Tenaga Nasional Berhad (TENAGA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for joining us here physically and virtually via Webex. We will be starting our session in about 5 minutes. For those who are already here in this hall, we welcome you to take your seat and we appreciate if you can help us fill in this front row. Thank you. This session will be divided into 2 parts. First, our President and CEO, Datuk Ir Haji Megat Jalaluddin Bin Megat Hassan will present on TNB's group strategy deployment. Following that, Mr. Nazmi Othman, our Chief Financial Officer will delve into TNB's first quarter financial year 2024 performance. After these presentations, we will open the floor for questions before concluding the event. Now, let us watch a video showcasing our role and commitment as a national electricity utility in supporting energy transition. Please, welcome. [Presentation]

We hope this video offered valuable insights on TNB's business and the future energy landscape. Now, I am delighted to invite Datuk Ir Haji Jalaluddin Bin Megat Hassan, our President and CEO, to kick off today's session. Please, welcome.

[Foreign Language] and very good morning, [Foreign Language]. First of all, thank you very much for being here. The analysts who has been covering the quarterly briefing by Tenaga Nasional, thank you for your providing the time and the passion to be here. So today, we have our CFO, a familiar face, at the same time, I'm inviting Chief Retail Officer, Sheikh Rahman, who will be together trying to provide the best available information to the analysts with respect to how the business of Tenaga as we see. So this year, in the first quarter, we are seeing a number of announcements by the government with respect to the energy and electricity business of the country. The first one is the bidding announced by the Energy Commission with respect to the large-scale solar. So, this is the fifth addition of the large-scale solar development, also called LSS 5. And we are seeing a number of characteristics with respect to this LSS 5. First, I think the total size of the LSS 5 is 2,000 megawatts, significantly bigger compared to the LLS 1 to 4. Secondly, we're also seeing the elements of floating solar to be part of the whole scheme of solar generation. And thirdly, the cap or the maximum per company to bid is actually 500 megawatt. So, this significantly reflects the intent of the country to increase the generation mix based on the NETR objective. So, Tenaga Nasional, as the leading utility player in the country, will participate in LSS 5. And our team is currently preparing the details of the submission in the bidding. So, that is the first one. Second, we also see the announcement of the Energy Exchange Malaysia or just called Enegem. This is to kick start the potential cross-border energy sales, specifically to Singapore. The government has named a single buyer as the operator of the exchange, an independent operator of the exchange to facilitate cross-border energy sales. And the single buyer has made the announcement that there will be a trial of 100 megawatt of RE cross-border sales to Singapore as the start of the journey into the -- what we see as the bigger ASEAN energy assets that will come into the picture later on, which we will be covering the intent of the ASEAN power grid, as we noted in the past. So, this export also provides the industry players like Tenaga the opportunity for a new landscape and also provide a good catalyst for the industry capacity expansion with respect to RE generation. Thirdly, we also see the Green Electricity Tariff being launched for 2024 with a quota of 6,600 gigawatt hour. The offer is at competitive 2 premium rates, 10 sen per kilowatt hour for domestic and low voltage non-domestic customers and 20 sen per kilowatt hour for medium and high voltage non-domestic customers. And the increased quota provide the customers the opportunity to actually procure green electricity from direct from the grid. And as of today, we are seeing a capture level of 41%, mostly coming from the low voltage and also medium voltage customers. So Tenaga through our subsidiary, TNBX will be promoting and doing the proper marketing, so that the energy users coming from industries, commercial as well as domestic are able to purchase the GET. So, these are the 3 elements we believe that would spur ahead the electricity sector for the country and more importantly, spring the green electricity for country. So coming back to Tenaga, as everyone is familiar, we have the objective of our 3 pillars as part of our growth territory for the future. First is actually to deliver clean energy generation and this is driven by Genco and our new energy division. I'm happy to note that for Genco, amongst the projects you're undertaking at the moment, they're making a good progress. Actually, Nenggiri Hydro project, we are actually at 50% overall project completion. But for the year of 2024, we are actually at 56% project progress, meaning that the project is at a good progress on track at the moment. And we have actually surpassed the -- most of the difficult element with respect to hydro project. There's actually construction base of the project. So, we have surpassed that. So, now we are trying to build the hydro plant itself. So, good progress with respect to the Nenggiri Hydro project. The rest of the Genco project with respect to Sungai Perak, we are finalizing the new PPA as well as the -- for the coal firing of hydrogen and ammonia, we have completed the feasibility studies for both. So for us, it's actually to get distract into the face of a pilot in the future. So that is the scheme of thing that is happening in Genco. For NED, notable achievement, we are expected to commission our 102 megawatt peak of Solar Greenfield Development in the U.K. by the third quarter of 2024. We are expecting the revenue to come in the third quarter. The corporate PPA, 135 megawatt, we have started the construction work and expected to complete by 2025. And recently awarded solar park under NETR. We are going to achieve the financial close very soon. So, both of these 3 projects locally and overseas are providing a good territory for Tenaga with respect to growth entry. So, looking at what we have achieved to date, we have secured about 10.5 gigawatt of RE capacity. So at the moment, 4.3 gigawatt is already in operations, while the balance is 6.2 gigawatt under construction and in development. So, we are assisted by the fact that with this pipeline of our capacity, we can also achieve the sustainability of carbon emission. On average, we expect to avoid the emission of 14 million tonne of CO2 per annum. So, this is our generation business. Looking forward to making it a good business as we go along. The next will be on our regulated business. This is the core and foundation of our business. So, happy to share that with respect to the CapEx utilization for the third year of the update period, we are very much in line to achieve 100%. So to date, the utilization is about 25.3% of the total allocated CapEx for the year, which is MYR 6.4 billion. At the same time, we are in direct negotiations with the regulator with respect to the submission of RP4. Here, we will continue the negotiation and we expect to actually conclude it by year-end. And