Ladies and gentlemen, for those who are already here in the hall, we would appreciate if you could help us fill up the front row. Thank you.

Ladies and gentlemen, thank you for joining us here physically and virtually via webex. To begin our session, let us watch a brief safety video to ensure everyone is well prepared for any potential emergencies.

[Presentation]

Good evening, everyone. Thank you for joining TNB's Second Quarter FY 2026 Analyst Briefing.

A very warm welcome to everyone of you joining us here today. Datuk Engineer Technologist Shamsul Ahmad, President and Chief Executive Officer of Tenaga Nasional Berhad; our Chief Financial Officer, Mr.

Badrulhisyam bin Fauzi. I would also like to warmly welcome all of you joining us here today.

We also have 60 attendees joining us virtually via Webex. Today's session will be covered in 2 parts.

Firstly, our CEO, Datuk Shamsul, will provide an overview of TNB's second quarter FY 2026 performance, group strategy and outlook, followed by our Chief Financial Officer, Mr. Badrul will present on details of TNB's second quarter FY 2026 financial performance.

We will then open for Q&A before we end the session at 6:00 p.m. With that, I'm pleased to invite Datuk Engineer Technologist, Shamsul Ahmad to kick off our session for today.

Thank you, [Foreign Language] and very good evening to everybody, and thank you for joining us today. Everybody must be wondering it's Friday afternoon and [indiscernible] doing a business analyst briefing to all of us.

Is there a catch for doing that or not? There's nothing that we are going to hide from you.

We are going to be very transparent today. And it's just that I'm traveling from Kuantan this morning for [indiscernible] our new PMU 500 kV from Paka to Klang.

So that is another milestone as part of our expansion in improving and enhancing our grid expansion. First and foremost, let us share some of our key performance highlights for the first half of our financial year.

And we are glad to inform you that we delivered a resilient performance underpinned by strong operational execution across our key business pillars. On a normalized basis, adjusting for ForEx translation and IFRS 16 impacts, our core PAT reached MYR 2.3 billion.

Our regulated CapEx momentum remains firm with MYR 5.6 billion deployed into grid infrastructure to support accelerating electricity demand and enable our ongoing energy transition road map. And building on this stability, we are pleased to declare an interim dividend of MYR 0.25 per share, representing 63.2% payout on adjusted PATAMI.

This demonstrates our continued commitment to delivering sustainable returns to our shareholders while maintaining financial discipline. So turning to our operational backdrop.

Electricity demand remains excellent throughout the first half, primarily expanding commercial sector. This structural demand growth was demonstrated earlier this month when system peak demand scale consecutive historical high, reaching 22,014 megawatt on 6 August 2026 and surpassing the previous record of 21,827 megawatts set just 3 days prior.

This record peaks underscore the sustained growth in electricity demand across the country. On excellent execution, our clean energy road map, we achieved 2 key RE milestones.

So one is actually first TNB Bukit Sidim Kulim Solar achieved COD, adding 45 megawatt peak to our operating RE portfolio. And Dinawan Energy Hub was awarded the Capacity Investment Scheme, strengthening our future RE pipeline.

We successfully hosted the TNB Energy Transition Conference, ETCon26, convening over 6,000 delegates and industrial stakeholders. This one of the major and good event that organized by us.

More importantly, the platform catalyzed 15 strategic partnerships, cementing TNB's position as a preferred regional energy transition partner and unlocking long-term opportunities across grid modernization, clean generation and cross-border interconnectivity. And overall, our first half performance demonstrates continued resilience across our core business while we remain focused on expanding our renewable energy footprint and advancing the energy transition.

So building on our core demand momentum, total electricity units sold grew by 8% year-on-year. This growth was anchored by the commercial sector, which now comprises 39% of total sales volume.

Commercial demand expanded by 13.7% year-on-year, driven by data centers, shopping malls, businesses and accommodation-related services. So looking specifically at 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.

Furthermore, load ramp-up continues to accelerate with demand reaching about 1.26 gigawatts as of June 2026, indicating highly predictable volume scaling. While data centers represent our fastest-growing load category, they currently account for relatively small 6% of total sales, highlighting the underlying diversification and resilience of our broader customer base.

Building on the strong momentum in actual data center consumption, let us look now at our secured pipeline and where this growth is concentrated. As of June 2026, our secured pipeline stands at 61 projects, representing 8.35 gigawatts of maximum demand.

Of these 42 projects representing 5.65 gigawatt and are already in the system with actual load utilization reaching approximately 1.26 gigawatts. This secured pipeline is progressively translating into actual electricity demand, providing greater visibility of sustained demand growth.

And Johor continues to strengthen its position as a leading regional data hub backed by distinct competitive advantages in the land and power infrastructure as acknowledged across the industry. We will inform Johor is actually the biggest data center clusters actually in the world, and whereas Malaysia is actually one of the top 10 data centers clusters actually around the world.

That augurs well when it comes to data center business coming to Malaysia. And as this project continues to progress into operations, our focus remains on ensuring grid readiness and reliability supply while maintaining disciplined capital deployment and working closely with data center developers, right?

Turning to our technical performance. Our disciplined operational execution throughout the period -- throughout the period directly underpins our core earnings resilience, providing a highly reliable foundation for the Group's broader financial performance.

Generation has turned around and become -- now has produced a good performance for the first 6 months where equivalent availability factor have improved to 87.9%, up from 86.1% last year. And the operational uplift reflects enhanced plant availability and proactive fleet maintenance.

Turning to transmission and distribution. Network performance remained firmly at world-class benchmarks, ensuring grid stability and seamless power delivery despite expanding peak demand.

Specifically for distribution, our SAIDI tracked at 23.45 minutes, well within our internal threshold of 47 minutes. This performance highlights the structural resilience and operational readiness of our network.

Overall, the Group's strong technical metrics reinforce our earning quality, operational stability and ensure we are fully equipped to serve accelerating national electricity demand while enabling the nation's energy transition agenda. So moving to our strategic partnership.

We continue to expand our "beyond kilowatt hour" and integrated energy footprint through a high-impact long-term commercial collaborations across clean energy, grid infrastructure and energy efficiency solutions. And in June, we hosted, as I mentioned earlier, our second TNB ET Conference.

