SCHOOL OF BUSINESS MANAGEMENT (SBM)

UUM COLLEGE OF BUSINESS

UNIVERSITI UTARA MALAYSIA
SECOND SEMESTER (A192) 2019/2020 SESSION
BPMN 3023 STRATEGIC MANAGEMENT
GROUP H

STRATEGIC AUDIT REPORT:

TENAGA NASIONAL BERHAD (TNB)

PREPARED FOR:
DR. YUSMANI BINTI MOHD YUSOFF

PREPARED BY:
NAME MATRIC NO
FATIN NUR AINA BINTI MOHD RADZI 255230
SITI NURSHAZIRAH BT BASRI 248806
NURLIYANA BINTI AZHARAN 248659
AMIR AFIQ BIN ABDUL MUTALIB 256593
NAJWA BINTI AMIR 256715
NUR HIDAYATI HUSNA BINTI AZMI 250872
Due Date: 28 June 2020

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 Table of Content
1.0 INTRODUCTION 1-8
1.1 Company Overview 1-2
1.2 Logo of the Company 3
1.3 Vision 3
1.4 Mission 3
1.5 Objective 3
1.6 Location 4
1.7 Board of Directors 5
1.8 Top Management 6
1.9 Company’s structure 7
1.10 Products/services 8
2.0 STRATEGIC ISSUES 9 - 13
2.1 Operational issue: Electricity theft cases 9
2.2 Functional issue: Technical issue in high electricity bills 10
2.3 Financial issue: TNB tax dispute 10 - 11
2.4 Business issue: Demand risk due to Covid-19 outbreak 11 -12
2.5 Financial issue: TNB shares drop 12 - 13
3.0 COMPANY’S INTERNAL ANALYSIS 14 - 32
3.1 Company’s competitive advantages sources 14 - 19
3.2 Company’s competitive advantages analysis 20 - 21
3.3 Financial analysis 22 - 32
4.0 COMPANY’S EXTERNAL ANALYSIS 33 -
4.1 PESTEL analysis 33 - 38
4.1.1 Politics 33
4.1.2 Economics 33 - 34
4.1.3 Social 34 - 35
4.1.4 Technology 36
4.1.5 Environment 36 - 37
4.1.6 Legal 37 - 38
4.2 Porter’s 5 Forces 38 – 42
4.2.1 Bargaining Power of Suppliers 38- 39
4.2.2 Bargaining Power of Customers 39
4.2.3 Competitive Rivalry 39 – 40
4.2.4 Threat of New Entrants 40 - 41
4.2.5 Threat of Substitutes 41 – 42
5.0 SWOT ANALYSIS 43 - 45
6.0 STRATEGIES PROPOSE 46 - 57
6.1 TOWS Analysis 46 - 47
6.2 Recommend Strategy 48 - 57
7.0 CONCLUSION 58 - 59
8.0 REFERENCES 60 - 61

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 List of Figures
Figure 1: View of Tenaga Nasional Berhad (TNB) in Kuala Lumpur, 1
Malaysia
Figure 2: Logo of Tenaga Nasional Berhad 3
Figure 3: Map of Tenaga Nasional Berhad in Kuala Lumpur 4
Figure 4: TNB’s company structure 7
Figure 5: TNB’s distribution channel 14
Figure 6: Typical daily weekday system load profile 15

List of Diagrams
Diagram 1: Board of Director of Tenaga Nasional Berhad 5
Diagram 2: Tenaga Nasional Berhad’s Top Management 6
Diagram 3: TNB’s current ratio performance 22
Diagram 4: TNB’s quick ratio performance 23
Diagram 5: Cash ratio of TNB 24
Diagram 6: Performance of TNB in net profit margin 25
Diagram 7: Return on asset of TNB 26
Diagram 8: Return on equity of TNB 27
Diagram 9: TNB in debt ratio 28
Diagram 10: TNB’s debt-equity ratio 29
Diagram 11: Fixed assets turnover of TNB 30
Diagram 12: TNB’s operating cash flow over sales ratio 31
Diagram 13: Cash flow coverage ratio of TNB 32

List of Tables
Table 1: Key FY2019 Highlights 16
Table 2: TNB’s Competitive Advantage Analysis 20 - 21
Table 3: TNB’s current ratio 22
Table 4: TNB’s quick ratio 23
Table 5: Cash ratio of TNB 24
Table 6: Performance of TNB in net profit margin 25
Table 7: Return on asset of TNB 26
Table 8: Return on equity of TNB 27
Table 9: Performance of TNB in debt ratio 28
Table 10: TNB’s debt-equity ratio 29
Table 11: Fixed assets turnover of TNB 30
Table 12: TNB’s operating cash flow over sales ratio 31
Table 13: Cash flow coverage ratio of TNB 32

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1.0 INTRODUCTION
1.1 Company overview

Figure 1: View of Tenaga Nasional Berhad (TNB) in Kuala Lumpur, Malaysia.

Tenaga Nasional Berhad (200866-W) is the largest electricity utility in

Malaysia, and the largest publicly listed power company in Southeast Asia with assets
worth RM99.03 billion. It serves over 8.4 million customers throughout Peninsular
Malaysia (with the exception of Sarawak) and Sabah Electricity Sdn Bhd in eastern
Sabah state. TNB main operations are in the production, transmission, and distribution
of electricity. Some operations include power plant repair, testing and maintenance,
providing research, manufacturing and construction services for power plant-related
goods, production and manufacture of high-voltage switchgears, coal mining, and trade.
Operations are under way in Malaysia, Mauritius, Pakistan, India and Indonesia.
Tenaga Nasional is one of ten companies listed under Khazanah Nasional, Malaysia's
sovereign wealth fund and one of 13 Malaysian companies on the Forbes Global 2000
in 2018.

Tenaga Nasional Berhad was known as The Lembaga Letrik Pusat (Central
Electricity Board, CEB) from 1949 until 1965, which was formed on 1 September 1949
and came into operation. After its re-establishment in April 1946 that was the
Connaught Bridge Power Station, Cameron Highlands Hydroelectric Project & the

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development of a National Grid, the Board was to become heir to three major projects
considered by the Electricity Department. CEB eventually became the owner of 34
power plants with a generating capacity of 39.88 MW, including a 26.5 MW steam
power plant in Bangsar, a 2.28 MW hydroelectric power plant in Ulu Langat and
various 11.1 MW total capacity diesel generators.

On 22 June 1965, the Federation of Malaya's Central Electricity Board (CEB)

was renamed the Malayan states' Lembaga Letrik Negara (National Electricity Board,
NEB). By the 1980s the Board provided electricity for the entire peninsula, replacing
the Perak River Hydro Electric Power Company (PRHEP) and its subsidiary Kinta
Electrical Distribution Co. Ltd (KED) in 1982, Municipality of Penang in 1976 and
areas supplied by Huttenbach Ltd in 1964 comprising Alor Setar, Sungai Petani, Kulim,
Lunas, Padang Serai, Telok Anson, Langkap, Tampin and Kuala Pilah.

On 4 May 1988, a decision by the government on a privatization policy was

announced by the Prime Minister Mahathir Mohamad. Two pieces of legislation were
passed to amend the Electricity Act and allow for the formation of a new corporation.
The 1990 Electricity Supply Successor Company Act created Tenaga Nasional Berhad
(TNB) to succeed the National Electricity Board of Malaya State (NEB). From April
12, 2004 to March 11, 2020, Tan Sri Leo Moggie is TNB's former Chairman and Non-
Independent Non-Executive Member. Ahmad Badri Mohd Zahir was the new
Chairman of the company, appointed on 12 March 2020 to succeed Moggie.

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1.2 Logo of the Company

Figure 2: Logo of Tenaga Nasional Berhad

1.3 Vision

The vision that TNB implemented in their organization is “To Be Among the
Leading Corporations in Energy and Related Businesses Globally”.

1.4 Mission

TNB mission is “We Are Committed to Excellence in Our Products and

Services”.

1.5 Objective

TNB objective is transforming into a world-class player by year 2025.

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1.6 Location

Figure 3: Map of Tenaga Nasional Berhad in Kuala Lumpur.

Below shows the address of TNB Headquarter:

Legal Address: Pejabat Setiausaha Syarikat, Tingkat 2, Pejabat Tenaga Nasional

Berhad, No. 129, Jalan Bangsar Kuala Lumpur; Federal Territories; Postal Code:
59200
Contact details: +603 2296 5566
Fax: +603 2283 3686
Social media:
Facebook: TNB Careline
Twitter: @Tenaga_Nasional
Instagram: @tenaga_nasional
YouTube: TENAGAofficial
Website: http://www.tnb.com.my

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1.7 Board of Directors

DATO' SERI MAHDZIR

BIN KHALID
Non-Independent
Non-Executive
Chairman

Non-Independent
Independent Non-
Executive Director Non-Executive
Executive Directors
Directors

GOPALA KRISHNAN DATUK SERI AMIR AMRAN HAFIZ BIN

A/L K.SUNDARAM HAMZAH BIN AZIZAN AFFIFUDIN

DATO' ROSLINA BINTI

ONG AI LIN
ZAINAL

DATIN RASHIDAH
GEE SIEW YOONG
BINTI MOHD SIES

NORAINI BINTI CHE

DAN

JUNIWATI RAHMAT
HUSSIN

DATO' CHEOK LAY

LENG

Diagram 1: Board of Director of Tenaga Nasional Berhad

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1.8 Top Management

DATUK SERI AMIR

HAMZAH AZIZAN
President / Chief
Executive Officer

Corporate Division Core Business Non-Core Business Energy Ventures

IR. MEGAT SHAHAZWAN HARRIS DATO' HAJI NOR

DATUK WIRA ROSLAN
JALALUDDIN BIN AZMAN BIN MUFTI
BIN AB RAHMAN Chief Chief International
MEGAT HASSAN Chief
Corporate Officer Officer Chief Ventures Officer
Retail Officer

DATUK IR. HAJI HAJI FAZIL BIN

HUSAINI BIN HUSIN IBRAHIM Chief
Chief Grid Officer Information Officer

IR. ROSLAN BIN ABD. MOHAMAD ARIFF BIN

RAHMAN Chief ZAINOL Chief Global
Generation Officer Business Solutions

DATUK IR. BAHARIN

AMIR MAHMOD
BIN DIN Chief
ABDULLAH Chief
Distribution Network
Procurement Officer
Officer

DATUK FAZLUR
RAHMAN BIN
ZAINUDDIN Chief
Strategy & Regulatory
Officer

NAZMI BIN OTHMAN

Chief Financial Officer

DATO’ MUHAMMAD
RAZIF BIN ABDUL
RAHMAN Chief People
Officer, Human
Resources

Diagram 2: Tenaga Nasional Berhad’s Top Management

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1.9 Company’s Structure

Figure 4: TNB’s company structure

1.10 Products/Services

The main activities of Tenaga Nasional Berhad are electricity generation,

electric power transmission, control and distribution. The secondary activities: repair and
maintenance, construction of utility systems, architecture , engineering, and related coal
mining services as well. Below are the details of their services:

a) Supply of electricity
TNB customers connect to hydroelectric and thermal power plants by means of a
network infrastructure consisting of transmission lines, substations and distribution
lines. It is via this efficient network that TNB efficiently and constantly provides
consumers with energy and maintains a balance between demand and supply at all
times.