we believe this is one of the 2 words that will ensure the continuity and the growth of Tenaga business. So, everything is intact with respect to shareholding and we have a series of engagement with the regulator with respect to RP4 to achieve 6 [ massive ] outcome, which very much trying to deliver the energy transition while ensuring the security, supply and affordability of the electricity price for the customers. So, in greater details with respect to the regulated business. We are also monitoring the so-called CapEx that attributed directly to energy transition. Again, we have spent 21% of the total CapEx just for energy transition amounting to -- around MYR 680 million or a total CapEx of MYR 3.2 billion. Mostly, the project goes to the smart meter installation progress. The target is about 600 customers will be installed by -- who installed smart meters. Today, we have achieved 46%. Next is distribution automation project. We have achieved 21%, target of 2,800 substation. We believe, as we go along, we should be able to complete it. And you can see that this kind of project, what we have put is that the groundwork started in the beginning of the year. But as we move along in parallel, you see that the numbers will actually accumulate it, especially in the fourth quarter for the project. The other one is actually [indiscernible] automatization. Again, if we look at the numbers, it is about 9%. But overall, we are confident that this can be achieved towards the end of the year. Once again, I think the normality of this project, we started from 0 towards the end of the year. It will be coming to the accumulation of the total target. So, this is a key achievement with respect to the energy transition CapEx in line what is being targeted for under RP3. Another good performance that we see in the first quarter is on the data centers, which actually drive the demand of electricity for the first quarter. In so far, we have completed 9 projects amounting to 700 megawatts. Under the Green Lane Pathway, 2 projects are completed within the 12 months that we have promised the customer. The customers are Yellowwood Properties, also known as Yondr and also Princeton Digital Group data center, both in the Sedenak Tech Park in Johor. So, we are extremely happy with respect to this completion of the project. So, a rule of thumb, 1 megawatt of this consumption will give us about MYR 50 million kind of revenue to Tenaga. So in the pipeline, there are also 10 let's say, supply agreement that we have signed with a total capacity of 2,000 megawatts and we targeted to complete the project partly this year and it we be spill over to next year in 2025, taking into account over the 12-month period. And 2 of the biggest customer of data centers are Microsoft, who has signed recently in January 2024 and also, Vantage Data Centers taking at 275 kV. I think the Microsoft will be located in Johor, Vantage will be in -- sorry, I think both will be located in Cyberjaya and Cyberview. So, we are also seeing a good distribution of data centers, not only considered in Johor, but are also coming to the [indiscernible] area, the big data centers. Today, we have Microsoft and Vantage. So, a good growth for Tenaga as we anticipate the balance of the 2024. Under the customer pillars, solutions that we provide to the customers, GSPARX making, again, a good progress in the first quarter. We have secured 5 main chain of customers; [ SP Steel, TDM, Camel, VMS and DEP ]. These are a chain of customers, meaning that there are many premises of these customers that will be installed with a combination of solar rooftop. And today, we see that GSPARX has secured a capacity of 356 megawatt peak. And the target this year is actually to commission -- sorry, to secure another 160 megawatt. So hopefully, by the end of the year, GSPARX should have secured capacity of around 500 megawatt because the starting point is about 340 megawatt peak. So, we are extremely positive GSPARX will achieve those objectives in terms of the numbers and also the commissioning of those installation of the solar rooftop. So, another big project for GSPARX is actually our collaboration with Sime Darby Property to commence the so-called solar installation on the roof of a project based on the so-called another scheme, which is based on the rental of the rooftop in the Sime Darby project in Elmina. So, we are looking also if the project and the scheme of roof rental come into the picture that will actually expand the -- another possibility of a different business model for GSPARX. As we move along on top of the [indiscernible] business model that we currently have. So, this is GSPARX with respect to the rooftop installation. Another element that we are supporting the country is on the electrification of transport. Tenaga has 2 main role. One is we have to spur the electrification of transport through installation of public charging points. And to date we have commissioned 36 charging point throughout the country. At the same time, active numbers are commissioned in the first quarter of this year. So, we have a target of 66 towards the end of the year. You can see on the right-hand side, there is a map of where the locations are. So, most of the locations are at the main highway. Major trunk roads at the place where a lot of activities happen, especially at the shopping mall. So, you can see that Aeon is one of the places that we have identified to be a good location and we have the collaboration agreement with Aeon to install charges at the irrespective Aeon mall, together with installation of the solar rooftop. So, we are having RE and EV together for a single customer like Aeon. And we would like to actually expand this to a greater base of customers going to the market, both with RE and EV together. So, that is the first part of Tenaga role. And one of the world charger that we have commissioned in last quarter is the Juru Setia R&R area. This is the first charger up to 200-kilowatt obviously. And so far, the take-up rate has been very good. We anticipate a 4% utilization rate. But for this Juru Setia, I think it has gone beyond that. So, meaning that the payback period or the return on investment can be faster compared to what we have projected. The second part of the Tenaga role is to encourage the other touchpoint operator to install EV charges. So to date, we have 148 applications coming from various CPOs for selection of judges throughout the country. The demand of electricity so far recorded for the application is about 115 megawatt. So, this is another positivity that we see that the EV business is going to take off. And we also see the number of registered vehicles through JPJ in the positive growth. At the same time, Tenaga is also taking our own initiative to electrify our own fleet and thus far, we have procured 108 vehicle to replace the old ICE [ power ] drive into the EV ICE power drive and we will pursue the same objective this year based on the asset replacement initiative for the vehicle that we have taken. So that is the EV business. Again, I think this is a growth business for Tenaga and it's also providing a good economic stimulus for the country with respect to electrification of transport. So with that, I will pass to our CFO for the financial performance update. Please.