It is truly a proud moment for all of us. And beyond combining these key regional stakeholders, the platform serves as a major commercial catalyst culminating in 15 formal agreements.

These span renewable generations, cross-border power integrations, grid developments, gas infrastructure and technical capability building. And highlighting some of them are our partnership with DayOne to supply renewable energy for its data center operations under the CRESS scheme.

And we have also collaborated with PETRONAS for the regasification terminal of RGT-3 in Lumut and through GSPARX, our subsidiary, we have secured a 25-megawatt peak rooftop solar project with EVE Energy. This represents GSPARX largest single rooftop solar project to date.

We also continue to expand our integrated energy solutions through clean -- through recent partnerships with Universiti Malaya and Air Selangor. First, TNEC signed a 20-year cooling energy supply agreement with Universiti Malaya to modernize the cooling infrastructure at the UM's Wisma R&D.

This demonstrates our capability to deliver reliable and cost-effective solutions that improve energy efficiency and support sustainable campus development. And we also signed a landmark dual agreement with Air Selangor to enhance the reliability and efficiency of Malaysia's critical water infrastructure.

These agreements are electricity supply agreement for TNB to supply 180 kV (sic) [ 132 kV ] power to the Sungai Rasau water treatment plant and 20-year cooling energy supply agreement. TNEC will provide gas district cooling services to Air Selangor's facility.

So collectively, these strategic alliances strengthen TNB's position as an integrated energy solutions provider while creating long-term value beyond conventional electricity supply. And moving to our nonregulated growth pillar, we are advancing a robust and diversified generation pipeline comprising about 12.7 gigawatts of projects under construction and developments through 2033.

In the first half of this year, we will commission an additional 30.5 megawatts from Unit 1 of the Sungai Perak Hydro HLEP expansion program and our large-scale solar project in Sabah. Our commissioning trajectory accelerates in 2027, adding nearly 1 gigawatt of RE capacity via Nenggiri Hydro large-scale solar 5.

And this will be followed by over 3 gigawatt peak in 2028, anchored predominantly by our flagship NETR developments. 2030 will mark a pivotal year as we commercialize our 3 gigawatt of diversified capacity spanning solar, hydro and wind assets across both our domestic and international portfolios.

So as we scale this high-efficiency clean capacity, TNB is executing a disciplined phased decommissioning strategy, retiring about 6.6 gigawatts of legacy assets by 2030. This allows us to progressively transform our portfolio, keeping an option and aligned with the energy transition while safeguarding the grid stability and customer supply reliability.

And looking beyond our committed pipeline, TNB remains strategically positioned to capture high-value accretive growth opportunities that align with the measures long-term demand growth and decarbonization objective. And the government recently unveiled 2 major national programs.

First, the LS6 program (sic) [ LSS6 program ], targeting commercial operations by December 2029. We are currently assessing our participation based on its strategic fit and commercial viability.

And second, the NEWGEN26. The government is fast-tracking new combined cycle gas turbine capacity of high-efficiency combined cycle block for Peninsular Malaysia to operate between 2029 and 2031.

And we are pleased to inform to report that we have submitted our proposal on 1st of July 2026, and we hope we will win the bid. Together, this initiative ensure TNB is well positioned to secure high-quality generation growth, reinforcing national energy security and drive long-term shareholder value creation.

With that operational and strategic overview. I will now hand it to our CFO, Badrul, who will walk you through a detailed background of our financial results for the first half of this year.

Thank you.Over to you, Badrul.

Thank you, Datuk. So we'll go into some of the slides to cover the financial highlights for our performance for the first half 2026 where you have seen that the numbers are quite good in the sense that the profit remains stable, and this is actually driven by overall solid performance across all our business units.

So if you look at the revenue actually it has grown by 7.5%, adding additional MYR 2.5 billion of additional revenue coming mostly from growth of electricity demand, as earlier explained by the CEO, driven mostly by commercial sector. And of course, data center driving a lot of that demand very strongly.

But most importantly, if you look at our EBITDA, it has also increased around MYR 509 million to MYR 10.8 billion for the first half of 2026. Granted, we have that EBITDA margin slightly lower at 30.8% compared to last year.

But this is also the fact that we are definitely not spared from the cost pressure that is actually everywhere in the current business climate. But we believe that this is being mitigated.

We are looking at very -- we are looking at various ways to contain this cost and this is actually not far off from our number in 2025, which was around 31.6%. So we believe that at the end of the day, absolute amount of EBITDA is actually still growing.

That shows that there is a positive momentum as far as the earnings of the company is concerned. And most importantly, when it comes down to core PAT, after adjusting for ForEx and MFRS 16, we actually improved the core PAT by 5.3% recording MYR 2.3 billion for the first 6 months.

Granted, if you look at some of the news report as well, the reported PAT is actually lower because of the absence of the ForEx gain of almost MYR 370 million last year. That's why we believe that the more reasonable number is the core PAT.

And if you drill down into the numbers as well, this year, we do have lower finance income by almost MYR 160 million as a result of us optimizing our cash balance on the face of massive CapEx last year and this year. And of particular interest to all of you as well, if you look at our effective tax rate for this year, for the -- so far, on the 6 months is at around 29.3%, which is just slightly lower than 29.8% that we recorded last year.

And as mentioned earlier as well, in the first quarter, the rationale -- I mean, the more moderate effective tax rate that we are targeting would still be around 24%, but that would only realize closer in the quarter 3 and quarter 4 as we finalize all the incentive that's being available to TNB. And I've also noticed that in some of the reports that have gone out by the analysts today, there was also a lot of focus on our Genco unit.

So I'm pleased to actually confirm that as far as we are concerned, Genco is actually performing very well this year operationally. But financially, we urge you to look at the numbers in terms of the whole 6 months, not just quarter 2 alone because, obviously, there are some nonseasonal item in quarter 2, but we would like to confirm that there is no major one-off during the second quarter, but we do have a bit more higher one-off costs in the -- in particular 2 items, we do have -- operationally, we have minor demolition work in our Pasir Gudang and Putrajaya and we do have a minor combustion and inspection exercise in quarter 2.

So that actually is part of the normal operating business for Genco. But most importantly, if you look at year-on-year, the net energy generated is 10% higher year-on-year.

