MYR 600 million. So another MYR 180 million to reach. I said that is not going to be acceptable to us, so we are asking more. We are hoping that, Fong, is going to be If I commit, then you start writing your analysis and start saying that also. Huh? Okay, off the record, probably around-
I'm not-
Oh, yeah. Now I'm getting worried because if I commit then. But certainly more than MYR 600 million. That I can vouch. Okay. If I don't hit MYR 600 million, you come back to me. I correct you. But at least MYR 600 million, I'm quite confident to hit that one. All right. Okay, Fong.
Okay. All right. Okay. Thank you so much.
You ask the same question, then I say you again.
Okay. Thank you so much.
Okay, Fong. Thanks.
Badrul. Yeah.
All right.
Okay. That will be all the questions for today. Ladies and gentlemen, thank you all for your questions. Once again, I would like to invite [Non-English content] Shamsul Ahmad to deliver his closing remarks.
All right. Ladies and gentlemen, thank you for the engaging session. It's a very exciting year for us. First, we remain highly confident in the core resilience of our operations and the structural strength of electricity demand trajectory. As Malaysia's landscape evolves, we are strategically positioned to capture high-value growth opportunities selectively and with investment discipline. TNB remains firmly committed to a prudent capital allocation framework while delivering sustainable shareholder returns. Backed by strong fundamental, operational fundamental, high visibility growth pipeline, and disciplined execution, we are well-positioned to deliver long-term active value for TNB, our shareholders.
It has been certainly a very exciting three years for all of us, and we're looking forward to a very exciting few more years coming. There are plenty of things on our plate. Currently our plates are full. We are making many more proposals to the government, which I cannot disclose right now, but certainly we look forward for a very exciting years coming to Tenaga in the future. Thank you very much, ladies and gentlemen. If you have any follow-up questions, do not hesitate to contact any of our members, investor relation teams, it's always available at your disposal. Please contact them. I
hope that concludes today's session. I would like to take this opportunity to wish everybody a meaningful Merdeka celebration. We celebrated our 77 year on 1st of September. I was talking 77, we are old. We are already old. Tenaga is Tenaga. We are getting stronger than ever. Inshallah, we'll do better. So thank you very much and [Non-English content] .
All right. Okay. Thank you, [Non-English content]. On behalf of Tenaga Nasional Berhad, we thank you for your participation in today's briefing. If you require further clarifications on any unanswered questions, please feel free to contact our investor relation officers or email us at tenaga_irr@tnb.com.my. To all our attendees, whether present, physically or virtually, we appreciate your time and engagement. For our Muslim attendees who are here with us physically today, a prayer room is available at Tower A, level 1, and our staff will be happy to guide you there.
Thank you once again, and we look forward to seeing you in our future sessions. With Malaysia's Independence Day just around the corner, we wish everyone a wonderful and meaningful celebration. Take care and have a wonderful day.