Thanks, Datuk. For the financials other than what we have released last Friday, which is quite very detail and we're going through the details for the long weekend. So, what I will do just stress a few points that have impacted or have affected the results for the first quarter unaudited line. So for the first quarter, we saw a good pickup in term of revenue, very high pickup in revenue about 9.9%. That's very, very high. It's mainly coming from industrial and mainly from coming commercial and domestic. Though industrial is a bit small pickup, but compared to last year, there's also a pickup of industrial also for the year. So that's a very good sign for the industry. So, 9.9% is very, very high pickup. And also, our investment in U.K. also has started to give good revenue for us. So that has helped us in terms of our bottom line. Having said that, there are certain events that have occurred or happened during last year in COVID period, last -- this year that impacted our bottom line, namely the unplanned outages in Genco, we manage M4 is a well known fact. So, we are doing everything that we can to be back online. And then we're also doing some recourse if necessary to minimize the value [indiscernible]. And also, we also saw during the quarter because of the higher sales that we have been recording throughout last year and this year, based on accounting principles, we have to power a bit more for the [ ADD ] the doubtful debt, right? That's not the accounting because of the higher sales, the impact or the value for loss, so we need to power a bit more for that. That's just accounting. And also, we saw in the year that weakening of ringgit against the dollar. So, at December-end, we were at MYR 4.5, but quarter-end, we're at MYR 4.7 thereabout. So, there's some [ commotion ] sometimes there's a loss that we have to record for our dollar [indiscernible]. And for the quarter, the tax impact for the accounting -- this is the accounting tax impact for the accounting because of the translation loss is not allowable. So, we have to -- that's why the ETR, the effective tax rate is higher because of that and also some non-allowable expenses that we had during the year -- during the quarter that we have to account for. So that's accounted for the higher effective tax rate. Other than that in terms of production, they are well. We can see that in terms of the royalty factor for Genco, we are still at high, above 75. We are, well, 78. The difference is coming from M4 namely. In terms of transmission for the first quarter is almost 0 or 0 compared to the threshold that we have set for that, 1.5. And first ID or distribution management for the customer is 7.95 compared to 50. So all in all, technically, we have a very good result in terms of technical of regulated business. So, they are performing very well. But Genco, as we mentioned and just managing M4, we are doing our very best to come back as soon as possible. Next. In terms of working capital, we have collected the MYR 4.7 billion in terms of FCPT due to us -- last year from the government. That is why we are able to manage our receivables well. The FCPT is about [ 5.1% ] compared to [ 4.7% ] last year is because of some fluctuation in the fuel prices and some very some outstanding that we have for this year from January to June, we are yet to win, but [ MYR 71.4 billion ] for the 6 months, when we have been communicating with the government on that one also. For receivables, as I said just now, got higher sales as it occurs during the quarter, that's where we have a bit of higher office overbalancing. In FCPT, as I said, we have recovered and during the quarter, thanks to our [indiscernible], this collection rate is [indiscernible] for the quarter, which is very good. We've been trending upwards and been managing that way. So, he's been collecting and been able to do that quite well and very well in fact. So that is why we are able to manage the working capital a bit more and we are really -- we are able to manage the load that's due that we can sell those more extensive load so that we can manage our working capital in a more effective manner in terms of managing our business. FCPT outlook is just an outlook. For the quarter, it's about [ 4.6% ]. So -- but this is just FCPT we are about to collect. And mind you, Tenaga always remain neutral in terms of FCPT. So, what we are going to do going forward is that if the coal prices remain neutral, it's about [ 112 ]. So it's quite stable that way. We don't see a lot of fluctuation in there. So, we should be able to manage the working capital better. We should be able to manage our capital expenditure, the loan requirement for that. And we should be able to have a healthier cash flow for the year. I think with that -- and also, I'd like to note, last week and just evening, so S&P have upgraded us from BBB+ to A-, which is good. That's on the premise of the better working capital management and the better collection rate for Tenaga. So based on that, so now I pass back to Bin Megat Hassan.

