Tenaga Nasional (5347) Investor update summary

Tariff framework and recent developments

• New electricity tariff structure effective 1 July 2025 unbundles costs into generation, network, and retail segments for greater transparency.

• Generation costs, including energy, capacity, and AFA (Automatic Fuel Cost Adjustment), account for 70% of supply costs.

• Recent global fuel price increases, especially due to the Middle East crisis, have driven up AFA surcharges since May 2026.

• Government raised the protection threshold for domestic customers from 600 kWh to 800 kWh/month for September–December 2026, exempting more households from AFA and related charges.

• This move protects about 90% of domestic customers, adding 1 million more to the exemption group.

Financial and regulatory impact

• Estimated one-off cost absorption of MYR 120–150 million for the exemption period, representing about 6% of projected AFA costs.

• Cost assumptions are based on high-case fuel prices and conservative estimates; actual impact may be lower.

• The adjustment is outside the regulatory framework and does not affect regulated returns or the company's dividend policy.

• Tax impact will be a reduction in total revenue, but the amount is considered manageable and not expected to affect credit ratings.

• The KWIE fund continues to cushion AFA increases, but the current absorption is a shared, temporary measure.

Policy outlook and future mechanisms

• The current AFA mechanism remains intact; the one-off relief is temporary and ends December 2026.

• From January 2027, the government is expected to introduce a new, more sustainable AFA policy.

• The 800 kWh threshold will revert to 600 kWh in 2027, and cost pass-through mechanisms are expected to ensure cost recovery.

• Future adjustments may involve differentiated rates for customer segments, depending on government policy.

• No incentives or compensation are provided for the one-off cost absorption; it is a CSR-type support for customers.