So for us, it's about looking at the longer term rather than being too worried about 1 single quarter performance by Genco. And you have seen that as far as the 6 months number are concerned, it's tracking very positively.

So in short, we believe that the overall performance reflect the fact that increase in sale of electricity, higher consumption from commercial sector actually has improved the core PAT of the company, which is accompanied by improved operational profitability across all our businesses. So if we look at into capital management side of the company, obviously, we are focusing on 2 important things.

The first 1 is the working capital management as well as making sure we have proactive funding arrangement to make sure that we are able to utilize our strong credit profile to raise funds at very competitive costs. So if you look at capital management from the trade receivables side, we ended the first half year '26 at MYR 4.7 billion, which is actually lower than MYR 4.8 billion that we had 6 months last year despite that we have much higher revenue.

So this is actually granted. You can say that it's higher than March and December 2025, but the seasonality do reflect that by the end of the year.

Obviously, a lot of our receivables are settled. So that everybody can show a nice P&L at the end of the year.

So we do expect that seasonality to happen. But as far as collection is concerned, at MYR 4.7 billion receivable against a much higher revenue compared to last year.

This is a manifestation of the fact that we have now a very comfortable proactive credit management of our receivable where they are well below 30 days as far as receivables are concerned. And if you drill down further into regulated receivables, this is even better in the sense that at the end of last year, we had MYR 1.9 billion of regulated receivable.

So I'm pleased to report that actually as far as ICPT for April to June 2025 of MYR 1.3 billion was already received in March 2026. So that amount actually has gone down to less than MYR 1 billion as of June, and there are only 2 big components [indiscernible] that we have been enjoying AFA rebate all the way up to until April 2026 before the fuel cost dictated that there is a AFA surcharge coming from May.

And the government actually has decided to come in and shield the [ ratepayer ] from the full brunt of this elevated fuel cost. So that actually is the first time that we are using -- I mean government is utilizing KWIE's fund to shield part of the AFA's impact.

So that's why we are claiming it from KWIE already, but the process because this is the first time we are starting this. So the amount from May and June has already been claimed and July is coming soon.

So the amount is being processed in the beginning. So that's why it's a bit slow at the moment.

But once that mechanism is finalized, it will be monthly payable to TNB. So you will see a much lower amount from that.

So that's 1 part of it. And we also have around MYR 370 million of OpEx from year 2024, which half of it was already received already by now in July.

So once this mechanism are in place, you will be able to see that the regulated receivable will be much lower. So this is also the beauty of RP4 where under the new tariff mechanism.

A lot has been done to make sure that TNB would be sheltered in terms of the cash flow risk from the uncontrollable factors. So that's very important.

So if you look at the next item on AFA, as mentioned just now, almost MYR 400 million actually still to be recovered. But again, like I said, this is only a small portion of the overall cost pass-through.

So a lot of it has been passed through the consumer where TNB has been able to recover a lot of it from a monthly basis. Only the 1 that is coming from KWIE that's a bit delayed in this sense because the early days governmentation.

But this is also the fact that government has -- is making sure that rakyat is not too affected by these current high elevated prices. So if you look at funding, obviously, we have been an active issuer in the market this year.

We have actually issued MYR 6.55 billion at current relatively low rate, making sure that we lock in our current borrowing at this kind of level over the next 25 years to match with our asset profile. So if you look at the first one, we already issued MYR 4 billion for TNB that is maturity between 7, 10, 15, 20 and 25 years.

That's very well subscribed with blended average rate actually at around 4.22%. The second one on the subsidiary.

This is very unique. This is for our LSS5 plus and TNB Renewables.

This is very unique in the sense that, yes, it's just slightly above MYR 1 billion. We can probably get many banks interested to give us term loan, but we actually went with SRI Sukuk Wakalah, where we actually issued maturity of every year.

So it's like amortized loan but Sukuk. So investors actually a big tenure of 3,4,5,6, 7, 8, 9, all the way up to 19 years.

But we did that because of the appetite for very clean renewable Sukuk. So we got a very good rate.

So the blended rate between 3 to 19 years is actually 3.99%. So that's very competitive.

And the third one under TNB Genco, we had our issuance of MYR 1.5 billion. This is mostly to finance Nenggiri hydro project as well as Sungai Perak life extension.

Again, that one is we don't want it to be short term because this is long-term PPA, 20 to 40 years. So we issued 10, 15, 20, 25 and that actually got a blended rate of only 4.17%.

So you see that as far as borrowing is concerned, we must make sure that we are able to lock in a good rate at our long term. And that's why today, we have a competitive rate of cost of borrowing of 4.65% and 96% of that amount are fixed long-term rate.

So in the event that there is up cycle of higher interest rate coming over the next many years, we would not be exposed under that environment. So we must be able to continue in doing this to make sure that we have a disciplined financial management so that we are able to continue having a strong credit rating as demonstrated by RAM that has maintained our AAA rating.

And yes, they are aware of our massive regulated asset investment case, but they're also aware of our massive investment in the generation power plant, but they are convinced that as far as these new additional borrowings are concerned is for productive and profitable usage. So this is also showing that we do have enough capacity to support the investment that we need to make over the next many years.

And if we move to the next one to what we have done so far, Obviously, if you look at our CapEx for first 6 months, we have spent MYR 7.1 billion, and you will notice that out of that. A lot of it is actually to strengthen our grid resilience as well as advancing our clean energy capacity on the nonregulated CapEx.

So if you look at our regulated CapEx that we will spend already this year, that's MYR 5.6 billion. That is more than last year's delivered at around MYR 4 billion.

And if we look at our base CapEx, in particular, that is already last year, MYR 10.6 billion, plus this MYR 5.6 billion. We are already at around 58% of the RP4 base CapEx of MYR 26 billion.

And if you look at the contingent CapEx, yes, we spent last year, MYR 1.7 billion, this year, another MYR 740 million, but we are not really concerned about the mix between the 2 anymore. So as mentioned in the first quarter briefing as well, you should focus on the total regulated CapEx, both base and contingent because we are on track to deliver the MYR 13 billion regulated CapEx this year, which will reflect in our income irrespective of base or contingent.

So if you look at what we have spent this year MYR 5.6 billion, we can categorize it into 3 main categories: security of supply, MYR 2.6 billion, to cater for demand growth, MYR 2.3 billion. That will be all the data center that CEO mentioned just now.