Thank you very much, CFO on the overall and financial performance for Tenaga so far for the first quarter. So next, I probably provide a brief outlook for 2024. As mentioned, we are expressing a good growth in the first quarter. Quarter-to-quarter growth was 9% comparatively. So, we expect the demand of electricity here is going to be strong. We have projected 2.5% to 3%. You may think that it is a bit probably conservative from the angle. Yes, I think we would like to be prudent at this stage. Hopefully, that the actual performance can be better off compared to this. But this is what we are budgeting in the sense that we will have a good growth compared to what we have last year and the plan for the first quarter are reflecting those. Second, with respect to CapEx, we are expecting or projecting to spend about MYR 15.8 billion this year. The regulated CapEx should be about 50% to 60% of this. But the balance our Tenaga regulatory CapEx involving generations, the solar business as well as the electric vehicle business that we are in. So, in all MYR 15.8 billion and we would expect that we are able to actually spend those with -- in a good discipline because as everyone is aware, at least that is where our return is going to be. So that is the feature of the CapEx this year. In terms of the capital management, CFO has mentioned it just now. I think we will continuously to be proactive with respect to our capital management. And the good sign is that the coal price is more or less stabilized. So, we think that this is the best place for Tenaga to ensure that our capital allocation are proper to provide the necessary growth that we want. And we are looking at the capital allocation perspective in a very granular manner, trying to address the retail perspective locally as well as some of the overseas investment that we are taking on. And the group rating by the S&P last week provide us another opportunity for us to get the foundation correct with respect to capital allocation and funding for growth. Next item is on regulatory period. I think everybody anticipates this to be a good one for Tenaga with respect to the objective of energy transitions. So, as mentioned, we have submitted the RP4 proposal anchored on 6 massive outcome, trying to balance the Trilemma of energy, security and supply, affordability and sustainability. Together with the proposal is the potential discussion of tariff reform, which Tenaga tariff has to be looked at in a fair and equitable manner, sort at the full ecosystem of electricity business would be sustainable in the future. So, we are hoping this can be concluded by year-end. On top of that, we will continue to deliver value to our shareholders. And one key element that we have seen in the past is the stability of our regulated business that provides us a strong foundation to give the assurance to the shareholders the return will be coming and putting the performance of regulated business, both on the CapEx as well as the OpEx management will always be key to Tenaga Nasional. And last but not least, the growth and green perspective of Tenaga. We understand we are one of the industry player that is very much in the middle of this sustainability game with respect to our nature of our business and we have focused on the sustainability of our business, the greening of our business in more granular manner for 2024. And today, as everybody understand last year, the rating of, ESG rating for our company was BBB by MSCI. So, our objective is to get into the A for 2024. So thus far in the first quarter, we have made a good progress and the individual rating of the MSCI company and seems to provide it is a good moving forward for 2024. Then God willing, inshallah, we will achieve a better rating this year going to the A rating for MSCI. So that some of the perspective that we have for the balance of the 2024 financial results for Tenaga. So, thank you very much. That's probably the end of my presentation.

