TENAGA: Strategic Shift Towards Nuclear Power Drives Long-Term Outlook

A recent engagement with the TNB Nuclear Taskforce highlights a significant strategic direction for Malaysia’s energy sector, positioning a major utility provider as a key player in the nation’s nuclear future. The discussion underscored the country’s ambitious plans to integrate nuclear power into its energy mix, with the first nuclear power plant targeted for commercial operation by 2031.

Malaysia’s Nuclear Ambition

The Malaysian government aims for 300MW of nuclear capacity by 2031, expanding significantly to 3GW of large nuclear capacity by 2034, under the 13th Malaysia Plan. The utility is actively preparing its capabilities, including manpower skilling and technical knowledge, to serve as the Developer-Owner-Operator (DOO) for these upcoming projects. This aligns with broader policy targets to ensure energy security, affordability, and sustainability amidst growing demand.

Strategic Rationale and Decarbonisation

The inclusion of nuclear power is seen as a critical pathway to low-carbon energy and a viable baseload replacement for retiring coal and gas plants. Malaysia’s entire 12GW coal capacity, currently accounting for up to 61% of its generation mix, is scheduled to be retired by 2044, with more than half going offline between 2029 and 2033. This transition offers substantial capacity replenishment opportunities and supports generation portfolio decarbonisation efforts. Rising electricity demand from sectors like transport, industry, population growth, and data centers further necessitates robust and sustainable energy solutions.

Proactive Involvement and Studies

The utility has proactively championed nuclear energy through active government engagement and strategic initiatives since 2023. It has initiated key nuclear studies, including a nuclear roadmap and siting studies, and established a Nuclear Project Management Office. This office is tasked with leading preparatory activities across funding, commercial, technology, infrastructure, regulatory, and capacity building aspects. The utility is also collaborating with other state-owned enterprises in government taskforces to assess the country’s readiness for nuclear energy deployment.

Technology and Cost Competitiveness

The taskforce is exploring various reactor technologies, with Small Modular Reactors (SMRs) and floating nuclear power plants being considered as potential candidates. SMRs, due to their modular nature, offer the potential to shorten typical development timelines, which usually span 10-15 years. While SMRs face initial “First-of-a-Kind” costs, competitiveness is expected to emerge through economies of multiples, design simplification, and supply chain maturity.

Furthermore, the utility argues that nuclear power costs in Eastern countries (like China, Egypt, and UAE) are significantly lower than global averages, which are often skewed by higher costs in Western nations. Its analysis indicates that nuclear power plants built in China can achieve a Levelised Cost of Energy (LCOE) competitive with domestic coal or combined cycle gas turbine plants in Malaysia.

Investment Outlook

TA Securities views nuclear energy development as a significant medium-to-long term catalyst for the utility. This strategic shift is expected to drive decarbonisation of its generation portfolio and benefit from broader energy transition initiatives, including increased grid capital expenditure to accommodate higher renewable energy penetration and data center-driven demand growth. The investment bank maintains a BUY recommendation, with a DCF-based target price of RM15.80. The last traded price was RM13.46.