So all those needs to be strengthened to make sure that we are able to supply those and around MYR 600 million was spent on energy transition. So sometimes, it's very difficult to get a color of exactly what are we spending on because you're talking about the grid.

So today, we are lucky CEO was saying he just came back from the PMU in Kampung Awah. That's our 500 kV line.

So that is groundbreaking ceremony. I've seen the photos of him with the shovel just now putting the ground away.

So in the next few quarters, you'll be able to see PMU Kampung Awah in the CapEx that we do under network reinforcement. But so far in the first quarter, in the first half, that will be the 1 that we did in Serdang West and Salak West, plus the upgrade of our underground cable from Pantai to Salak South.

These are specific major project, but actually, it's a lot more with smaller projects across the country where we do proactive asset replacement initiative to make sure that the network are able to deliver the number that you see just now, 0.001 minutes and all. So these are effectively being done all the time.

And you've got specific projects, for example, this year, ECRL, where we had 10 feeder station supplying 132 kV bulk supply. So that is already 97% completion.

And on energy transition, obviously, we have our flagship Santong Battery Energy Storage System that was already operating since the second quarter of this year. And if you look at the sum of the energy transition project that we're doing, smart meter, which is a key project for us to enable time-of-use for all our customers.

Year-to-date, we have achieved around 351,000 meters installed. That would be -- target this year is around 1 million.

So by the time we finish year-to-date, that is already close to 6 million customers having smart meters. And of course, we need also on our distribution network, we are actually investing in distribution automation to make sure that we are able to reduce downtime remotely to ensure supply reliability.

And so far, 53% of the targeted work have already been completed. So I'm dwelling a bit more here so that the communities actually understand that, yes, it may sound big MYR 7 billion, MYR 5 billion and all.

But if you break it down, there are key components and team that we are delivering across these 3 pillars to make sure that we are able to support the demand that is coming in. And on the other side of this slide, if you talk about nonregulated CapEx, yes, investment in the grid and the regulated business is important, but nonregulated CapEx is equally important to make sure that at the end of the day, there is power to be delivered over the grid that we are upgrading.

So, so far, we spent MYR 1.5 billion already for the 6 months, and this is on the future growth platform. So you've seen that Nenggiri hydro project that CEO mentioned just now, that 76% completion already ready for operation in second quarter next year.

We've got this Sungai Perak, 36% already the first unit coming on stream by year-end. And the one that we did a financial close just now, that is LSS5 that 686 megawatt peak that is on progress, so we can start construction that the funding is already in place.

And one of the project CRESS that CEO mentioned just now, we signed around 1,050 megawatts of CRESS project with DayOne that split into 2. The first 500 megawatt, which is 785 megawatt peak is the hybrid hydro-floating solar in Kenyir, which is progressing very well, where EPCC has already awarded.

And hopefully, the next quarter, we should be able to tell you that the other 500-megawatt ground-mounted solar would also be coming on stream. So these are all part of the massive generation capacity that's coming on stream over the next many years as detailed out by the CEO in the previous slide.

So yes, that's pretty much hopefully the details of what we have spent and invested on over the many years. Obviously, if I don't talk about dividend, all that I mentioned just now won't matter much to all of you.

So we are pleased to actually show that as far as the performance of the company is concerned, we are maintaining the absolute amount of MYR 0.25 dividend payout to reward our shareholders for the first 6 months. And at MYR 0.25, yes, that will be similar to what we paid interim dividend for '24 and '25.

Don't worry so much about the payout ratio, obviously, because as far as the company is concerned, that is not much off from the 60% payout. And we do expect to sustain the current trend of dividend payment, which will be determined by the end of the year when the full year numbers are in place.

So with that, I pass back to CEO to talk about the outlook and guidance for the rest of the year.

Okay. Thank you.

So ladies and gentlemen, the last 3 years, it has been very exciting to us and also to the whole ecosystem, plenty of exciting things happening, driven mainly by the energy transition. And we also see that things -- many things have been driven by the robust macroeconomic fundamentals that accelerate load expansion and increased demand from data centers, especially.

And we are revising our electricity demand growth upward between 5% to 6%. And this is line with Malaysia's projected GDP growth of 4% to 5% this year.

To support this expanding electricity demand and execute our strategic decarbonization commitment, we maintained our total group CapEx deployment for the year to be approximately MYR 18 billion. Of this, MYR 13 billion will be allocated to our core regulated business, with the remaining MYR 5 billion we will fund for our nonregulated growth pillar.

As we deploy this growth capital TNB remains anchored to strict financial discipline. We will actively optimize our capital structure, leverage competitive funding sources and preserve robust balance sheet liquidity to safeguard our investments -- investment-grade credit ratings.

And finally, underpinned by our resilient operational cash flows, we we reiterate our firm commitment to our established dividend policy, delivering consistent, sustainable distribution and long-term value to our shareholders. Alongside delivering sustainable shareholder returns.

Sustainability remains fully integrated into our long-term value creation strategy. Our focus is to expand our core business while supporting Malaysia's energy transition and solidifying TNB's position across the evolving regional energy landscape.

In line with this commitment, we have published our latest sustainability report, which is very big in nature, a very heavy close to 2 kilograms report, just to impress everybody how serious we are in ESG, which highlights our Group progress, key operational milestones and ongoing initiatives. We submitted 2 reports on the sustainability statement almost 100 pages and report also close to 100 pages.

So everybody said, why is your ESG, you printed almost close to 2 kilograms of report. So okay, probably next year, we'll do it better.

Okay, limit the printing, okay. I've been -- she always correct me Mazuin is my payung, my CSO.

With that I'm glad that -- so this is a presentation I made to you very honest, very transparent, and I hope there will be a lot of questions and answers after this, and we do look forward for your continued support and attention. And to that, I hand over back to you, Edwin, all right.

Thank you, Datuk Shamsul and Mr. Badrulhisyam for your presentation just now.

Let us now move to the Q&A session. We will begin by taking questions here from the attendees in the room followed by those joining us on Webex.

With that, I open the floor for questions. [Operator Instructions].

Kindly introduce yourselves and share your questions.

Just remember this is Friday afternoon.

Daniel Wong from Hong Leong. A few questions here.