Thank you, Datuk Megat and Mr. Nazmi for your presentation just now. Let us now transition to the Q&A session. We'll begin by taking questions from the attendees here in the room, followed by those joining us on Webex. For those on Webex, if you have any questions, kindly type your name and the company you represent in the chat box. Our team will unmute you once your turn is up, and then you may address your questions accordingly. With that, I open the floor for questions. You may ask your questions at the microphone stand provided.

This is Isaac from Affin Hwang. I have 2 questions, please. One is that -- I mean, we have heard about the introduction of the TPA framework could be getting more detailed in the third quarter. So my question is, how is that going to affect your business? Will they only come in as part of our RP4 regulation when the revenue front or the CapEx front? Or would that be a separate things that we should look at? That's number one. And number 2 is that, can we have some updates on the Enegem, like how have you seen the response from the Singapore side so far? Can you give some color whether you have like demands and any indicative on the -- any color on the pricing and other things will be very helpful?

Thank you very much, Isaac on the 2 questions. First, on the TPA framework, I think the regulator or the government has probably give very skeleton framework with respect to the announcement. From a Tenaga perspective, this is going to be positive for industry, whereby the generators, the 3 generators are able to sell the green energy directly with the customers. And of course, we will go through the transmission and distribution line that we currently have. So the meaning of TPA is actually assessed the actually the network that we have transmission and also the distribution network. So, this provides a good positivity to Tenaga because we own and operate the distribution and the grid. So, we are expecting a better utilization of the grids and we are also expecting to provide those inter-connection facilities because their distribution can come from everywhere and somewhere. So meaning that we have the opportunity to actually upgrade the grid to facilitate this PPE. So with respect to the grid business, I think this is going to be good for Tenaga, opportunity to actually increase the capacity of the grid, the opportunity to build a more resilient and flexible grid. So, those are the transmission and also the special network of Tenaga. Secondly, it also provides a good opportunity for our Tenaga business in the sense that we can also do the RE generation and get a TPA over to the customer in it. So overall, I think it's going to be positive for Tenaga.

Just a follow-up on that one. The TPA now we are talking about energy as a whole, not just RE. Is that right to hear? Because from the newspaper, it sounds like it's a bit more than RE now, the TPA? That's one. Number 2 is understand on the revenue opportunity and the capital requirement, will that be part of your RP4 or is it separate in terms of how should we look at the revenue and the CapEx requirement for this?