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b) Thermal power plant
TNB's Thermal Power Plant generates power by mainly using conventional steam
turbine and steam generator, fired by cool, oil or natural gas (steam power plant),
gas-fired or diesel-fired open cycle gas turbine generators, and combined cycle gas
or diesel generators.
c) Hydroelectric Power Plants
The generation of hydroelectric power is the use of electricity from flowing water
as it descends from a height, and potential energy is transformed into electric power.
A hydroelectric power station needs the means of transporting water to generate the
necessary force to spin a turbine connected to an electrical generator, typically
through a conduit such as a pipeline or tunnel to a turbine generator spun by the
passing water. Hydroelectric Power Stations at TNB are classified as Storage, River
Run or Pondage Stations.

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2.0 STRATEGIC ISSUES
2.1 Operational issue: Electricity theft cases

Electricity theft is the biggest crime that robs TNB of millions of ringgits, which
could otherwise be invested in extending, reinforcing and modernizing the power
supply or distribution system. The main cause of electricity theft is due to tampered
meters, either by syndicates or individuals employing some form of high-tech or
magnetic method, although there are a handful due to incorrect readings from old
meters (The Star,2011). When the meter has been tampered, this means that the actual
amount of electricity used was not fully recorded. Only around 30% of it was recorded.
In light of this issue which falls under operational level, the act of tampering with the
electricity meter is very dangerous as it could harm users or the perpetrator himself
which it could also lead to fatal electrocution.

Unlike other forms of theft such as burglary or robbery, the seriousness of

electricity theft might not be fully appreciated by the public at large, as the stolen ‘item’
does not have a tangible physical presence. Nevertheless, whether it is through
siphoning supply or meter tampering, its effects are more damaging than popularly
thought. For instance, the financial cost can be astronomical. As related by Enforcement
and Regional Coordination Director Ir Othman Omar, in Peninsular Malaysia alone,
TNB loses tens to hundreds of millions of ringgits annually as a result of such fraud.
There is a case in which TNB had pursued damages amounting to RM14 million for
lost revenue owing to electricity theft. It should be noted that it is not just the utility that
has to bear the cost. In fact, those who steal electricity also cause problems for honest
consumers.
Due to this issue, TNB suffered a huge loss even though being a sole utility firm
in Peninsular Malaysia and the largest publicly listed power company in Southeast Asia.
As for June 2019, the TNB lost RM106 million from electricity theft in the peninsula
involving 457 cases, with Selangor itself recording the highest number in 370 cases.
Roughly 33 premises around Kuantan were raided the same year due to suspicion of
manipulating electricity distribution boards in Bitcoin's cryptocurrency mining
operations, resulting in a loss of RM3.2 million.

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2.2 Functional issue: Technical issue in high electricity bills

Tenaga Nasional Berhad (TNB) has stated that it had experienced technical
issues from May 15 to 20, 2019 in its billing system causing consumers to complain
about the sudden spike in electricity bills recently. Negligence and technical fault on
the part of Tenaga Nasional Bhd were two among three reasons why electricity bills
spiked for certain consumers, but the government is having none of it (The Star
Online,2019). Many consumers had complained through social media that their
electricity bill had increased, and they felt cheated, more so, since TNB did not come
forward with any answer (The Star Online,2019). There were 14,469 complaints
regarding the increase in electricity bills that TNB received from April to May on that
year. Of that number, 11,331 were resolved while the remaining 3,318 are still being
investigated. TNB has admitted that a recent technical glitch is among the reasons for
the sudden surge in utility bills (Msn News, 2019). This issue leads to functional level
of organization issues as TNB failed to regularly check and maintained it power supply
which led to technical glitch.

The biggest impact from this issue is that TNB had been slapped with RM3.6
million compounds by Energy Commission in December 2019. The move was made
after investigating complaints from consumers on high electricity charges in May and
June of 2019. Investigations show that the company failed to comply with ST’s
instructions on minimum service level (MSL) performance standards regarding the
period for delivery of electricity bills to consumers. Based on the MSL, TNB needs to
ensure that each user receives the electricity bill on a monthly basis (FMT News,2019).
As a service provider and a license holder, TNB must ensure that it delivers high service
levels to avoid causing any burden to its consumers.

2.3 Financial issue: TNB tax dispute

In November 2019, TNB said it had received a tax bill of RM1.43 billion for
2015, RM1.24 billion (2016) and RM1.3 billion (2017), bringing the total to RM3.98
billion from Inland Revenue Board (IRB) or familiar with Lembaga Hasil Dalam
Negeri (LHDN). This is not the first time TNB has been slapped with a tax bill by the
IRB (The Daily,2019). On Nov 23, 2015, the company received additional assessment
notices for 2013 and 2014, for RM985.57 million and RM1.08 billion respectively by
the tax authority (The Daily,2019). At the time, the IRB had approved, in principle, the

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 company’s reinvestment allowance claim for the assessment years in question.
However, after that, it reversed the approval on the basis that the company is not in the
business of manufacturing that allowed such exemptions. In 2016, both TNB and IRB
decided not to launch any action against the assessments until the matter is resolved on
a subsequent appeal by the income tax special commissioners and the High Court.

Due to this, TNB has been slapped with RM 3.98 billion tax their share price
drop to 4% which is from RM13.72 on November 28 to RM13.07 on December 2. This
dispute also resulting in lost RM3.64 billion in market capitalization over two trading
days after it announced it had been slapped with a tax bill of close to RM4 billion by
the IRB.

In December 2019, TNB commenced legal proceedings to challenge the notices

for the years of assessment 2015 to 2017 raised by the IRB (The Star Online,2019). The
High Court has granted an interim stay of all further proceedings for Tenaga Nasional
Bhd’s (TNB) notices of additional assessment amounting to close to RM4 billion it
received from IRB The Daily,2019. This is until the hearing of the leave application on
April 2, 2020 (The Daily,2019). Unfortunately, there still do not have any progress of
this issue due to Malaysia have implement Movement Control Order during Convid-19
crisis.

2.4 Business issue: Demand risk due to Covid-19 outbreak

During the Movement Control Order due to the outbreak of Covid-19, energy
demand plunge as most schools, malls, hotels, corporations, and factories shut down,
while household electricity consumption rises even with lower average tariffs incurred
relative to other sectors. Approximately 79% of Peninsular Malaysia's TNB revenues
come from industrial and commercial customers. There also demands risk which not
cushioned in TNB’s retail division, which makes up a minor 2% of base tariff.
Meanwhile, its Malaysian power-generation business is largely guaranteed capacity
payments, to cover finance cost, fixed cost and margin (Aziz, 2020). On that, TNB said
in its report for the fourth quarter of FY19 (4QFY19) that the impact of two power plant
outages in TNB Janamanjung (Unit 2) and Kapar Energy Ventures (Unit 6) to the
generation business will be reflected on 1QFY20 (Aziz, 2020). On the flipside, it will
add 1,440MW generation in July via Southern Power Generation (Aziz, 2020).

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 Meanwhile, the global lockdown may impact TNB’s international operations.
Low demand could hurt businesses in Turkey and India, raising the possibility of further
impairments, moving forward (Aziz, 2020). It impaired RM334 million last year, and
nearly RM1 billion the year before (Aziz, 2020). Its renewable energy (RE) ventures in
the UK should remain stable under RE tariff structure (Aziz, 2020). TNB also operates
in Saudi Arabia, Pakistan and Kuwait. It is unclear if the global lockdown results in
lower operating costs in the near term, considering the sizeable workforce with some
36,000 employees (Aziz, 2020).

2.5 Financial issue: TNB shares drop

Being a connected entity with the legislature, TNB has also taken an interest in
supporting the government in addressing the Covid-19 outbreak through national
assistance. TNB has therefore donated RM10 million to the Ministry of Health (MOH)
to kick-start this campaign to help tackle this outbreak. All electricity consumers
nationwide will receive discounts for consumption bills up to six months from 1 April
to 30 Sept. According to the Minister of Energy and Natural Resources, Datuk Dr
Shamsul Anuar Nasarah, he said the move was to reduce people 's burden in facing the
Covid-19 infection onslaught. The discounts were announced by Prime Minister Tan
Sri Muhyiddin Yassin on Feb 27 via the 2020 Stimulus Package and following the
Economic Action Council on March 16 which is a great aid to the corporate image of
TNB.

The government has agreed to provide a 15 percent discount on electricity

consumption from April 1 to Sept. 30, 2020 to six selected business sectors directly
affected by the Covid-19 outbreak, such as hotel operators, tourism and travel agencies,
shopping complexes, convention centers, theme parks, and local airlines. This 15
percent discount includes around 10 000 (business) accounts from six selected accounts
business sectors that come under the Trade Tariff category.

In addition, the 15 per cent discount for the six-month cycle would see a
reduction of RM40 million in the Peninsula, RM20 million in Sabah and around RM8.5
million in the electricity bill in Sarawak. Meanwhile, Shamsul announced in a separate
statement that TNB and Sabah Electricity Sdn Bhd would not cut electricity
connections for consumers who were late in paying their bill during the MCO period.

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 Nevertheless, for their level of business, this outbreak has significantly affected
TNB as their shares have dropped by 4.22 per cent since the start of 2020, compared
with the 11.15 per cent drop in the KLCI benchmark in the same period. TNB made
RM4.53 billion in net profit on sales from RM50.94 billion for FY19 ended Dec 31,
2019. The Regulated Asset Base (RAB) business accounted for about 85 percent of the
bottom line, or RM3.84 billion. That was after the regulatory adjustments left off excess
revenue of over RM1 billion.

An analyst said any upward adjustments can be made over multiple regulatory
periods, so as not to shock the market with an electricity tariff jump. The TNB's balance
sheet will support the shortfall while awaiting the adjustment. TNB holds RM25,77
billion of current assets to RM23,9 billion of current liabilities. In recent notice, HLIB
Research said that in the upcoming pass-through analysis of the imbalance rate, TNB
will be compensated to fix the shortfall in earnings due to a 2 per cent growth year-on-
year lower than expected power demand. Therefore, profit and loss (accrual accounting)
would have limited effect but delay in cash flow to 2H20 (the second half of 2020).

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3.0 COMPANY’S INTERNAL ANALYSIS
3.1 Company’s competitive advantages sources
i. Resources
The main business of Tenaga Nasional Berhad is power supply while its non-
core business is its subsidiaries and partners. Generation Division is a key business
division of TNB where it is committed to building, running and sustaining TNB 's
portfolio of power units. The Power Division has thermal power facilities and large
hydro-generation projects in Peninsula Malaysia, and one IPP that operates in
Pakistan. The following figure shows how TNB customers get electricity supplies.
They are linked by a network infrastructure consisting of transmission lines,
substations, and distribution networks with electricity from hydroelectric and
thermal plants. Via this efficient network, TNB thus efficiently and reliably supplies
customers with energy, thus maintaining a fair balance between demand and supply
(Core business, 2020).

Figure 5: TNB’s distribution channel

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 Figure 6: Typical daily weekday system load profile

• Thermal Power Plant

TNB's Thermal Power Plant generates electricity from conventional steam
turbines and steam engines, primarily fuelled by coal , oil or natural gas (wind
turbine), gas-fired or diesel-fired open cycle gas turbine generators, and mixed cycle
gas or diesel turbines.
• Hydroelectric Power Plants
Hydroelectric power generation is the use of energy from running water as it
descends from a height and potential energy is transformed into electricity. A
hydroelectric power plant needs the means to carry water to produce the necessary
force to spin a turbine attached to an electric generator, normally through a conduit
such as a pipeline or tunnel to a turbine generator spun by the flowing water.
In addition, the Distribution Division is responsible for two supply chain
operating activities on behalf of TNB, which are the functions of the Distribution
Network Operations & Electricity Retail Operations. The assets of the Peninsula
Malaysia's 33 kV, 22 kV, 11 kV, 6.6 kV and 415/240 volts will be managed by
distribution network including plans, constructs, operates, repairs & maintenance
of the Division.

