Tenaga Nasional Bhd’s (TNB) power generation arm, TNB Genco, has secured a major contract to develop a new 1.4 gigawatt (GW) combined cycle gas turbine (CCGT) power plant in Paka, Terengganu, marking a key addition to Peninsular Malaysia’s future electricity capacity.
TNB Genco and its consortium partner Aurora Power Generation Sdn Bhd received a Letter of Notification from the Energy Commission confirming their successful bid under the New Generation Capacity (2025–2029) competitive tender.
The Paka facility is the only new power plant awarded under Category 2 of the tender exercise, which was launched in May 2025. Other awards under the programme involved short-term capacity extensions totalling 4.9GW from existing or expiring power plants.
Construction of the new plant is expected to take about three years, with completion targeted in 2029. The project will operate under a 15-year Power Purchase Agreement (PPA), with Tenaga Nasional Berhad acting as the offtaker.
Strong earnings contribution expected
CIMB Research estimates the new power plant could generate approximately RM200 million in annual earnings before interest and tax (EBIT) once operational, providing a meaningful boost to TNB’s long-term earnings profile.
While TNB has yet to disclose its equity stake in the consortium, CIMB expects the utility giant to hold a majority interest. Based on project investment estimates of RM7.5 billion to RM8.0 billion, the consortium would likely raise RM6.0 billion to RM6.4 billion in debt and inject RM1.5 billion to RM1.6 billion in equity under an assumed 80:20 debt-to-equity funding structure.
Assuming TNB holds an 80% stake, its equity contribution would amount to around RM1.2 billion to RM1.3 billion. CIMB said this remains manageable given TNB’s strong financial position, with estimated cash reserves of RM12 billion by the end of FY2025.
Separate from existing Paka repowering project
The newly awarded plant is separate from TNB’s ongoing Paka repowering project, which received a letter of intent in 2022 and is also scheduled for completion between 2029 and 2030.
CIMB estimates the repowering project could similarly contribute around RM200 million in annual EBIT, highlighting the strategic importance of the Paka site in strengthening Malaysia’s power generation infrastructure.
Together, the two projects are expected to support TNB’s long-term earnings growth while enhancing supply reliability amid rising electricity demand.
Positive outlook supported by regulated asset base growth
CIMB Research maintained its “Buy” recommendation on TNB, with an unchanged discounted cash flow-based target price of RM15.10, pending further details on the new power plant and the company’s upcoming fourth-quarter 2025 results.
The research house expects TNB’s earnings growth between FY2025 and FY2027 to be supported primarily by expansion in its regulated asset base, which provides stable and predictable returns.
However, key risks include higher-than-expected operating costs and slower implementation of contingent capital expenditure plans.
The latest project win reinforces TNB’s dominant position in Malaysia’s power generation sector and underscores its continued role in supporting the country’s energy security and long-term economic growth.