On the first question, as we understand the RE for the country are coming mostly from solar. Solar has this characteristic of it is distributed all over the place, we can generate, which is a good one, a good characteristic. But it also has a limitation with respect to duration and intermittency. So, when we talk about TPA as well, yes. So, to address the intermittency and the duration, definitely, we have to go beyond the RE. So, if you look from the set up of 24 hours continued supply, then it has to be a continuous RE and basically, non-RE generation. So, the non-RE generation actually can come from the grid because today, we actually provide those. So that is going to be the scheme of things. So, if you are going to rely alone on RE, you may not be able to get the supply continuously for 24 hours. So, it's a good combination to have. Second, on the investment respect to the grid, yes, definitely, we are -- we will anchor on those as part of the RP4 to upgrade the capacity to ensure the grid flexible and resilience to address those intermittencies and the new interconnection facilities that are required for the distributed energy resources. The second question on Enegem. The response so far, there is a process that a single-buyer has undertaken and from what we know today, the first of the process is actually to get registration from interstate buyer from Singapore. And we believe today, there are buyers who have registered to actually procure the energy based on the Enegem. Since the process is still ongoing, I'm not ready to share beyond that.

I would like to invite the second analyst to address your questions.

Daniel from Hong Leong. Regarding the TPA, again. Just want to check -- okay. If the TPA allow the power generation to directly deal with end user. So, I think, of course, they can't directly deal with them because they are already signed with a single buyer. So, if the TPA, all be expired, so does that allow this expired TPA, expired IPP to actually directly sell their power to end user, then it like that doesn't mean, also affect the RE initiatives or so-called to get Net Zero by 2050, for the planning itself. Another question is that -- if there is a new IPP, want to come into market, a small IPP maybe, maybe 50 megawatt. So that mean, they can directly get the end users directly without going through Tenaga or without going through single buyer even? And then my follow-up -- okay, these are my questions for now.

Okay. Thank you very much, Daniel for questions. I believe the answer to those questions will be given in due time by the government. How is the whole framework of the working of the whole framework? I think at the moment, probably we let the question to be unanswered at the moment because I believe the government will make those announcements. But what is interesting is that, or what we are excited about is that there is a good opportunity for both the generators, especially the green generators, because I think the CPA is meant first to address the green generation to ensure that the customers who require green are enabled to get those but at the same time, the generators who actually can do the proper investment to ensure that the green can be available to those customers.

Can I get back to your slide on the data center, where you mentioned that 2 projects you already commenced, [ 500], 550 megawatt kind of thing. Just want to check. You mentioned 550 megawatt. So from our analysis, are we supposed to look at 550 times 24 hours time, 365 days, to get the actual power utilization for this power for this data center, or we are just supposed to use a portion of it?

Yes, I think the capacity of the demand of data center, as you mentioned, is going to be constant, constant based on their soft core requirement. So the numbers that we have seen is the electricity supply demand that they have signed from us. So that is the first part. The second part that, of course, we have to understand that the data centers have this, what we call a step load, meaning that they will increase the demand progressively. So today, even though we have signed -- they have signed 555 of megawatt, if we compare today, maybe the utilization has not come to that picture, but it will reach to that point. So there's a step -- they call it, the step load, that they will increasingly increase the consumption as they get more customers to come in. So that is the basis of the capacity. Of course, in due time, we will see this so-called demand being fulfilled by those data centers. And the progression of this demand from our plant, I think, is quite good. And that is one of the reasons why we are seeing the first quarter growth compared to last year into almost close to double digit. So it's a step, but there are many steps from many data centers. So eventually, it will reach to that point.

Lee Len from UOB. Maybe just a follow-up on that demand question. So we are looking at RP3 at 1.9% demand growth approved by the government. As we move into RP4, what would be a reasonable assumption for Tenaga's demand growth in view of data center demand and also strong first quarter numbers? So that's the first question. Second question on TPA on RE. Can you run us through -- currently there is a reeling wheeling charge, roughly about MYR 0.20 per kilowatt hour, if I'm right. How will that change if you include battery storage, if any, to sort of temporarily model in intermittency for your grid lines? And third question is really housekeeping. Manjung 4, can you give us an update as to what's the situation? When can that be resolved? And there is also higher repair and maintenance in the first quarter. Is that related to Manjung 4? And will we see also similarly high numbers in second quarter?