Next are tangible and intangible sources of the Distribution Division in Tenaga
Nasional Berhad, which has 13 state-level offices, 38 regional offices, 56 branches,

15
 8 small branches, 4 Call Management Centers (CMC) and 140 Customer Services
Center throughout the Malaysian Peninsula (Distribution Division, 2020).

ii. Organizational Capabilities

There is no doubt that TNB is a sustainable organization, partly driven by a

strong capacity building tradition within Malaysia 's industry. In order to sustain in
the business, the leaders must lead their team to succeed, eventually attaining higher
levels for the organization, and years of professional development, experience and
commitment can be needed to prepare this leader for the role. TNB said that their
people are important to the success of TNB. They aim to constantly strengthen their
leadership, improve employee performance and grow talent. They are committed to
recruiting, cultivating and maintaining the right talent as they realize their
employees ' skills and the organizational climate are key components in
implementing our strategy for Reimagining TNB. They have been known as a
"Employer of Choice," and are motivated to prove it consistently. The table below
showed what TNB have been done which known as Key FY2019 Highlights:

Table 1: Key FY2019 Highlights

They are not only focused on recruiting talents with the relevant skills, but also
individuals who share the same values as our organization. Their key talent
recruitment highlights for FY2019 include:

o Participation in local career fairs (International Islamic University Malaysia

(IIUM), National Defense University of Malaysia (UPNM), Universiti
Malaysia Terengganu (UMT), and Sunway University).
o Strategic partnership with iCube, a UK-based student society to brand TNB
in innovation.
o University relationships, such as "Tea with Tenaga" and career talk.

Similarly, capacity growth is a vital part of helping TNB grow and sustain
business. We strive to create an impact-oriented learning culture that recognizes the

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 value of learning and offers our staff extensive career opportunities. In FY2019
more than RM183 million were invested in initiatives related to education,
development and TNB Company provided an average of six human days of training
per employee. RM10 million spent on cultivating 705 young potential through
ProFT (PROTÉGÉ) is part of government initiatives to training graduates who have
not yet gained jobs. In addition, TNB’s Career Enhancement Management (CEM)
is a platform that helps to closely align an employee’s role to their specific skillset
and competencies throughout their employment period up until their planned
retirement. This is especially useful for periods of transition within the company as
many of the affected individuals will be reskilled for the requirements of their
current and future roles (TNB Annual Report, 2019).

iii. Core Competences

As Malaysia's biggest power supply, TNB play a major role in the building of
the country. In recent years, they have also embarked upon our sustainability agenda
by making efforts to add value to all stakeholders, such as green energy and other
environmental and social initiatives. Next, they assume that these initiatives will
not only put Tenaga Nasional Berhad (TNB) into the future, but also further grow
the business as they want to become one of the top 10 worldwide utility companies
by 2025. In fact, TNB remains steadfast in providing affordable electricity to the
public while improving service quality and minimizing environmental impacts. For
instance, they take the following approach to address the energy trilemma such as:

• Upgrading infrastructure to ensure the reliability of current and future electricity

supply.
• Optimizing system efficiency to provide affordable and fair tariffs.
• Venturing and investing in renewable energy and cleaner power assets.

To this extend, they have continued our direct contributions to four (4) of the
UN SDGs, namely Goal 7 (Affordable and Clean Energy), Goal 8 (Decent Work
and Economic Growth), Goal 13 (Climate Action), and Goal 17 (Partnerships for
the Goals). We are taking a progressive step in our sustainability journey this year
by further aligning our aspirations and contributions with the Malaysian
Government’s latest development blueprint, the Shared Prosperity Vision 2030
(SPV 2030).

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iv. Distinctive Competences

Distinctive competence refers to the core skills and practices that increase the
competitiveness of an organization and make it different from its competitors. An
organization's competitors cannot imitate this competence (at least in the short term)
allowing an organization to gain an advantage over others. An organization must
protect its distinctive competence to retain its competitive edge.

An organization must also consistently change its distinctive competence in a

changing business environment to keep its competitive edge, and its competence
must become part of its corporate strategy. Examples of distinctive competence are
fast delivery and the extremely high quality of an organization's product.

An organization's competitors cannot imitate this competence allowing an

organization to gain an advantage over others. In this case, TNB are the largest
electrical distributor in Malaysia and monopolizing the industry. TNB play a major
role in the building of the country, responsible for keeping the lights on for all
residents of Peninsular Malaysia, Sabah and Labuan.

The government also play an important role as they came out with the restriction
to limit any parties from interrupting this industry by providing license only to TNB
as the country electricity supply monopolist. So, low intensity of competitive rivalry
makes an industry less competitive.

v. Competitive Advantages

Competitive advantages are a business concept that describes the attributes of

allowing an organization to outperform its competitors. Their services are

a. Supply of electricity
TNB customers are connected with power for hydroelectric and thermal
plants through a network system made up of transmission lines, substations and
distributions lines. It is via this reliable system that TNB supplies electricity to
customers consistently and continuously, as well as ensuring a balance between
demand and supply at all times.
b. Thermal power plant
TNB's Thermal Power Plant produces power by using conventional steam
turbine and steam generator principally, fired by cool, oil or natural gas (steam

18
power plant), gas-fired or diesel-fired open cycle gas turbine generators, and
gas-fired or diesel-fired combined cycle turbine generators.
c. Hydroelectric Power Plants
Hydroelectric Power generation is the utilization of energy from flowing
water as it descends from a height, and potential energy is converted to electrical
energy. A hydroelectric Power Station requires the means of conveying water
to produce the necessary force to spin a turbine linked to an electric generator,
usually through a conduit such as a pipeline or tunnel to a turbine-generator
which is spun by the passing water. TNB's Hydroelectrical Power Stations are
classified as Storage, Run of river or Pondage stations.

19
 3.2 Company’s competitive advantages analysis

Primary/secondary Competitive
TNB YTL Power Malakoff
support activities advantages
- TNB always come out Marketing is a risk- For marketing
For this
the best marketing aware culture within activities, Malakoff
marketing
especially when the YTL Power Group many uses
activities we
celebrate every festival and for the awareness campaign
know that
in Malaysia. identification and to promote their
TNB has good
- TNB always make evaluation of services to user. The
marketing with
Marketing advertisement in media significant risks awareness campaign
their service to
social and so on. applicable to their like environmental
their
areas of business, awareness, A series
customers,
together with the of “Vendors’
compared to
design and operation Awareness Day”
YTL Power
of suitable internal Events and others.
and Malakoff.
controls.
- Entered into As business demands - Filtration
partnership with increase with the fully equipment to
SWCorp to develop a liberalized electricity reduce Particulate
biogas technology from market, YTL Matter (“PM”) For this
anaerobic digestion of PowerSeraya began its emissions - an technology
food waste, its business implementation of electrostatic development
model and establish a cloud computing and precipitator and also, we can
potentially new offshore capabilities, fabric filter are see that TNB
revenue stream for to maintain its installed at TBPP has come out
TNB. competitive and TBEPP with new
- Further encouraging advantage, enhance respectively. technology
the adoption of EV we customer experience - Flue Gas which is the
Technology continue to partner the and improve business Desulphurization carbon dioxide
development Malaysian Green efficiency. (“FGD”) to reduce (CO2)
Technology Sulfur Oxide greenhouse
Corporation (MGTC) (“SOx”) emissions. system and
to increase the - pilot biogas
ChargEV station plant are just
facilities in major two examples
cities. A model of the of the various
ChargEV was exhibited projects
at the International undertaken at
Greentech & Eco TNBR.
Products Exhibition &
Conference Malaysia
2019 held in Kuala

20
 Lumpur from 9-11
October 2019.

- TNB REMACO is - YTLPG was The operation For operations

mainly involved in the
energy industry. It
provides repair and
maintenance services
for power plant
equipment’s.
Operations
- Operation and
Table 2: TNB’s Competitive Advantage Analysis
subsequently Division has activities we
awarded the project extensive experience can see that
for the supply of in managing TNB also has
power from Paka combined cycle gas better
Power Station under turbine (“CCGT”), advantages
a short-term open cycle gas because TNB
capacity bid called turbine (“OCGT”) is the mainly
by the Malaysian and coal-fired plants power supply
Energy as well as multi- for Malaysia.
Commission. stage flash
desalination plants,
maintenance reverse osmosis
(“O&M”) of the plants and multi-
power station is effect distillation and
carried out by YTL cogeneration plants.
Power Services Sdn
Bhd, a wholly
owned subsidiary of
YTL Power’s parent
company, YTL
Corporation Berhad.

As the conclusion that can we conclude is TNB has better place in Malaysia
compared to YTL Power and Malakoff. We can see that TNB always care about their
customers and their service to citizen. For YTL, we can see there are four types of business
such as power generation (contracted), Multi utilities business (merchant), water and
sewerage and mobile broadband network. So that, YTL are not only focus on power supply,
because they have another activities business that they can run. For Malakoff, their core
business includes power generation, water desalination, operations & maintenance and
waste management and environmental services. In Malaysia, we own an effective
generation capacity of 5,822 MW comprising 6 power plants that run on gas, oil and coal.

21
3.3 Financial analysis
i. Current Ratio

Average 2017 2018 2019

1.43 1.80 1.41 1.08
Table 3: Current ratio of TNB

Current Ratio (2017 - 2019)

2.00
1.80
1.80
1.60 1.41
1.40 Average = 1.43
Current Ratio

1.20
1.00 1.08
0.80
0.60
0.40
0.20
0.00
2017 2018 2019
Year

Diagram 3: TNB’s current ratio performance

The Diagram 3 and Table 3 above show the current ratio acquired by TNB for
3 years from 2017 to 2019. It obviously can be seen the declination of current ratio.
Current ratio is metric to measure the ability of company to pay in short-term of period.

In year 2017, the current ratio by TNB is the highest current ratio than other
years by 1.80 and show the lowest point on 1.08 in 2019. It shows drastically decreases
from 2017 to 2019. This is happened due to decrease in current liabilities.

It can be concluded that 2017 is highest point of current ratio due to its lower
liabilities compare to other years.

22
ii. Quick Ratio
Average 2017 2018 2019
1.37 1.74 1.35 1.00
Table 4: TNB’s quick ratio

Quick Ratio (2017 - 2019)

2.00
1.80 1.74
1.60
1.35
1.40 Average = 1.37
Quick Ratio

1.20
1.00 1.00
0.80
0.60
0.40
0.20
0.00
2017 2018 2019
Year

Diagram 4: TNB’s quick ratio performance

Table 4 and Diagram 4 above illustrated the quick ratio from 2017 to 2019 in
TNB company. The graph shows the sequent decreasing for those 3 years. The quick
ratio or acid test is a calculation to measure the ability of company to pay in short term
of period by minus the current assets with inventories that they have. The higher ratio
is the better for company.
In 2017, the quick ratio has the highest point with 1.74, and then it went to
decrease with 1.35 in 2018 and become 1.00 for 2019. This happened because of the
increasing in current liabilities in TNB, beside the number of inventories also year by
year.
The conclusion is 2017 is the better ratio than other years for TNB and it was
affected by increasing in inventories.