First thing is on you regular CapEx you guided MYR 13 billion for the full year and then MYR 5 billion for the nonregulated. But your first half only done MYR 5.6 billion for regulated and MYR 1.5 billion for nonregulated.

So we are expecting all this to accelerate towards second half of the year. Another question is that on your MYR 5.6 billion regular CapEx already spent, how much of it actually part of the so-called contingent CapEx.

If it's already spent on the contingent CapEx for your first half, has this actually started to flow into your first half earnings?

The short answer to the first question. Yes, I have my senior Chief Network Officer here, who are very committed, and they do tell me that they work better under pressure.

So they will deliver the number according to the plan. So yes, internally, we have guided for this MYR 13 billion unregulated CapEx for the first quarter.

And we know that the first half, we have only delivered MYR 5 billion of that. But a lot of it -- in the normal construction project, you do spend a lot of time building the foundation and the groundwork to make it moving.

But the once it gets moving, you get to progress very quickly. So we are confident still to deliver the regulated CapEx, in particular, according to that progress.

And yes, as far as nonregulated CapEx, much lower but those are tied to the commitment that we have in terms of COD of those projects. So we will be delivering that.

So if you notice, our guidance for CapEx second quarter and first quarter has not changed. Internally, yes, we had the same question.

Based on 6 months progress, can we do it towards the end of the year? And the answer that I got was yes, and we will deliver this CapEx this year.

As far as contingent CapEx recognition is concerned, yes, so far, MYR 700 million of that contingent CapEx has been recognized this year. And yes, it has already flowed into our income for 6 months this year already, that's around MYR 160 million already.

Sorry, MYR 160 million PAT at the bottom line for first half?

Yes.

So if you exclude this one, basically, your earnings generally grow I mean first half compared to first half last year, if you exclude this contingent CapEx earnings, which additional year-on-year basis, we wouldn't have much growth.

Yes. I mean, we look at it, that's why I said as far as we are concerned, we look at the regulated earnings overall first 6 months this year against 6 months last year, which is growing as a result of both base and contingent CapEx.

So it is growing. So that's what contributing towards the overall core PAT growth of the Group.

Okay. Just to make things clear here.

When you guide the CapEx spending of MYR 13 billion is based on cash flow, right?

Capitalized under accounting principle so that it goes into our regulatory financial statement, then the regulator can approve that amount as due to us.

You've guided MYR 13 billion for this year, you mean capitalized. When you say capitalized means already approved or already signed off by the engineer, but the cash flow may not go out yet?

No. Well, cash flow, you've got the cash flow going out and some of them goes under, what we call, CWIP work in progress.

So the projects needs to achieve certain milestones. Of course, if you COD that once it [indiscernible], but you've got a certain milestone before you are able to capitalize it.

So once you capitalize it, then you can earn the return on base and contingent CapEx. So -- but this is like ongoing all the time.

So you've got projects are being spent and being capitalized. So it's a rolling numbers all the time.

But what we are guiding is what we're going to capitalize under the balance sheet, which will be tied to the earnings that we're going to get, which is the 7.3%.

So if a project -- okay, for example, if the project is halfway this quarter and halfway done, halfway WIP, work in progress, only done by 70% and then the engineering contractor already say that it has been done 70%, but I have not COD yet. Will you actually start to recognize this earnings?

You still have to wait for COD first of the project, right?

But that's when I showed the project is now under the network side, it's very, very unique in the sense that you really have to define 1 project on its own? Or how do you define it?

Let's say you're building a cable between 2 PMU that's 100 kilometers long. So you can say it's 1 project you need to wait until 100 kilometers, but you can capitalize or if you award it under 2 package, 50 kilometers, 50 kilometers, 150 kilometers, that's 1 project that you can capitalize already.

So there are a lot of nuances to it. But what we're seeing is yes, it has to be capitalized.

And what we're guiding is what will go into our balance sheet.

I see. And then my follow-up question is that on the -- okay, for the next 2, 3 years until '27 under RP4, has it actually allocated some of the budget for the ASEAN Grid or we can only expect that ASEAN Grid CapEx to only start in -- flow in 2028 or RP5?

We better use the manual one. It's a lot -- what -- there are some CapEx being allocated on RP4 but we will not be covering the whole project of APG.

For example, there are CapEx for land acquisition, which has been actually budgeted under RP4. So there will be some minimum CapEx allocation that you will -- we will see under RP4 IBR period.

But it's not totally the whole APG project. So it depends.

For example, for the project APG land acquisition is one of the key that we need to do it fast, then it allows about a few hundred millions over there for the land acquisition. That one we'll -- those are the same things that we see under RP4.

So the likelihood is actually when we go under RP5, there will be a slightly major allocations under RP5, simply because there's a lot more clarity in terms of the project, okay? Meanwhile, it has bare minimum of allocation being allocated under RP4.

Okay. Any more questions?

One question. Max from RHB.

Max, yes.

Can you share in terms of the new ESA that was signed in first quarter and second quarter. So I just want to get a sense how was the progress?

And if I check -- if I remember, if I see the slides correctly, I think it's about 0.9 gigawatts, right?

0.5 gigawatt, 5 ESAs so far.

So what's the split between 1Q and second Q.

Kamal, do you want to take that one?

The new ESA signed between 1Q and Second Q.

Currently for the first half of the year, we have signed 5 ESA, which is totaling about 862 megawatt. So we're actually projecting 11 for the whole of the year.

So we are already halfway through right? I'll give you the detail with respect to first quarter and second quarter, right?

This is Isaac from Affin Hwang. I have 2 questions, please.

And number one, just now you have shown your plans for the capacity expansion over the next couple of years. I know that those new power plants subject to further approval from the Suruhanjaya Tenaga.

Is this going to be under the current NEWGEN26? Or is that like a separate.

Okay. Just to answer you, Isaac.

All projects must be provided to Suruhanjaya Tenaga and also PETRA. So what the process is actually they issue you an initial letter of notification for you to do the necessary preparations.

Once you receive that, basically, the project is given to you, but you need to comply to certain governance regulations or policies and procedures of the government. Then after that, we need to submit for levelized study and some negotiations with ST, then you lock with it.