Yes. So looking at RP4 demand growth, I think if we probably go into some kind of crystal balling of what can happen in RP4, we believe that the demand will be as strong as what we see in this last year of 2024. So, meaning that we should be able to project those. So we have projected around 2.5% to 3%. So we believe that would be the numbers going into RP4. And we are also hoping those numbers will stay in RP4, a good demand growth formulation. And if you can see the trend in the '90s, our demand growth is always one-to-one with the GDP. But over the years, probably, yes, half compared to GDP, but we are now seeing the trend that we are actually closer back to the GDP, about [ 60% to 70% ]. So I think that's also another indication what will be the demand that we want to project for RP4. So the wheeling charges, so at the moment, the regulator, the government, has not announced the rate for the wheeling charges. I know there are many speculations in the market. But definitely, I would probably not enter into that debate what is the charges? But definitely the changes will be announced by the government. But the question -- I think pertinent question that is on battery storage. So at the moment we are seeing the cost of battery for generation, probably still at a slightly higher side to become a good go-to-market kind of solution. But on the other hand, we're also seeing the trend of this battery generation to be coming down. So this is the same -- exactly the same trend that we see for generation through solar rooftop. So over time, I think it will go down. So we anticipate that we probably can have a better understanding with respect to -- a better understanding. We probably have a better economics with respect to battery storage in a couple of years' time. It's also good to note that in the recent announcement by the government, the government has awarded a battery storage project to Tenaga Nasional as a pilot for -- to address the intermittency issue. We are going to do the project for 100 megawatt equivalent to 400 megawatt hour battery in one of the locations. So that should provide us a good indication technically and economically, how battery can serve its usefulness for the whole electricity business in the country. Third question and for update, maybe CFO can come in.

So on the M4, what's happening now is that they are working very hard to make sure that we can come back by the end -- towards the end of the year. So that is the plan at the moment, the end of the year. So the value added, at least as we mentioned, just starts about MYR 400 million. And then we are doing everything that we can to minimize the recourse of that. So it's just a figure that we have. So of course, we will pursue the legal and the commercial recourse for us to recover. And the question about the higher repair maintenance cost is not coming from that, because at the moment, we are still very much into trying to get it back. And we're also engaging with the insurance and engaging all the legal aspect of whether we can recover. So the high repair maintenance is not coming from M4. But in fact it's coming from the distribution network, because quarter-on-quarter, we saw a bit higher repayment this year, but still well within the approved IBR level that they are allowed to. So that's the update that you asked. So for M4, I think we are on track to come back properly, inshallah, and we make sure that we address all the recourses that we can do, legal and commercial recourse to minimize the value areas. Thank you.

Is there any other questions from the floor? Yes, please go ahead.

My name is Hadi from CLSA. I just want to follow up on the demand from data center. Out of 635 megawatt that was completed last year, what was the utilization rate? Or better still, in the first quarter, '24 numbers out of your commercial segment, how much in megawatt is actually on the data center?

Yes, Megat, I let [indiscernible] who has the numbers in details. Okay. Of course, as [ Rito Ogak ] mentioned with regards to the requirement of the data center, with regards to the step load, currently for the first 2 data centers, we are talking about 54 megawatt new requirement for the first quarter, yes. That's against around 686 megawatt. So 54 megawatt over maybe a commercial of about a total of 20 megawatt. That is the percentage that we're looking at in terms of the requirement of megawatt of the data center right now. Okay. Currently it's about -- the total requirement is 686 megawatts. Right. And the generation that we generate towards Tenaga Nasional is about 20 -- close to 20 megawatts. So currently the demand for the -- yes, for the first quarter -- first quarter. Yes.

Yes. Just to add, I think for the data centers demand in totality, inclusive of the 2 that we mentioned, it was about 150 megawatt based on the 150 megawatt utilization as of today, compared to the ASA of 500 something that we have signed. So that is the stepping of the load. Okay.