23
iii. Cash Ratio
Average 2017 2018 2019
0.25 0.29 0.35 0.10
Table 5: Cash ratio of TNB

Cash Ratio (2017 - 2019)

0.40
0.35 0.35
0.30
0.29
0.25
Cash Ratio

Average = 0.25
0.20
0.15
0.10 0.10
0.05
0.00
2017 2018 2019
Year

Diagram 5: Cash ratio of TNB

Table 5 and Diagram 5 above represent the performance of TNB by showing

the cash ratio on that company from 2017 to 2019. It obviously can be seen the
significant changes on cash ratio. Cash ratio can be measured by divide the cash and
cash equivalent with current liabilities.
In 2017, the cash ratio is 0.29 before it increases by 0.06 point to reached 0.35
in 2018. This changed occurs by the increasing in cash & cash equivalent from 4,512.90
million to 7,598.60 million. Then, it falls by -0.25 to become 0.10 in 2019. This
happened because the cash & cash equivalent getting low on that year.
To be concluded that 2018 is the best cash ratio among of those years.

24
iv. Profit Margin Analysis (Net Profit Ratio)
Average 2017 2018 2019
10.24 14.58 7.43 8.73
Table 6: Performance of TNB in net profit margin

Net Profit Margin (2017 - 2019)

16.00
14.00 14.58%

12.00
Net Profit Margin

Averarege =
10.00 10.24%
8.00
8.73%
6.00 7.43%

4.00
2.00
0.00
2017 2018 2019
Year

Diagram 6: Performance of TNB in net profit margin

Table 6 and Diagram 6 above represent the net profit margin for TNB for 3
years in row which is 2017, 2018 and 2019. It clearly shows the changes occurred in
net profit margin among those 3 years. Net profit margin is the situations where
company indicates whether it is efficient or not at converting the sales into actual profit.
In year 2018, it shows the lowest point on net profit margin with 7.43% compare
to others. This is difference around 7.15% from net profit at 2017 (14.58%). This is
because the net income has difference range between year 2017 and 2018 with 3,167.1
million. Then it rises up again in 2019 with 8.73%.
The conclusion is TNB got the highest profit on 2017 due to their income are
highest among those years and the revenue also the higher between the 3 years. It
recommended to TNB to produce more income and revenue by reducing in their cost
in good sold.

25
v. Return on Assets
Average 2017 2018 2019
3.24 4.79 2.44 2.49
Table 7: Return on assets of TNB

Return on Assets (2017 - 2019)

6.00

5.00
4.79
Return on Assets

4.00
Average = 3.24
3.00

2.00 2.44 2.49

1.00

0.00
2017 2018 2019
Year

Diagram 7: Return on assets of TNB

Table 7 and Diagram 7 above express the movement of return on assets (ROA)
in TNB from 2017 to 2019. It clearly shows the 2017 has the highest return on assets
4.75 than others. Return on assets is a ratio that represent of profit earns to its overall
resources.
From 2017 to 2018, it shows the gradually decreased in return on assets when
it presents 4.79 to 2.44. It happened when average assets were increased but not in net
income, that why the ratio become less for 2017 (2.44). For the next year, which is
2019, there increased horizontally on return on assets with 2.49 and has the difference
just around 0.05 compared to 2018.
To be concluded that the return on assets that received by shareholders were
decreased for last two years when it caused by the decreasing in their net income.

26
vi. Return on Equity
Average 2017 2018 2019
8.59 11.92 6.34 7.50
Table 8: Return on equity of TNB

Return on Equity (2017 - 2019)

14.00

12.00 11.92
10.00
Return on Equity

Average = 8.59
8.00

6.00 7.50
6.34
4.00

2.00

0.00
2017 2018 2019
Year

Diagram 8: Return on equity of TNB

Table 8 and Diagram 8 above demonstrate for return on equity from 2017 to
2019 from Tenaga Nasional Berhad (TNB). It patently shows 2017 as higher plotting
graph with 11.92.
Gradient shows descending plot from 2017 to 2018 with 11.92 to 6.34. This
happened when the numbers of equity are increased, but the net income in TNB was
decreased. However, the ascending occurred in 2019 with 7.50. It occurred when net
income stated the increasing from 2018 (RM 3,745.0 million) to 2019 (RM 4,445.0
million).
To be concluded that 2017 is the best performance for TNB among those 3
years. Recommendations for TNB is to increase their net income per year besides their
assets by cutting their cost in variable cost such as marketing tools.

27
vii. Debt Ratio
Average 2017 2018 2019
0.63 0.60 0.62 0.67
Table 9: Performance of TNB in debt ratio

Debt Ratio (2017 - 2019)

0.68
0.67
0.66

0.64
Debt Ratio

Average = 0.63
0.62
0.62
0.60 0.60

0.58

0.56
2017 2018 2019
Year

Diagram 9: TNB in debt ratio

Table 9 and Diagram 9 above shows the data collecting in TNB’s debt ratio.
The significant number has state the debt ratio getting increased from 2017 to 2019.
Debt ratio is measured the ability of company to service their debts, there a good way
to keep in track the company in long term of period and the above 0.6 ratio is considered
to be a poor to service in debt.
From 2018 to 2019 it increased in debt ratio when it presents from 0.60 to 0.62,
by increasing in 0.02. It happened when the total liabilities sharply increased by RM
94,643.1 million to RM 119,565.1 million.
It can be concluded that last two year has increased drastically in plotting due
to number of total liabilities become bigger and 2017 is the best performance by getting
the low par of debt ratio.

28
viii. Debt-Equity Ratio
Average 2017 2018 2019
1.70 1.49 1.60 2.02
Table 10: TNB’s debt-equity ratio

Debt-Equity Ratio (2017 - 2019)

2.50

2.00 2.02
Debt-Equity Ratio

Average = 1.70
1.50 1.60
1.49
1.00

0.50

0.00
2017 2018 2019
Year

Diagram 10: TNB’s debt-equity ratio

Table 10 and Diagram 10 above illustrated the plotting graph in debt-equity

ratio for TNB from 2017 to 2019. Its notable data on 2019 is the highest point of debt-
equity ratio than other years with 2.02.
The gradient is ascending from 2017 to 2019 with the data from 1.49 to 1.60,
and then it reached the highest point in 2.02 in 2019. This is because the total liabilities
stated the big range between years and the shareholder’s equity state a little bit
increased.
The conclusion is 2017 is the best performance of company by stated the lowest
debt-equity ratio it will able to generate enough cash to satisfy its debt obligations.

29
ix. Fixed-Asset Turnover
Average 2017 2018 2019
0.43 0.43 0.43 0.44
Table 11: Fixed assets turnover of TNB

Fixed Assets Turnover (2017 - 2019)

0.44
0.44 0.44
0.44
Fixed Assets Turnover

0.43
0.43
0.43 Average = 0.43
0.43
0.43
0.43 0.43
0.42
0.42
0.42
2017 2018 2019
Year

Diagram 11: Fixed assets turnover of TNB

The table 9 and graph 9 above represent the plotting of fixed assets turnover for
2017 to 2019 in TNB. It can be seen the highest plotting was occurred in 2019 with
0.44.
Between 2017 and 2018, the fixed assets turnover result shows no
differentiation between those years by performing 0.43. This is because the revenues
were increased same goes to net fixed assets on TNB.
To be concluded that 2019 is the best plotting on graph because it will spend
less money in fixed assets for each dollar of sales revenue.

30
x. Operating Cash Flow/Sales Ratio
Average 2017 2018 2019
0.30 0.26 0.26 0.38
Table 12: TNB’s operating cash flow over sales ratio

Operating Cash Flow/Sales Ratio (2017 -

2019)
0.45
Operating Cash Flow/Sales Ratio

0.40
0.38
0.35
0.30 Average = 0.30
0.25 0.26 0.26
0.20
0.15
0.10
0.05
0.00
2017 2018 2019
Year

Diagram 12: TNB’s operating cash flow over sales ratio

Table 12 and Diagram 12 above shows the operating cash flow over sales ratio
in TNB from 2017 to 2019. It stated the horizontally plotting on graph between year
2017 and 2018 with 0.26.
On 2019, the highest plotting was getting 0.38 instead 2017 and 2018 when only
0.26 for both years. This is because there has a big amount of number in operating cash
flow in 2019 between 2017 and 2019.
The conclusion is 2019 is the highest amount of TNB spent their money to
running their business.

31
xi. Cash Flow Coverage Ratio
Average 2017 2018 2019
0.22 0.23 0.21 0.23
Table 13: Cash flow coverage ratio of TNB

Cash Flow Coverage Ratio (2017 - 2019)

0.24
0.23 0.23 0.23
0.23
Cash Flow Coverage

0.22 Average = 0.22

0.22
0.21
0.21 0.21
0.20
0.20
0.19
2017 2018 2019
Year

Diagram 13: Cash flow coverage ratio of TNB

Table 13 and Diagram 13 above demonstrate the cash flow coverage ratio for
TNB in 3 years which is 2017, 2018 and 2019. It obviously can be seen the V shape
plotting graph when there has the descending result before it ascends again for the next
year.
In year 2018, there is the lowest plotting when it has 0.21 on cash flow coverage
ratio, when it decreased by 0.02 from 2017 (0.23). For the next year, which is 2019, the
cash flow coverage ratio was increased also by 0.02 values to reached 0.23.
To be concluded that the 2017 and 2019 is the best performance because it
shows the ability of company to pay off its obligations with its operating cash flow.

32
4.0 COMPANY’S EXTERNAL ANALYSIS
4.1 PESTEL analysis
4.1.1 Politics: Privatization of TNB

The National Electricity Board was corporatized as Tenaga Nasional Berhad

(TNB) in 1990 as a first step in enforcing the government's privatization strategy and
subsequently privatized and floated on the Kuala Lumpur Stock Exchange, with the
Ministry of Finance holding around 70% of the shares. The Sabah Electricity Board as
Sabah Electricity Sdn was privatized in 1998. Bhd., with TNB as the key shareholder,
while in the late 1990s the Sarawak state government divested 50% of its SESCO
equity to the private sector. Also, since 1990, the government has issued 15 IPP
licenses, one transmission permit, two distribution licenses and several merchant co-
generation licenses. In addition to these, there are approximately 2,000 self-generation
licenses given to industrial and commercial companies producing electricity for their
own use.

Therefore, with the successful privatization of TNB a result of bold changes for
Malaysia which won accolades for its achievements. Malaysia held the fourth spot in
the field of electricity generation for two years consecutively. In a Doing Business 2020
survey, 190 countries / economies had been evaluated and our achievement is a major
jump from the first time we were evaluated in 2011, when we just managed the 60th
position. The success of TNB had a direct impact on the acceleration of economic
growth through greater investment and contributed to the expansion of the corporate
sector.