So there's plenty of exciting projects because we see moving forward until 2031, 2032, there's a good growth in terms of electricity demand whereas -- and what we see is actually our existing facility remains the same all right? So there is a reason now to actually plant up quickly in order for us to meet those rise in demand.

And that is where NextGen25 (sic) [ NEWGEN25 ] -- NextGen26 (sic) [ NEWGEN26 ] has recently been floated. And you see LSS6 come into the picture also, which is supposed to be closed sometime in November, if not mistaken.

The NextGen26 (sic) [ NEWGEN26 ] also is supposed to be closed sometime in November. Correct me if I'm wrong, sorry, NextGen26 (sic) [ NEWGEN26 ].

I mean -- so everybody is talking about November to catch 2029, '30 and '31 growth. So we bid for NextGen26 (sic) [ NEWGEN26 ] for an open cycle gas turbine -- combined cycle gas turbines, and there are quite a number of other participants also.

So they are all lined up to meet that expected demand due to the rise in the -- of the electricity growth.

Sure. I think you have secured some of the I-loans already for those you have flashed out maybe the Kapar, the Paka repowering plant.

Okay. We received quite a number I-loan, but I want to really excite the whole market because until we really.

Okay, we received I-loan [indiscernible]. So we received an I-loan for Paka 2, Paka 1, 1004 (sic) [ 1400 megawatts ] Paka 1, 1002 (sic) [ 1400 megawatts ] Paka 2.

I-loan for Paka 2 coming. I-loan for Paka 1 coming, loan for Paka 2 we received already, right?

And that is 2008 (sic) [ 2800 megawatts ]. So we received an I-loan for our pump storage Ulu Jelai of 700 megawatts.

And we also received Kapar I-loan for 2,100 megawatts. There is a confirm I-loan and loan that we have received for now.

So that one probably pretty close to about more than MYR 50 billion over the next 5 years, that we'll be spending our CapEx.

Yes. All right.

Just another question. I guess is on the CRESS versus the LSS.

So I see that you have both. So in terms of the preference, is there any particular -- which 1 of these are you prioritizing?

And in the DayOne deal that you have who is -- who will be bear for the fluctuation in the SAC? Is that your part or is that their part?

Zarihi, you want to take that one? This is my expert on CRESS and LSS.

Thank you for the questions. On the first one, whether do we prefer CRESS or LSS, short answer is no.

Right, both offers opportunities in terms of benefits and return. On the CRESS, I'm not sure whether it is public information, but there is a risk transfer that we have agreed, and most of it will be borne by the offtaker.

So that's...okay.

[indiscernible] SAC cannot go up, it can only go down.

So as always, I don't have... Okay, anyone else?

Yes, it's Colin from Macquarie. Just wanted to understand a bit on the regulated CapEx side of things.

Because you're saying the base CapEx and contingent CapEx, we should just look at it as 1 item, regulated CapEx, right? But just going into 2027, which is the last year of the RP4, how would that look like your regulated CapEx?

Would that be on a similar level? Or if -- should we expect more contingent CapEx to ramp up significantly as a result?

Yes, can I get color, some on that.

As mentioned, if you look at our base CapEx, with MYR 4 billion that we spent this year and MYR 10.5 billion we spent last year, that's already 58% of the MYR 26 billion base CapEx. So we have a 3 years CapEx spend for regulated.

We have guided that to be at around 70% to 80% of the allocated MYR 43 billion. So last year, we spent MYR 12 billion.

This year, we're guiding for MYR 13 billion. So you need close to another MYR 13 billion, MYR 14 billion, MYR 15 billion in next year.

So yes, contingent CapEx has to make up most of the CapEx in 2027. And that's much easier to justify because of the fact that most of the base CapEx will have already been spent already.

So when there is demand, there is supply, and there is the need for energy transition to cater for all these LSS projects and CRESS and all. So that's how we are positioning it so that we are able to get timely approval for the contingent CapEx.

So it has to come in because of the demand, because of the energy transition needed to cater for the solar projects, yes.

Any more questions, please?

This is Noah from Khazanah. Just a question on Genco.

You mentioned that we should look at the first half results rather than quarter-on-quarter. And you said that 10% net energy generated year-on-year.

How do you expect that performance for Genco for the rest of the year on net energy generated?

Genco you want to take up or do you want me to take up that one?

i got to take [indiscernible].

Okay. We see a very strong performance.

I'm very happy to look at the performance of Genco this year. We have turned around the organization.

We're hitting the numbers we expect to hit. And I'm really hoping that with a strict discipline of doing the necessary maintenance, the sales, the net megawatt sales out of Genco is going to be very consistent towards the end of the year.

There will be patches of maintenance here and there. But overall, think I'm gonna cross my fingers that nothing will happen big time.

Small things do happen from time to time, but no major incidents that we're going to see a very strong performance from Genco this year.

Hazmy from CLSA. Just a couple of questions.

Just on cost items. I think in the second quarter, we can see some elevated bit, I mean, of course, on the fuel OpEx, but also on the nonfuel OpEx part, can you comment a little bit, especially surrounding any staff IT costs and all that.

Will it still remain elevated going into second half? And if there are any details about that.

It sounds like cost is my part of the -- So yes, I've seen a lot of concern as well on the energy side on the elevated cost nonfuel in the second quarter in particular. But I think as earlier mentioned, there is a lot of it coming from repair and maintenance actually for our big asset base.

But yes, you are right, there is also attribution to computer licenses, trainings as well as overall staff cost. So I think it's important to note that as far as staff costs are concerned, yes, you have seen that for RP4 in particular, 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 to deliver those kinds of CapEx. But of course, during the course of the time we have been hiring as well.

So that is a reflection of the fact that it's a much bigger scale for CapEx delivery for our regulated business. But if you look at Genco as well just now, those projects that's going to get us another 12.7 gigawatt over the next few years, those come with people that have to deliver the project now, but earnings will come earliest 3, 4 years down the road.

So there is a bit of a mismatch there that as far as we are concerned, that we have to deliver to make sure that the earnings comes later. So -- and in second quarter, in particular, obviously, there is this annual performance cycle that happens as well.

So that's something that we have to take in. So we do expect that as far as nonfuel OpEx costs, third and fourth quarter, we are managing that, and we expect that to moderate in the quarter 3 and 4.