Due to time constraints, we have now proceed to take questions from the analysts who are joining us virtually. We have 1 question from Mr. Sumedh Samant from JPMorgan.

Can you hear me? Maybe I'll proceed with the question. So I have a couple of questions basically. So firstly, on the Genco side, I just want to understand better with respect to the projects in pipeline, what are the structure of PPAs and tariffs? We haven't heard a lot about that. So it would be great if you could explain that to us. And secondly, just want to understand maybe a bit of a technicality, but the guidance for the regulated CapEx is MYR 7.7 billion, but the approved CapEx is MYR 6.4 billion. So can you please explain what the difference is?

Yes, I think on the Genco project pipelines structure and tariff, I think there are 2 options for us. One option is actually a PPA. It's the conventional PPA mode of management for Project Nenggiri, Mangere, Sonera, Maker Nangiri, Sungai Perak, Parker and Kapar. We actually can have those conventional PPA regimen, 21 years of fixed tariff and so forth. So the other project that we are looking at, for example hydro -- hybrid floating solar and also the centralized solar park. We have actually the opportunity to provide this green generation to a particular customer since the PPA is already being announced. So that is the mechanism that we actually can go to the market. So it's going to be a combination of the conventional PPA for our Genco project as well as the new mechanics of PPA that recently announced. So there is -- on the regulated CapEx there is a difference between 6.4% and 7.7%, maybe CFO can touch on it.

Yes. Thanks. Actually, the CapEx opening could be different because of the rollover project that we carry from last year. So we are allowed a 3-year period of CapEx, about MYR 21 billion. So we can use it within that period. So normally, we have some CapEx that we conducted in RP3 but period 2 and we have not completed that. We are allowed to carry forward into year 3 of the same period. But it's normal because some of the CapEx is like a great CapEx is a long-term CapEx. We're not able to complete the job in 1 year. So normally take a few years to do that. So we have a lot to roll over the CapEx value until the next year. Yes, thank you very much.

Is there any other questions from Webex? Since there is no further questions, ladies and gentlemen, that's the end of our Q&A session. Now I will pass to Datuk Ir. Megat Jalaluddin Bin Megat Hassan, President and CEO of TNB for his closing remarks. Please welcome.

Thank you very much. Thank you very much for the session, Q&A. So let me recap of the briefing today. So as mentioned, we are seeing a good positivity with respect to the growth for the first quarter in 2024. Demand really pick up in the first quarter. And we're also seeing a good stimulus announcement by the government, especially on the 3 counts of large-scale solar, Enegem as well as the GET tariff. And at the same time, we have made proposal with respect to the RP4 submission. This is where I think the opportunity for Tenaga and glad to brief everyone, the negotiation is actually on track for us to achieve the conclusion, inshallah, by year-end. So with respect to the earning potential of Tenaga Nasional. Understand we are a bit impacted by Genco, underperformance of M4. But as mentioned by CFO, our focus is actually to get the M4 come back as soon as possible and after that we will pursue the recovery so that the value arrears can be minimized. Second, with respect to our financial performance, we are seeing foreign transaction loss for the first quarter. In fact, if you look into details, we actually made a transaction gain for the first quarter with respect to a transaction compared to translation. Of course, we will keep monitoring to this with respect to the performance. And another good aspect is that the fuel price, namely coal, are stabilizing. So this speaks well with respect to our -- managing our cash flow and working capital. So we will be mindful of this performance over the first quarter and we will remain focused on the challenges ahead as we continue to pursue the growth exploration. So in conclusion, we are committed to drive sustainable growth and pursue initiative that maximizes value for our shareholders. Rewarding our shareholders remain a priority and of course, we appreciate your continued support in this journey. Thank you very much, ladies and gentlemen, and have a good day.

Ladies and gentlemen, we have now come to the end of our session. On behalf of Tenaga Nasional Berhad, we thank you for your participation in today's briefing. For any questions that may remain unanswered rest assured that we will promptly address them following this event. If you require further clarification or inquiries, feel free to contact our investor relation officers or e-mail us at [email protected]. For those here in person, please join us for a networking launch at level G. To all our attendees whether present physically or virtually, we appreciate your time and engagement. Stay safe, and we look forward to seeing you in our future sessions. Thank you and have a wonderful day.