4.1.2 Economics

During the Movement Control Order due to Covid-19 outbreak, energy demand
plummets as most offices, malls, hotels, businesses, and factories shut down, while
household electricity consumption increases even with lower average tariff incurred
compared with other sectors. Approximately 79% of Peninsular Malaysia's TNB
revenues come from industrial and commercial customers.
33
 There also demands risk which not cushioned in TNB’s retail division, which
makes up a minor 2% of base tariff. Meanwhile, its Malaysian power generation
company is effectively guaranteed to bear funding costs, fixed costs and margins. On
that, TNB said in its study for the fourth quarter of FY19 (4QFY19) that the effect on
the generation sector will be reflected on 1QFY20 of two power plant outages which
are TNB Janamanjung (Unit 2) and Kapar Energy Ventures (Unit 6). On the plus side
via the Southern Power Generation, it will add 1,440MW production in July. This
outbreak had greatly impacted TNB as their shares have dropped 4.22% since the start
2020, compared to the 11.15% decline in the benchmark KLCI in the same period.
TNB made RM4.53 billion in net profit on sales from RM50.94 billion for FY19 ended
Dec 31, 2019. The Managed Asset Base (RAB) company accounted for around 85
percent of the bottom line, or RM3.84 billion.

The global lockdown could meanwhile affect the international operations of

TNB. Low demand in Turkey and India could harm companies, increase the risk of
more impairments and move forward. Last year it lost RM334 million, and almost RM1
billion the year before. Under the RE tariff system the UK renewable energy (RE)
projects will remain stable. TNB also operates in Kuwait, Pakistan and Saudi Arabia.
It is uncertain if the global shutdown would in the short-term result in lower operational
costs, given the large workforce of some 36,000 employees. Considering the shadow
cast by the COVID-19 pandemic, growth projection for Malaysia’s electricity industry
is uncertain and will be dependent on the Nation’s economic recovery post COVID-19.
Therefore, TNB are closely monitoring the related risks and potential impact as well as
implementing necessary measures to ensure electricity demands are met in a
sustainable manner.

4.1.3 Social

The social segment is concerned with group perceptions and cultural values.
This is because attitudes and values form the backbone of society as they also drive and
change the demographic, economic, political, and technological conditions. In order to
stay connected with their customers and to make life easier, TNB had opened their own
official social media such as Facebook, Instagram, Twitter and also YouTube channel.

34
By sharing their views, feedback and ideas on how to improve TNB's products and
services, their customers will keep connecting with TNB using these social media
channels. Not only that, TNB also launched myTNB APP which a free mobile app for
the customer to manage their TNB electricity account in one location. They can view
and pay their electricity bills anytime, anywhere and manage their TNB account on the
go. Malaysian can experience better features by finding out how much electricity they
have used, view their total electricity bill, pay for their bill anytime and submit
feedback for any bill related matters quickly.

TNB views development of skills and talents are valuable to the industry in our
country, therefore through Universiti Tenaga Nasional (UNITEN), TNB have been
contributing towards the development of skills and talent required by today industry.
TNB also taking this commitment further through programmed such as Dermasiswa
My Brighter Future (MyBF) and PROTÉGÉ. Under MyBF, they provide financial
assistance to students from the B40 group to take up undergraduate studies in Science,
Technology, Engineering and Mathematics (STEM). As of December 2019, this
programme has been extended to 2,672 students. Under the Government’s PROTÉGÉ
programme, meanwhile, TNB provide on-the-job training to unemployed graduates
with the objective of enhancing their employability. While some of the participants are
subsequently given full-time jobs at TNB, others tend to contribute the skills and
expertise acquired in other technology-based businesses. With all the programmes,
TNB hopes to produce a better human capital for the industry and seek to build the
capabilities and competencies of their people in order to realize their full potential.

Apart from that, to ensure all the Malaysians has higher standard of living and
in order implement student development framework that will allow them to run
programmes to improve underprivileged students leadership and soft skills, TNB had
ensure all of those in rural and remote areas have access to electricity. They had
completed their commitment to deliver electricity supply to 30 remote villages and
connecting 615 houses to the grid.

35
4.1.4 Technology

Corporations are constantly at risk in today's digital age of having their

operations sabotaged by cyber intrusions. That poses a real and significant threat to
TNB, given their critical role in powering the country. Safeguarding their systems from
cyber threats is equally important to prevent disruptions to their business. Cyber-attack
is a serious threat that can have various impacts on the national security, which can
jeopardize the political, economic, and social welfare of the country. Because of the
widespread and high interconnectivity in the cyber space, the damage scale would be
significant. For example, if TNB Power Transmission / Distribution services are down
even though their power generation services produce electricity.

4.1.5 Environment: TNB offers the nation discount and online payment during
MCO as part of the TM’s effort to make Malaysians stay at home and stay safe.

Faced with today 's unprecedented pandemic, which has engulfed the world, the
subsequent measures taken to combat further infection have resulted in a completely
different way of living and working. It stands to reason in conjunction with the
government-imposed movement control order, that there is growing concern about
continuing work with as little interruption as possible. One of the worries arising from
having to work from home is the increased usage utilities, especially electricity. Since
utilities constitute a major part of household expenses, there is no waste of utilities,
such as water and electricity, which sounds plausible to make sure. Now that we're at
home all the time because of the MCO, it's no surprise we 're consuming more
electricity than we normally do, especially in households with multiple people.

TNB view that household electricity consumption will increase as they use
electricity more frequently or for longer than usual during the MCO. To help ease the
burden on their customers, especially those in lower income, a six-month discount for
domestic consumers for electricity consumption was announced as part of the
government's stimulus package from April 1 to Sept. 30, 2020. There is no need for
household consumers to apply for the discount as it will automatically be reflected in
the electricity bill. During MCO, customers can access a copy of their bill online via
the myTNB portal or myTNB app, which can be downloaded free from the Google

36
 Play Store and Apple App Store. TNB urges customers to use energy wisely and with
minimum waste, so that they can get the most out of the discounts. TNB has posted tips
on wise and safe energy usage on its website at mytnb.com.my to help customers
manage the need for electrical equipment without wasting electricity.

4.1.6 Legal

Keeping in mind the nation's interest, the government has aggressively pursued
its ultimate objective and passed two pieces of legislation to amend the current
Electricity Act and provide for the development of a new Tenaga Nasional Berhad
(TNB) company, purposefully replacing the NEB (Successor Company Act). Datuk Hj.
Ibak bin Abu Hussein became the last Deputy Chairman and General Manager of the
NEB and the first Managing Director of TNB.

On 1 September 1990, Prime Minister Dato Seri Dr. Mahathir bin Mohamad
officially proclaimed TNB as the heir and successor to NEB. TNB became a private
company wholly owned by the government; on the same day, Tan Sri Dato Haji (Dr)
Ani bin Arope was appointed Chairman.

Being the only supplier of electricity in Peninsular Malaysia, TNB has a general
statutory duty to supply electricity to anyone who has requested and applied for the
same. TNB's relationship with customers is regulated by contract as well as by the 1990
Electricity Supply Act ("ESA 1990") and the 1990 Supplier Supply Regulations ("LSR
1990"). Although TNB has a general statutory duty to provide electricity upon request,
there are circumstances in which TNB can justifiably refuse to do so. There are
essentially three (3) main grounds from which TNB is allowed to interrupt the
electricity supply, namely:

• Non-payment of bills;

• Non-payment of deposit or insufficient deposit balance; and,

• Dishonest use of electricity.

Under Section 29 of the Electricity Supply Act 1990, amongst others, provides
for a special agreement to be made between TNB and a consumer stipulating special

37
 terms and conditions of supply including tariff. Tariffs for Top Up & Standby Services,
Bulk Supply for Distribution Licensees, Thermal Energy Storage installations, Sunday
Tariff Rider / Off-Peak Tariff Rider and island supply are one of the terms of the special
agreement.

4.2 Porter’s 5 Forces

4.2.1 Bargaining Power of Suppliers

TNB is mainly electricity power that has in Malaysia. TNB monopolist in

electricity utility industry, for that customers basically don’t have many choices to pick
another electricity utility. So, customers choose TNB to supply electric to their house
for daily activities. Buyer for electricity appliances comprise of domestic, commercial
and industrial customers, including small and medium sized Enterprises and also larger
corporation. Customer will expose to the wide range of a choice and their Behaviour
pattern will influence their choice of appliances. It would be difficult for TNB to
established brand loyalty or shop loyalty to start with. Thus, there are significant
bargaining power for the customers in this industry.

For instance, if there are two companies supplying electricity to household and
industry in Malaysia, TNB and X Company. With the existence of two companies, it
has created a competitive market and given a choice for consumers to choose. From a
consumer’s perspective, consumer will definitely preferred company offering the same
goods and services with lower price and better quality. Moreover, the increase of
number of transmission towers of different companies makes it difficult to track and
direct the cable to each household according to the suppliers they have chosen. To solve
this issue, government came out with the restriction to limit any parties from
interrupting this industry by providing license only to TNB as the country electricity
supply monopolist. No doubt to say, government intervention and imposition of
regulation have made entry of new firms unattractive and almost impossible.

However, TNB do not practice price discrimination to torture consumer but set
a fixed price to all consumers based on their monthly usage. In this case, even though
the customers are large in number and able to purchase a large portion of the industry’s

38
 output, but their switching cost is high as there is no option for them to choose.
Customer is unable to pose any threat to integrate backward into the seller’s industry.

4.2.2 Bargaining Power of Customers

Bargaining power of supplier is the ability of supplier to put pressure on

buyers which is companies by increasing the prices of material (input) and at the
same time try to influence the competitors to do the same things for their benefits
whether for profitability and even for competitiveness (Kabeyi, 2018).
Furthermore, the factor that influences the power of suppliers are come from the
power of buyers that demanding for better quality and service.

Tenaga Nasional Berhad (TNB) is the largest electrical distributor in

Malaysia. By monopolizing the industry, TNB is prepared well to become more
manageable in this industry because they have their own raw material. That means,
TNB no need the external supplier to supply their material to supply power to
household industry in Malaysia. It shows the bargaining power of supplier is low
because they are not affecting in any threats that will come from suppliers. It also
put a barrier by government of Malaysia by do not let any company to compete
with TNB. By dominate the both side, which is supplier and buyer, TNB will spent
to improve the technology to give the best service for consumers in other that give
an impossible way to new company to compete them.

Thereby, TNB can control all the prices of raw material until final product
(electric) and as a monopoly type of company, consumers have no power for
choosing in goods to substitute product.

4.2.3 Competitive Rivalry

The intensity of rivalry among competitors in an industry refers to the extent to

which firms within an industry put pressure on one another and limit each other’s profit
potential. If rivalry is fierce, then competitors are trying to steal profit and market share
from one another. As a result, this reduces profit potential for all firms within the
industry. According to Porter’s 5 forces framework, the intensity of rivalry among
firms is one of the main forces that shape the competitive structure of an industry.

39
 Porter’s intensity of rivalry in an industry affects the competitive environment
and influences the ability of existing firms to achieve profitability. For example, high
intensity of rivalry means competitors are aggressively targeting each other’s markets
and aggressively pricing products. This represents potential costs to all competitors
within the industry.

High intensity of competitive rivalry can make an industry more competitive

and thus decrease profit potential for the existing firms. In comparison, low intensity
of competitive rivalry makes an industry less competitive. It also increases profit
potential for the existing firms.

It shows that the intensity of rivalry is low based on one of the following occurs,
which is when the competitors are few. In this case, TNB are the largest electrical
distributor in Malaysia and monopolizing the industry. The government also came out
with the restriction to limit any parties from interrupting this industry by providing
license only to TNB as the country electricity supply monopolist. So, low intensity of
competitive rivalry makes an industry less competitive. It also increases profit potential
for the existing firms like Tenaga Nasional Berhad (TNB).