But I would have to say that at the end of the day, when additional people is being employed to deliver those business cases. So it does flow through to the additional licensing, IT costs, training costs and all those.

So yes, it's high on our list and it's a bit elevated in the second quarter, but should moderate quite in the third and fourth quarter based on those trending.

Just to piggyback on that, going with all this inflationary pressure and going into RP5 kind of like discussion as well, the question then begs is 7.3% still good run rate for the RAB or how do you guys look at it?

That sounds like CEO's question.

Yes. We got to wait until RP5 when we submit, we want to submit at 7.8%, most of the time, there is a real pushback from the government.

So let's see and wait for RP5 proposal that will come back to you probably in the next one. Difficult for me to tell you that.

We'll have 7.3%. They have been maintaining 7.3%.

We hope that we're going to enter the negotiation with 7.3%. Let's see how it goes when we are ready with all proposals by the regulatory teams.

On top of that, we see that there is elasticity -- I just want to add on CFO's comment, we see a growth in the company, the plenty of projects. You need more people, right?

And also, we are also very supportive of the government's call for the minimum living wage. And you see that being included also in part of our effort to actually improve the basic living wage for -- instead of having 1 lump sum, we spread it over 3-years period.

So this is where you see -- there will be some gradual increase over the period of 3 years where you see our overhead cost will slightly go up in nature. All right?

Just 2 last one. On the KWIE fund, can you remind me again how much do they owe you and also how much of remaining buffer that they have left.

KWIE fund is confidential [indiscernible], only they knows, but we also track because we always pay. But I think it's enough for them to cover and the government has been -- do we do they owe anyone...

That's MYR 900 million out of which we have received around MYR 180 million ICPT last year. So that will be around MYR 380 million for AFA for the 3 months plus all the contingent CapEx recovery and all those.

But to tell you they have enough to cover us. On top of that, I know we are very concerned because of the high surcharge period that the whole country is experiencing.

And I'm truly glad that the government has just come forward to actually alleviate in the surcharge by taking a portion of it to be absorbed by the KWIE. And that is great to me.

And by elevating whatever the surcharges that being actually supposed to be passed through to the whole consumer are being absorbed by the KWIE fund -- through the KWIE fund by the government. So that's a great news in [indiscernible] that people may not realize it.

But I think initially, they have a lot of buffers there. But being buffers, as long as you consume we're going to deplete someday.

But I think that's where ST is actually looking diligently and prudently how do actually they expense the KWIE fund.

And last question on data centers. I think on the plan of the 5 ESA, how is it in terms of progress compared to last year?

I'm referring to on data center task force. Is it like getting tougher now to get sort of like more data center application and all that?

The good news is actually we had a good meeting with Datuk Seri Jo. They approved 19, 2 weeks ago.

And recently, they want to approve another [ 33 ]. So all in all, the backlog is going close to more than 5 gigawatts coming to the season.

And that's a good news for the industry. That's what I can tell you.

It's -- for the next 3 years, we projected close to 8 gigawatt coming from data centers already.

So that 5 gigawatts is on top of the 8 gigawatt that you showed in the slide just now?

5 megawatts (sic) [ gigawatt ]. 5 plus 8.

Any questions.

Follow-up some questions here. Just now you guided -- guiding that in second quarter, there were no major one-off for your power generation side, but there are some demolition works and minor combustions all this.

So this actually high up your cost during the second quarter and then compared to your first quarter, is it?

For Genco performance?

Yes. So it will roughly around MYR 200 million total cost here.

Then it's just happening this quarter. It may not actually continue in the coming quarters on the...

I don't think it's MYR 200 million, but I need to look at the details. I don't think it's MYR 200 million out of these few things that we have to look at.

Because looking at your numbers, actually, it dropped from MYR 300 million to less than MYR 100 million in second quarter. And then there is no major one-off all this, but your numbers performance dropped, revenue continued to improve in the middle, unless the interest cost or depreciation charges go up, then shouldn't be much difference to explain the MYR 200 million, unless you're talking about the tax, they have a higher tax expense.

Not at Genco. The tax expenditure is at -- I mean, the tax expenditure -- the major portion is actually at TNB, not at Genco, yes.

Trying to find out compared to your first quarter and second quarter, what are the major difference here? If you are looking at from the Genco side, the difference is roughly about MYR 200 million compared to your first quarter and your second quarter.

There is also provisions that we have to do in terms of the regulatory charges from the state entities, in particular. So there are a few items that is being charged where we are in the process of finalizing the recovery.

So you know that we operate in many different states. And some of the charges are being imposed by the state in terms of what the usage and all.

So different states have different charges. And sometimes, they are being charged to us and some are being negotiated, some are being disputed and all, but some may need accounting provisions already.

So they do -- we do have a bit of that in the second quarter as well.

This is on the Power Gen side.

Power Gen side, yes.

Okay. And last question on just now you mentioned that the MA subsidies, you are trying to recover about MYR 400 million from the KWIE fund from AFA or from the government?

AFA?

AFA.

Yes. That one is not we are trying to recover actually, when we do the projection for AFA, government has decided that they don't want to pass through the whole amount to the rakyat.

That's why CEO was saying, government want to alleviate some of the pain. So KWIE says they will cover part of that AFA because AFA is fuel cost, supposed to be neutral for TNB.

So it has gone to all of us, but government decided some part of it, government will take. So the 1 that is being passed to consumer, I get it within 30 days, the 1 that is being covered by KWIE because this is a new process.

So it started in May, May and June. We have submitted our claim for May and June already and July is being processed.

So that amount is not yet paid to us. So that's around MYR 380 million that I have in the slide just now, that is part of the overall MYR 900 million regulatory deal from government entities.

So this only affect your cash flow but doesn't affect your P&L because the P&L you accrue [indiscernible] only.

Yes, I believe we have taken a lot of questions from the floor today. So we now would like to proceed to last 2 questions from the participants from Webex.

So we have 2 persons with a couple of questions here. First, Rachel Tan from UBS.

I have a couple. So in terms of the cost, are there steps you can take to manage the cost inflation that you talked about earlier?

And also given that you are ramping up staff costs ahead of execution, should we be expecting a bit more compressed EBITDA margins going into the full year and maybe next year.

