Tenaga Nasional Berhad (TNBMK)

Based on public information, TNB’s current credit quality can be viewed as that of a high investment-grade, support-inclusive utility credit, but it is not an issuer whose rating level can be explained by standalone financial metrics alone. The credit direction appears broadly stable, supported by profit improvement in 2025 and the introduction of RP4/AFA, but it should not be described as clearly improving because of large-scale capex and volatility in fuel costs, foreign exchange, and working capital. The probability of rapid credit deterioration over a short period does not appear high, but if delayed AFA recovery, higher fuel costs, MYR weakness, increased investment, and weaker refinancing markets occur simultaneously, the view could deteriorate relatively quickly through operating cash flow and liquidity.

The pillars supporting credit quality are the indispensability of TNB as electricity supply infrastructure, institutional cost recovery through IBR/RP4/AFA, and capital market access based on high ratings and government linkage. AFA in particular may accelerate the reflection of fuel cost and foreign exchange changes relative to the previous ICPT mechanism, reducing working capital risk.

The constraints on credit quality are also clear. FY2025 total borrowings were RM59.1bn, capex was RM15.7bn, and operating cash flow was RM15.8bn. In other words, even with profit improvement, TNB does not have a structure that can comfortably absorb investment and refinancing entirely with internal funds. RP4 investment may be recovered as regulated assets over the long term, but there is a timing gap between cash outflow and recovery. TNB is a credit that assumes the regulatory framework functions and capital market access is maintained. Because undrawn committed lines have not been confirmed, backup liquidity under extreme market stress remains an item for the next review.