4.2.4 Threat of New Entrants

Entry of new entrant depends on the barriers to entry and the barriers to exit in
that industry. There will be higher difficulty to enter a competitive environment
industry when there are barriers. This force considers easy or difficult for competitors
to join the marketplace in the industry. The barriers to entry include absolute cost
advantages, access to inputs, economics of scale and well-recognized brands (Martin,
2018). When more companies compete for the same market share, profits start to
decrease. It is essential for existing organizations to create high barriers to enter the
new entrants (Jurevicius, 2013).

TNB being a sole utility company in Peninsular Malaysia is definitely a

monopoly in that particular market. Thus, only one company provide electric power in
a region is more efficient rather than few electric companies. Therefore, the threat of
new entrance into the electricity utilities industry is low due to the high barrier to enter

40
 the industry. This is because government in Malaysia do not grant any licenses or
accept any other new companies into the market. As the barriers to entry in the electrical
power industry is high, there will be likely any newcomer will need high capital
investment in Research & Development (R&D), technology and marketing in order to
be able competing with TNB that had been around in the industry for a long time. In
the year of 2011, Tenaga Nasional Berhad already had six thermal power stations and
three major hydroelectric power generating plants in peninsular Malaysia. In addition,
TNB reduces transmission loss up to 2.8% by introducing low loss conductor as of year
2011. The new entrants may be absence of proprietary technology to turn into a player
in the industry. Hence, the threat of new entrants improbable as the startup cost of
entering the industry needs a lot of investment.

Hence, TNB is the monopoly firm that provides electricity, and this is the reason
why consumers are given no choice but to utilize electricity from TNB. Economies of
scale of TNB will stop other firms from joining and contending with TNB because
TNB is the primary electricity provider. TNB had monopoly Malaysia’s electrical
power industry for more than 60 years. Therefore, it has gained trust and loyalty from
its customers especially in peninsular Malaysia. In order to earn customers trust, new
entrants will take very long term, or they should come out with some innovative plan.

4.2.5 Threat of Substitutes

According to Accounting Tools (2018), the threat of substitutes is the

availability of other products that a customer could purchase from outside an industry.
The competitive structure of an industry is threatened when there are substitute
products available that offer reasonably close benefits match at a competitive price. In
this case, price points are limited by the prices at which substitutes are available,
thereby limiting the amount of profitability that can be generated within an industry.

As for Tenaga Nasional Berhad (TNB), we already knew that it is one of the
biggest power suppliers that monopoly the power supply all over Peninsular Malaysia,
where Malaysia government is the major shareholders of the company through Ministry
of Finance. TNB have collaboration with Sabah Electricity Sdn Bhd (SESB) and
Sarawak Electricity Supply Corp (SESCo).

41
 IPP Location Capacity (MW)
YTL Power Generation Paka, Terengganu 808

Pasir Gudang, Johor 404

Segari Energy Ventures Sdn Lumut, Perak 1303

Bhd
Powertek Sdn Bhd Alor Gajah, Melaka 440

Port Dickson Sdn Bhd Tanjung Gemuk, Port 440

Dickson

Pahlawan Power Sdn Bhd Tanjung Keling, Melaka 334

Genting Sanyen Power Sdn Kuala Langat, Selangor 720

Bhd
Table 14: Competitors in the same industry

IPP are independent power producers that contribute to TNB power

distribution around Peninsular Malaysia. Although, TNB is dominating the power
supply market, with transmission and distribution equipment from foreign gigantic
companies, such as ABB, Siemens and Samsung, the probability threat of substitution
is still strong enough to overcome the domination of TNB in power supply market.
IPP’s who contributing to power supply of TNB, can be an indirect competitor in short
term and can be a direct and strong competitor in future long run.

In conclusion, the threat of substitution exists for TNB, but the percentage is
too small, because TNB had hold the majority of Total Addressable Market Size of
power supply in Peninsular Malaysia.

42
5.0 SWOT ANALYSIS
STRENGHT
1. TNB is no doubt is the largest utility company in Malaysia
and Southeast Asia's largest publicly listed power company
with assets worth MYR 99.03 billion. It serves more than 8.4
million customers throughout Peninsular Malaysia (except for
Sarawak) and through Sabah Electricity Sdn Bhd in the eastern
state of Sabah.
2. Besides that, TNB also have advance equipment, stable and
efficient power plant which make them to become one of
company strength. According to Chairman Tan Sri Leo Moggie
(2019) throughout the years TNB has grown from strength to
strength especially during the period of demand boom for
electricity supply since 1980s. Even though with economic
growth, and electricity demand went up in tandem but TNB
remains steadfast in fulfilling its role as the only electric
distributor in the country. Therefore, this factor plays a major
role in becoming the top electricity producer in Malaysia, hence
get supported by the government and policy.
3. TNB has immense support from Federal Government of
Malaysia. This is due to TNB’s role as Malaysia’s principle
energy provider and the government’s indirect majority
ownership in the utility.
WEAKNESSES
1. TNB produce large amounts of greenhouse gas emissions
as part of its day-to-day operations. The use of coal to
generate electricity is a rather carbon-intensive process
because for every tone of coal burnt, close to three tons of
carbon dioxide (C02) are emitted. Malaysia burns around
56,000 tons of coal each day through its seven coal-fired
power plants, two of which are operated by national utility
company, Tenaga Nasional Bhd (TNB). CO2 is one of the
greenhouse gases that trap heat in our atmosphere, causing
it to warm up like a greenhouse. According to TNB, about
26% of the country’s total CO2 emissions came from the
electricity and energy industry sector, and this is chiefly
using fossil fuels like coal, gas and distillate. The present
heavy reliance on coal is due to its relatively low price
compared to alternatives such as natural gas (Yew Choong,
2012).
2. The reliance exclusively on Malaysian market is the
shortcomings of TNB. Even though it has a solid portfolio
and is the monopoly in Malaysia, it is not active regionally
and its primary source of revenue comes from Malaysia
only.
43
4. TNB has a cover wide geographical area in Malaysia as it
owns approximately 60% of all Peninsular Malaysia’s
generation assets and approximately 55% of all Malaysian
generation.
5. TNB is a monopoly in the electricity market. TNB is the one
and only leading electricity company in Malaysia. Tenaga
Nasional Berhad has been providing Malaysia’s household and
outlets electricity ever since the year 1949. This group own a
significant portion of the group’s regulated assets and generate
most of the group profitability as it will maintain its single buyer
status.
OPPORTUNITIES
1. TNB can invest in another source of power generation such
as wind power generation as in peninsular Malaysia, Mersing,
Johor and Kuala Terengganu have been identified as high wind
areas while in East Malaysia, Kudat and Sabah are the highest
wind potential areas. Onshore wind power in Malaysia could
reach up to 1.5 MW (Zaharim et al., 2017). Another source is
solar power generation as Malaysia has among the highest
potential for solar uptake as it is strategically located near the
equator therefore TNB can opt for solar generation (Gomesh,
Daut, Irwanto, Irwan & Fitra, 2013). The worldwide pattern in
sustainable power source is so fast that TNB should make a
move right now to take advantage of close future and move
away from fossil fuels.
3. TNB has small return on equity due to the economies of
scale and scope. Too much dependent on Malaysian market
has effects on the return on equity as of the limited volume
and the scope which is covering it doesn't have the intensity
of which it has in Malaysia as the market leader and a
monopoly company in the other parts of Southeast Asia.
4. TNB also has the record of occurring technical issue in
high electricity bills. They stated that it had experienced
technical issues from May 15 to 20, 2019 in its billing
system causing consumers to complain about the sudden
spike in electricity bills recently. Not only that, recently in
the second week of June 2020, the problems occur again.
Negligence and technical fault on the part of TNB were two
among three reasons why electricity bills spiked for certain
consumers.
THREAT
1. Rising cost in production can be the biggest threat for TNB
to continue its production. As currently TNB power plant
mostly depend on coal, the rising price of coal is worrisome.
In 2017, TNB once said the actual imbalance cost for the
January to June 2017 period of RM523.23 million, resulted
in a surcharge of 1.02 sen/kWh, which was basically
because of rising coal prices in the international market and
the impact of foreign exchange rates on the ringgit. The
price of coal has increased substantially in 2016 with
Australia’s Newcastle coal more than doubled in 2016 to
almost US$110 per tonne in November, before slipping to
about US$80.
44

2. TNB has less threat of new entrant in the industry. TNB had
monopoly Malaysia’s electrical power industry for more than
60 years. Therefore, it has gained trust and loyalty from its
customers especially in peninsular Malaysia. In order to earn
customers trust, new entrants will take very long term, or they
should come out with some innovative plan.
3. There also other opportunities that TNB can grabs in the future
which to reduce the emission of Carbon Dioxide (CO2). As
the present heavy reliance on coal is due to its relatively low
price compared to alternatives such as natural gas, TNB needs
regular efforts in increasing its plant efficiency by exploiting
advanced technology, besides the establishment of Nuclear
Energy unit for future energy require mentor the low carbon
initiative is highly supported by the government which plans to
reduce CO2 emission. In this regard, researchers at TNB
Research (TNB’s research arm) are experimenting with marine
algae cultivation as a means of biologically capturing (or fixing)
CO2 (Yew Choong, 2012).
2. In 2020, the world economic is in recession due to the
pandemic Covid-19 which poses threat to TNB as they are
facing demand risk. During the Movement Control Order
due to Covid-19 outbreak, energy demand plummets as
most offices, malls, hotels, businesses, and factories shut
down, while household electricity consumption increases
albeit with lower average tariff incurred compared with
other sectors. About 79% of TNB’s sales in Peninsular
Malaysia come from industrial and commercial customers.
This outbreak also had greatly impacted TNB as their shares
have dropped 4.22% since the start 2020, compared to the
11.15% decline in the benchmark KLCI in the same period.
3. As TNB is a power generation company, they are bound to
environmental regulation. In other words, TNB must
comply with all the laws and regulation and committed to
continual improvement of environmental performance
whilst responsibly providing safe, efficient and reliable
supply of electricity. However, it might become a threat for
them if later, in the future TNB had found a new way to
develop or a new sustainable power sources but it was
against the environmental regulation, they might not be able
to develop it. Even worse, if TNB has neglected of what they
had agree before, they might be pressed charge on it.
45
6.0 STRATEGIES PROPOSE
6.1 TOWS Analysis
STRENGTH
S1: Largest utility company in Malaysia
S2: Have advance equipment, stable and
efficient power plant
S3: Cover wide geographical area in Malaysia
S4: Monopoly in the electricity market
OPPORTUNITIES SO Strategy
O1: Invest in another source of power 1. Use the monopoly power to expand the
generation business by increasing the production.
O2: Less threat of new entrant in the (S1, S3, S4, O2)
industry 2. Try to extend the brand quality by
O3: Reduce the emission of Carbon investing in potential market. (S2, O1)
Dioxide (CO2). 3. Introduce smart meters and advanced
metering infrastructure facilities. (S2,
O1)
WEAKNESSES
W1: Produce large amounts of greenhouse
gas emissions as part of its day-to-day
operations.
W2: Reliance exclusively on Malaysian
market
W3: Small return on equity due to the
economies of scale and scope
W4: Technical issue in high electricity bills
WO Strategy
1. Decrease the environmental pollution.
(W1, O3)
2. Venturing into new businesses and
opportunities beyond their
conventional business and territory.
(W2, O2)
3. Implemented Electricity Prihatin Aid
for 3 months to those users who
entitled free electricity with bills of
RM77 and below. (W4, O1)
46
THREAT
T1: Rising cost in production and
unexpected event.
T2: World economic recession
T3: Bound to environmental regulation.
ST Strategy
1. Launch discount in low demand period.
(S1, S3, S4, T2)
2. Improve the sustainability of the
industry. (S2, T3)
3. Increase the cooperation with external
organizations for the raw materials
benefit. (S1, S2, S3, T1, T2)
WT Strategy
1. Improve management & operational
services. (W4, T1)
2. Develop the technology that using
energy input like nuclear or wind.
(W1, T1, T3)
3. Expand the power plant outside the
region with cooperation of external
companies for penetrating the foreign
market. (W2, T3)
47
SO Strategy
1. Use the monopoly power to expand the business by increasing the production. (S1,
S3, S4, O2)

As we know Tenaga Nasional Berhad (TNB) is one of the monopoly company in

Malaysia that provides the electric supplier direct to consumers. TNB also play action as
price market which means they can set the price or control the price of electricity supply
either the price become higher or lower. Even though when the price keeps increasing the
consumers would continue to purchase electricity. Therefore, TNB can use their strength
as the monopoly company to expand the business by increasing their production. If there
are strong companies would have enough capital to build the business, so they cannot
enter the electricity industry easily because they need to compete with TNB since TNB
have Cover wide geographical area in Malaysia.

