Tenaga Nasional: Data Center Demand Doubles, But Costs are Biting

Malaysia's largest utility posts record peak demand and a 13.7% jump in commercial sales, yet margin pressure and a massive new-build program keep the 7.3% regulated-return model under scrutiny.

5347.KL · Earnings Call · 2026-08-28

Demand: The Digital Tsunami

Tenaga Nasional Berhad (5347.KL) delivered a resilient first half for FY2026 on August 28, with core PAT rising 5.3% to MYR 2.3 billion and an interim dividend of MYR 0.25 per share (63.2% payout). The most striking number came from the data center segment: “actual energy consumption from operational data centers has more than doubled year-on-year, surging from 1. -- terawatt hour to 4. -- terawatt hour.” — Shamsul Bin Ahmad, President and Chief Executive Officer · 2026-08-28 This is not just a blip—it aligns with a broader commercial sector that grew 13.7% year-on-year and now accounts for 39% of total sales. The system peak demand has hit consecutive records, reaching 22,014 MW in early August. Data center demand is the engine, and it's embedded in the secured pipeline: 61 projects representing 8.35 GW of maximum demand, of which 5.65 GW are already in the system. Electricity demand is clearly accelerating.

we are definitely not spared from the cost pressure that is actually everywhere in the current business climate.
Badrulhisyam bin Fauzi, Chief Financial Officer · 2026-08-28

Costs: The Margin Squeeze

But the same report reveals a tightening margin. EBITDA grew to MYR 10.8 billion, yet the margin slipped to 30.8% from 31.6% a year ago. The CFO pointed to elevated non-fuel OpEx—repair & maintenance, software licenses, and staff costs—largely driven by the scale-up in CapEx delivery. “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. So obviously, for 2025, the first year operation, we do push our people under a lot of pressure.” — Badrulhisyam bin Fauzi, Chief Financial Officer · 2026-08-28 This is classic utility cost inflation, but the regulated return on assets is fixed at 7.3%, meaning any overspend beyond the approved budget eats into profitability. The CFO was quick to note that they are within budget, but the pressure is real, and analysts have consistently probed on cost inflation in prior calls as well.

Capital: Betting on Gas and Grid

The company is not shrinking from the challenge. It maintains its MYR 18 billion total CapEx guidance for 2026, with MYR 13 billion for the regulated grid and MYR 5 billion for non-regulated generation. A key new development is the government's NEWGEN26 program—fast-tracking new combined-cycle gas turbine capacity. The CEO confirmed: “we have submitted our proposal on 1st of July 2026, and we hope we will win the bid.” — Shamsul Bin Ahmad, President and Chief Executive Officer · 2026-08-28 This is a fresh high-momentum theme for TNB, and it directly addresses the demand surge. Alongside, TNB's non-regulated pipeline stands at 12.7 GW through 2033, with nearly 1 GW of RE capacity coming in 2027 and 3 GW by 2030. NEWGEN26 is a strategic pivot towards gas just as the grid prepares for renewables, but it also signals that TNB sees robust long-term load growth.

Outlook: The 24% Tax Reversion

One bright spot on the cost side is the effective tax rate. After years of overhang, the investment allowance granted by the Ministry of Finance was recognized in fiscal 2025, and the CFO reiterated a normalized target: “for the longer term, I think it will be prudent to keep it at around 24%” — Badrulhisyam bin Fauzi, Chief Financial Officer · 2026-02-28 — which, if realized, provides a meaningful earnings tailwind. This is a recurring theme; in the February 2026 call, the CEO emphasized the focus on AI-capable data centers versus CPU-based ones, “the focus will be the data centers with the AI capability rather than the normal data centers” — Megat Bin Megat Hassan, President and Chief Executive Officer · 2026-02-28, a stance the company continues to hold. The dividend, at MYR 0.25, is stable, and the Electricity demand growth forecast was revised upward to 5-6% for the year. TNB is clearly riding the wave, but the margin and capital discipline limits are being tested. For investors, the key question is whether the 7.3% regulated return can absorb the cost pressure while the company executes a record buildout — a balancing act that will define the rest of RP4.