Sorry, the first question is about the cost, right? So as far as the nonfuel OpEx, yes, well, we talk about the staff cost just now, but there is also an R&M cost that has came in as a result of the higher capitalization.

What does it mean is that basically, for example, 2025, we capitalized MYR 13 billion new assets. So this goes into our balance sheet.

And once it goes into our balance sheet, the R&M work for those assets actually become OpEx for 2026 already. So that's why a lot of that cost pressure actually because of higher asset base.

But this is something that the team is also looking very closely in the sense that we are trying to push a lot more towards preventive maintenance so that the more expensive corrective maintenance can be reduced. So this is part of the overall effect to make sure that we continue to protect our margins.

That's the first question.

Okay. Yes.

My next question will be, given the higher electricity growth forecast for the next couple of years as well as you're talking about 8 plus 5, what is your sense on the RP5 CapEx for now? Because last quarter, you suggested that it could potentially be lower.

We've got to wait until the team finalized the RP5 proposal. And right now, what the team is doing is now compiling all the projections, reports and everything so that we have a good proposal for -- to the government that will take into account all these demands forward forecast and all those things.

Definitely, whenever you see sales increase, definitely, it will also affect the profitability of the company. So going to your number three, the cost inflation, what we are currently doing is actually we're looking into various initiatives that to look into our productivity improvement, mainly in distribution network, we are -- that is a project to look how do we manage and improve our maintenance costs now by deploying a lot more predictive maintenance, risk-based maintenance rather than corrective base maintenance.

So we are looking at it, and we are making good progress, and we hope that -- we'll have good results, but towards some time end of the year and towards early next year. And we are also looking at how do we do productivity, efficiency, effectiveness, cost optimization, cost savings initiatives that are currently ongoing, being led by our CSO Strategy division, how do we capitalize on our strength while minimizing the cost.

Those are all in the pipeline, Rachel, be assured, we are working hard on it, so that in order for us to manage this cost inflation moving forward towards end of the year.

Okay. We have 1 last participant on Webex with questions Fong from CIMB.

2 questions from me. So firstly, just going back to the nonfuel OpEx, right?

So I noted the comments earlier around repair, maintenance and staff costs due to the scaled up CapEx delivery under RP4 as well as the comments on the general cost inflation. But this is covered by the 7.3% regulated return under the IBR, right?

So am I right to say that this shouldn't affect the EBITDA margin ultimately. And if anything, it is just timing differences between cost incurrence and perhaps recovery in the later quarters?

Maybe I'll start off with that question first.

Return under the regulated IBR framework is 7.3%, assume certain level of OpEx. So obviously, when you get approvals, you have to keep it within that budget.

So not every maintenance, not every OpEx item would fall within the approved. So if some of the amount does exceed the approved amount, then it will eat into the profitability in terms of the EBITDA margin.

So you cannot just generally say that everything under regulated business would be net at 7.3%. There are cost elements that is not part of the overall regulated return as well.

And in terms of the OpEx, right, that's under the regulated business in terms of how it's trending so far, are we still within the OpEx budget under RP4? Or are we starting to reach a level where we are starting to perhaps exceed some of this budget that we have been allocated for.

We are within budget.

Okay. So if it's within budget then, it should be no issue at least at this point in time.

Yes. That's why I'm not concerned because within budget.

If it's not, then very difficult for me.

Okay. Okay.

Understood. Understood.

Okay. And on Genco, right, Datuk Shamsul, any guidance on the adjusted PAT for Genco for the full year, so that we know the first half has been pretty strong, and you're saying that this performance will be strong for the full year, but any number that you can guide us on?

Okay. The guidance.

We did MYR 420 million in the first 6 months. They said their own KPI is MYR 600 million.

So another MYR 180 million to reach. So I say that is not going to be acceptable to us.

So we are asking more. So we are hoping that it's going to be -- if I commit and you start writing your analysis and start saying that -- so okay, operating record, probably around -- I'm getting worried because if I commit -- but certainly more than MYR 600 million that I can vouch.

Okay. I don't hit MYR 600 million you come back to me and correct.

So I did MYR 600 million, I'm quite confident to hit that one. [indiscernible] analysis, you asked the same question and then I'll answer you again.

Okay. That will be all the questions for today.

Ladies and gentlemen, thank you all for your questions. Once again, I would like to invite Datuk Engineer Technologist Shamsul Ahmad, to deliver his closing remarks.

All right. So ladies and gentlemen, thank you for the engaging session.

And it's a very exciting year for us. But first, we remain highly confident in the core resilience of our operations and structural strength of electricity demand trajectory.

And as Malaysia landscape evolve, we are strategically positioned to capture high-value growth opportunities selectively and with investment discipline. And TNB remains firmly committed to a prudent capital allocation framework while delivering sustainable shareholder returns and backed by strong fundamental operational fundamentals, high visibility growth pipeline and disciplined execution, we are well positioned to deliver a long-term accretive value for TNB, our shareholders.

It has been certainly a very exciting 3 years for all of us, and we're looking forward to a very exciting few more years coming. We have plenty of things on our plate.

Currently our plates are full. We are making many more proposals to the government, which I cannot disclose right now, but certainly, we look forward for a very exciting years coming to Tenaga in the future.

Thank you very much, ladies and gentlemen. If you have any follow-up questions, do not hesitate to contact any of our members, Investor Relation team is always available at your disposal, please contact them.

And I hope that concludes to this session, and I would like to take this opportunity to wish already a meaningful Merdeka celebration. We celebrated our 77 year.

On 1st of September, we was talking at 77 now we are we're already all [Foreign Language]. So -- but [Foreign Language], we are getting stronger than ever.

So we will do better. So thank you very much.

And [Foreign Language]. Thank you.

On behalf of Tenaga Nasional Berhad, we thank you for your participation in today's briefing. If you have further clarifications on any unanswered questions, please feel free to contact our Investor Relations officers or e-mail us at [email protected].

To all our attendees, whether present physically or virtually, we appreciate your time and engagement. For our Muslim attendees who are here with us physically today, a prayer room is available at Tower A Level 1, and our staff will be happy to guide you there.

Thank you once again, and we look forward to seeing you in our future sessions. With Malaysia's Independence Day just around the corner.

We wish everyone a wonderful and meaningful celebration. Take care, and have a wonderful day.