2. Try to extend the brand quality by investing in potential market. (S2, O1)

According to the CEO of TNB, he did mentioned about the plan to extend their
business in Middle East country since there are electricity demand in Turkey and is
expected to rise referring to Turkish-based Gama Enerji AS. Their company sees the asset
itself is good in terms of generation plant quality and water concession than the one they
have in Jordan. Moreover, touching on India, the CEO said investments there has always
shown good potential for growth and will continue to intensify utilisation of electricity in
the country. TNB sees some increase in the entity through which they want to develop
projects while addressing regulatory challenges there.

3. Introduce smart meters and advanced metering infrastructure facilities. (S2, O1)

In 2020, TNB already have advance equipment, stable and efficient power plant to
provide an electivity for their consumers in wide geographical area in Malaysia.
However, in order to become one of the top utility players globally by 2025 TNB decide
to invest into ‘Grid of the Future’ technologies. The investment will include advanced

48
 metering infrastructure (AMI) and grid automation, which are expected to contribute to
further advancements in network reliability and efficiency. So, with this the Advance
Metering Infrastructure (AMI), or simply known as the smart meter almost every
household in Peninsula Malaysia will be able to track their power usage and patterns.

WO Strategy
1. Decrease the environmental pollution. (W1, O3)

TNB Produce large amounts of greenhouse gas emissions as part of its day-to-day
operations. An increase in greenhouse gas (GHG) emissions, and therefore in carbon
footprint, is the primary event associated with climate change that has led to global
warming. Therefore, TNB decide to invest in various renewable energy projects. TNB
commenced work on their first Large Scale Solar (LSS) farm in Sepang, Selangor.
This project is to decarbonize their economy by reducing CO2 emissions from power
generation by an estimated 64,000 tonnes/year. IN Malaysia Biomass and Biogas are
fuel-type of renewable energy that can be used to replace fossil fuels while hydro and
solar energy are naturally-occurring the Renewable that can be converted into energy.
Renewable energy can benefit in
• Reduce greenhouse gases emission as it is carbon-neutral
• Clean energy for the environment
• Complement fossil fuel energy
• Infinite supply.

2. Venturing into new businesses and opportunities beyond their conventional business
and territory. (W2, O2)

The main endeavor of TNB when venturing into new businesses is to maintain fair
shareholder value to ensure continued investments in the system. In addition, over the past
few years, TNB has expanded its international footprint, having established its name in
countries such as Pakistan, Saudi Arabia, India, Turkey and the United Kingdom, making
TNB one of the largest electricity companies in Asia. Referring to their Grid Asset

49
 Investment Plan for the upcoming RP3, from 2021-2023, TNB want to focus and invest
more on six important areas:
1. Grid system expansion to cater for system expansion and mitigation of system
constraints
2. Refurbishment of existing network infrastructure
3. Risk reduction through safety and environment compliance
4. Establishing self-healing grid that will allow for immediate and reliable
mitigation of system disruptions
5. Data analytics and digital intelligence to drive operational excellence
6. Smart tools for more efficient maintenance work

3. Implemented Electricity Prihatin Aid for 3 months’ to those users who entitled free
electricity with bills of RM77 and below. (W4, O1)

According to the Minister of energy and natural resources, Shamsul Anuar Nasarah
has said that domestic users who are using electricity less than RM77 or 300 kilowatt hours
a month have a right to free electricity from April to June. As we aware, in the wake of
outcry over a sudden spike in electricity charges since the movement control order (MCO)
was implemented on March 18 due to sudden increase in electricity charges. Not just that,
TNB has decided not to disconnect electricity supply until September. Therefore,
consumers do not have to worry about any electricity cuts as a result of the impact caused
by Covid-19. In the nutshell, TNB also accept installments for bills until December because
they want to reduce the burden for B40 and M40 groups that facing financial limitation
along MCO period.

ST Strategy

1. Launch discount in low demand period. (S1, S3, S4, T2)

In 2020, TNB should launch a discount to counter the low demand due to economic
downturn as the world are having the pandemic Covid-19. Although TNB is the monopoly
utility company in Malaysia, they still affected by the low demand as the industrial and

50
 commercial sector has stop their operation due to the Movement Control Order (MCO) by
Malaysia government. Approximately 79% of Peninsular Malaysia's TNB revenues come
from industrial and commercial customers. TNB views that household electricity
consumption will increase as they use electricity more frequently or for longer than usual
during the MCO. Therefore, by launching a discount can keep their customer at home to
use without worry.

2. Improve the sustainability of the industry. (S2, T3)

As TNB is a power generation company, they are bound to environmental

regulation. In other words, TNB must comply with all the laws and regulation and
committed to continual improvement of environmental performance whilst responsibly
providing safe, efficient and reliable supply of electricity. With all the advance equipment,
stable and efficient power plant, TNB can improve the sustainability of the industry by
minimize the environmental impact wherever they operate. In 2017, TNB’s Green Energy
Development Fund was implemented by the Sustainability Development Committee, for
the purpose of seeding sustainability related initiatives.

3. Increase the cooperation with external organizations for the raw materials benefit.
(S1, S2, S3, T1, T2)

TNB have ownership to scarce raw material and this is effective way to making it no other
firm can have access to scarce inputs to produce the output. In this situation, TNB have
access to coal to produce their output. However, it can barrier to TNB if in the future the
TNB’s raw material will decrease and face the problems to producing the output. This is a
good step to TNB to do cooperation with other firm who also has the access to coal. This
way can solve the long-term problems that TNB will face.

WT Strategy

1. Improve management and operational services. (W4, T1)

Operations management and services has the functional responsibility for

producing the services of an organization and providing them directly to its customers.
TNB has the record of occurring technical issue in high electricity bills which make the

51
 customer to complain about the sudden spike in electricity bills. As a part to increase the
customer satisfaction, TNB should improve their management and operational services.
They might need to switch al the old meter to smart meter in all homes in Malaysia. Smart
meter will enable their customer to manage their electricity better by monitoring what they
are using.

2. Develop the technology that using energy input like nuclear or wind. (W1, T1, T3)

The volatility of raw material for coal will give impact to TNB in the future to
produce electric and satisfying Malaysian with their service. By using this coal, it also gives
impact to earth when it resulting the high greenhouse gas emission. TNB can take the step
further by exploring the technology in more earth-friendly way. TNB can explore for using
the nuclear energy and wind to produce as their input to generate the electric energy. TNB
can make a step over by collaborate with USA’s firm where USA is the largest producer
who making the nuclear electricity.

3. Expand the power plant outside the region with cooperation of external companies
for penetrating the foreign market. (W2, T3)

When the exclusivity products of TNB only for Malaysians, their products will only
applicable to Malaysians and their market will not widespread. To expand their market and
shareholdings, TNB should take steps to do negotiations to builds the power plants and
supply the electricity to foreign country especially to the third world countries. This move
will expand the market for TNB and strengthen their credibility.

52
6.2 Recommendation Strategy
6.2.1 Electricity theft cases

Electricity theft is the biggest crime that robs TNB of millions of ringgit, which
could otherwise be invested in extending, reinforcing and also modernizing the power
supply or distribution system. Due to this issue, TNB suffered a huge loss even though
being a sole utility firm in Peninsular Malaysia and the largest publicly listed power
company in Southeast Asia. As for June 2019, TNB has lost RM106 million from
electricity theft involving 457 cases in the peninsula, with Selangor itself recording the
highest number at 370 cases.

Therefore, as in S2O1 TOWS strategy which is introducing smart meters and

advanced metering infrastructure facilities. Thus, TNB can installing Smart Meter in
all homes in Malaysia. Smart Meter is the efficient use of energy which will result in
energy conservation hence less money being spent on electricity bills. This reduces
energy costs which lead to lower operating costs and therefore increase the company’s
profit. For that reason, the company should supply fewer power plants, transmission
and distribute system upgrades and construction. To achieve energy efficiency which
means that save energy and reduce cost of operations, technology strategy of the
company should become increasingly prominent with the application of high efficiency
motors, lighting, etc. By changing the old meter to Smart Meter can avoid the occurring
technical issue in high electricity bills which make the customer to complain about the
sudden spike in electricity bills.

TNB also recommended to give awareness to the citizen about safety tips. TNB
are committed to serving us a better and part of that is caring about our safety. As the
customers, we also should take note of their safety tips. We need to be informed about
the safety to protect ourselves and those around us. This awareness will make Malaysia
citizen will be more careful and concern about danger if we take this simple. We do not
want any risk to our family and us. Safety guidelines when we in flood condition is
important, because Malaysia is always getting natural disaster such as flood. So, this is
important to us to know more about safety tips from TNB.

53
6.2.2 Technical issues in high electricity bills

Tenaga Nasional Berhad (TNB) has stated that it had experienced technical
issues from May 15 to 20, 2019 in its billing system causing consumers to complain
about the sudden spike in electricity bills recently. Negligence and technical fault on
the part of Tenaga Nasional Bhd were two among three reasons why electricity bills
spiked for certain consumers, but the government is having none of it (The Star
Online,2019).

For the recommendation, as stated in S2O1 TOWS strategy, which is

introducing smart meters and advanced metering infrastructure facilities. Thus, TNB
can installing Smart Meter in all homes in Malaysia. Smart Meter is the efficient use
of energy which will result in energy conservation hence less money being spent on
electricity bills. This reduces energy costs which lead to lower operating costs and
therefore increase the company’s profit. For that reason, the company should supply
fewer power plants, transmission and distribute system upgrades and construction. To
achieve energy efficiency which means that save energy and reduce cost of operations,
technology strategy of the company should become increasingly prominent with the
application of high efficiency motors, lighting, etc. By changing the old meter to Smart
Meter can avoid the occurring technical issue in high electricity bills which make the
customer to complain about the sudden spike in electricity bills.

As stated in W4T1 TOWS strategy, which is improving the management and

operational services, it is recommended for TNB to make an improvisation of their e-
Service facilities. The advancement in technology has indicated that most bills must be
paid online. The e-service facilities such as the user interface screen or website speed
or apps are the element that contributes to customer satisfaction when bills are paid.
This is important in brand building and to earn trust from customers. TNB also need to
make sure that the right assistance is always provided. There must have trained
customer service agents to answering and resolving all types of account queries for the
customers who wish to make enquires about their bills and electricity accounts.
Improvisation with the consumer in this first-hand interface would improve customer
relationship management.

54
 With the same TOWS strategy, TNB are recommended to improve awareness
how to use e-services facility. According to this Covid-19 crisis, TNB has launch
MyTNB application. The application can be used to track electricity consumption and
pay electricity bills. TNB chief retail officer Megat Jalaluddin Megat Hassan said
myTNB provides a safer alternative for 9.28 million TNB customers since all 125
Kedai Tenaga outlets and self-service payment kiosks nationwide are temporarily
closed for bill payments during the MCO period. This alternative will help Malaysia
citizen to cut their time to go to pay their bills. And the important is TNB have to make
advertisement to get people more know about this e-services facility.

6.2.3 TNB tax dispute

In November 2019, TNB said it had received a tax bill of RM1.43 billion for
2015, RM1.24 billion (2016) and RM1.3 billion (2017), bringing the total to RM3.98
billion from Inland Revenue Board (IRB) or familiar with Lembaga Hasil Dalam
Negeri (LHDN). This is not the first time TNB has been slapped with a tax bill by the
IRB (The Daily,2019). On Nov 23, 2015, the company received additional assessment
notices for 2013 and 2014, for RM985.57 million and RM1.08 billion respectively by
the tax authority (The Daily,2019).

As for the recommendation, as in TOWS strategy, W1T1T3 which is

developing the technology that using energy input like nuclear or wind and W2T3
expanding the power plant outside the region with cooperation of external companies
for penetrating the foreign market. We recommended TNB to venture into energy
related investments. TNB can invest in another source of power generation such as
wind power generation as in peninsular Malaysia, Mersing, Johor and Kuala
Terengganu have been identified as high wind areas while in East Malaysia, Kudat and
Sabah are the highest wind potential areas (Gomesh, Daut, Irwanto, Irwan & Fitra,
2013). Onshore wind power in Malaysia could reach up to 1.5 MW. Another source is
solar power generation as Malaysia has among the highest potential for solar uptake as
it is strategically located near the equator therefore TNB can opt for solar generation.
The worldwide pattern in sustainable power source is so fast that TNB should make a
move right now to take advantage of close future and move away from fossil fuels.

55
6.2.4 Demand risk due to Covid-19 outbreak

During the Movement Control Order due to Covid-19 outbreak, energy demand
plummets as most offices, malls, hotels, businesses, and factories shut down, while
household electricity consumption increases even with lower average tariff incurred
compared with other sectors. Some 79% of TNB’s sales in Peninsular Malaysia come
from industrial and commercial customers.

As in S1S3S4T2 in TOWS strategy, which is launching a discount in low

demand period. By launching a discount can keep their customer at home to use without
worry. We recommended TNB to give tips on how to save electric in our home just
like make auditing electric supply in home. This is can be done by examining the use
of electrical appliances that use a lot of electricity. Electricity bills should be consistent
with the use of electrical equipment. Switch off the switch and remove the plug when
the appliance is not in use. switch to fluorescent lamps for indoor lighting.

6.2.5 TNB shares drop

This Covid-19 outbreak had greatly impacted TNB for their business level as
their shares have dropped 4.22% since the start 2020, compared to the 11.15% decline
in the benchmark KLCI in the same period. For FY19 ended Dec 31, 2019, TNB made
RM4.53 billion in net profit from RM50.94 billion in revenue. About 85% of the
bottom line or RM3.84 billion came from the Regulated Asset Base (RAB) business.

Therefore, as in TOWS strategy, W1T1T3 which is developing the technology

that using energy input like nuclear or wind and W2T3 expanding the power plant
outside the region with cooperation of external companies for penetrating the foreign
market. We recommended TNB to venture into energy related investments. TNB can
invest in another source of power generation such as wind power generation as in
peninsular Malaysia, Mersing, Johor and Kuala Terengganu have been identified as
high wind areas while in East Malaysia, Kudat and Sabah are the highest wind potential
areas (Gomesh, Daut, Irwanto, Irwan & Fitra, 2013). Onshore wind power in Malaysia
could reach up to 1.5 MW. Another source is solar power generation as Malaysia has

56
among the highest potential for solar uptake as it is strategically located near the
equator therefore TNB can opt for solar generation. The worldwide pattern in
sustainable power source is so fast that TNB should make a move right now to take
advantage of close future and move away from fossil fuels.

57
7.0 CONCLUSION

As conclusion, in order to sustain in monopoly electricity business there were many

efforts need to be done in terms of looking at unprecedented scale of climate change, the world
is undergoing energy transition, from a carbon-intensive system towards a low-carbon and
renewables-driven future. The progress towards a sustainable energy future, however, needs
to be delicately balanced against the imperative to develop and sustain the well-being of the
nation and communities. Therefore, TNB remains steadfast in providing affordable electricity
to the public while improving service quality and minimising environmental impacts. As such,
they take the following approach to address the energy trilemma such as upgrading
infrastructure to ensure the reliability of current and future electricity supply, optimising
system efficiency to provide affordable and fair tariffs also venturing and investing in
renewable energy and cleaner power assets.

Not just that, they also conducted materiality assessment workshop in FY2017 (ending
31 August 2017) to identify material sustainability matters that could have significant
economic, environmental and social impacts, both to their business and to their stakeholders.
As they recognise the urgency and significance of climate change towards the industry and
their business, they have redefined the “Greenhouse Gas (GHG) Emissions” material matter to
“Climate Change”, as approved and endorsed by the SDC. This is to reflect their progressive
efforts in line with the Government’s commitment to the Paris Agreement.

In parallel to Reimagining TNB’s transition towards Grid of the Future journey, TNB
is diligently implementing Advanced Metering Infrastructure (AMI), or also known as Smart
Meters to help improve our services efficiently and provide new customer experience through
digitalisation. This initiative aligns with TNB’s commitment towards Goal 8 of the UN SDG
and SPV 2030’s ST2 by driving productivity & digital innovation, and key economic growth
activities. Compared to the conventional electricity meter, smart meters are equipped with
additional digital and telecommunication facilities for two-way communication. Thus it
enables the smart meter to record customers’ electricity usage and automatically communicates
the information daily through various channels, primarily using Radio Frequency (RF) and to
a lesser extent Power Line Carrier (PLC) and Cellular Network technologies. All the
information will be available through myTNB mobile application and myTNB Portal (data

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down to 30 minutes interval), allowing customers to easily track their previous days’
consumption data. Through these applications, customers are empowered to manage their
energy consumption more efficiently, resulting in a reduction of electricity bills and carbon
footprint. TNB has set a target of installing 9 million smart meters across Peninsular Malaysia
in phases under the AMI initiative by year 2026. A total of 281,066 smart meters were
successfully installed primarily in Melaka and with limited numbers in Klang Valley as of
December 2019. Phase 2 of the initiative targets to install 1.2 million smart meters in selected
urban areas by 2020.

Last but not least, TNB strives to protect and conserve the environment in our
operations and decision-making in line with our commitment for continuous improvement of
environmental performance. Their company is not just focus on gaining profit but also
emphasize on protecting the environment which is known as one of their key priorities to
maintain business sustainability. The nature of their business requires them to utilise natural
resources, mainly fuel and water, on a large scale. These resources are essential to generate
electricity, and they are aware of the importance of managing their consumption not just for
business sustainability, but the impact that it has on the environment. In addition, another
TNB’s key initiative in uplifting marginalised youths is the Dermasiswa My Brighter Future
(MyBF) under YTN. This programme was established to promote equitable access to tertiary
education, particularly for families in the B40 bracket registered under the eKasih scheme. In
FY2019, MyBF has awarded scholarships to 3,564 students who are pursuing their tertiary
studies in Science, Technology, Engineering and Mathematics (STEM) as well as Technical
and Vocational Education and Training (TVET) subjects at seven (7) public universities,
community colleges and polytechnic institutions in Malaysia. The MyBF scholarship covers
tuition fees, boarding and living expenses throughout the duration of their studies. This enables
students to have some financial security, allowing them to focus on their studies and future
careers. They believed this kind of CSR able to give back to the society since all this while
society had helped them in their business.

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8.0 REFERENCES

Journal

Gomesh, N., Daut, I., Irwanto, M., Irwan, Y., & Fitra, M. (2013). Study on Malaysian's Perspective
Towards Renewable Energy Mainly on Solar Energy. Energy Procedia, 36, 303-312. doi:
10.1016/j.egypro.2013.07.035

Website

Aziz, A. (2020). How TNB weathers through low power demand. Retrieved 26 June 2020, from
https://www.theedgemarkets.com/article/how-tnb-weathers-through-low-power-demand

Core business. (2020). Retrieved 9 May 2020, from https://www.tnb.com.my/about-tnb/our-

business/#

Distribution Division. (2020). Retrieved 10 May 2020, from https://www.tnb.com.my/about-

tnb/our-business/core-business/distribution-division/

FMT News. (2020, January 1). Energey commission fines TNB RM 3.6 mill for high electricity
bills. Retrieved from FMT News:
https://www.freemalaysiatoday.com/category/nation/2020/01/22/energy-commission-
fines-tnb-rm3-6-mil-for-high-electricity-bills/

Msn News. (2019, May 31). TNB blames ‘technical issues’ for higher electricity bills. Retrieved
from Msn News: https://www.msn.com/en-my/news/national/tnb-blames-technical-issues-
for-higher-electricity-bills/ar-AACcj1h?li=AAaD1A0

The Daily. (2019, December 12). High Court grants TNB stay on RM4 billion tax bill from IRB.
Retrieved from The Daily: https://www.thesundaily.my/business/high-court-grants-tnb-
stay-on-rm4-billion-tax-bill-from-irb-ED1757754

The Daily. (2019, December 2). Inland Revenue Board’s RM3.98 billion additional tax claim.
Retrieved from The Daily: https://www.thesundaily.my/business/tnb-HF1700797

The Star Online. (2019, May 5). Negligence among TNB faults. Retrieved from The Star Online:
https://www.thestar.com.my/news/nation/2019/05/29/negligence-among-tnb-faults/

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The Star Online. (2019, December 12). TNB gets interim stay order. Retrieved from The Star
Online: https://www.thestar.com.my/business/business-news/2019/12/12/tnb-gets-interim-
stay-order

The Star Online. (2011, July 2). TNB loses RM500mil to electricity theft. Retrieved from The Star
Online: https://www.thestar.com.my/news/community/2011/07/02/tnb-loses-rm500mil-to-
electricity-theft

Annual Report

TNB Annual Report. (2017). Retrieved 11 May 2020, from

https://www.tnb.com.my/assets/annual_report/TNB_Annual_Report_2017.pdf

TNB Annual Report. (2018). Retrieved 11 May 2020, from

https://www.tnb.com.my/assets/annual_report/TNB_Annual_Report_2018.pdf

TNB Annual Report. (2019). Retrieved 11 May 2020, from

https://www.tnb.com.my/assets/annual_report/TNB_Annual_Report_2019.pdf

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