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Tenaga buys 80% stake in two U.K. renewable firms

Acquisition to help boost company's foreign portfolio as part of broader goal

Tenaga Nasional headquarters in Kuala Lumpur

KUALA LUMPUR (Nikkei Markets) -- Tenaga Nasional Bhd. said Thursday it has acquired 80% stake in two renewable energy companies in the U.K. for 77.37 million pounds ($106.37 million) as Malaysia's national power company expands its overseas portfolio to boost earnings.

The acquisition of GVO Wind and Bluemerang Capital marks Tenaga's maiden foray into onshore wind sector in the U.K. The two companies own the largest feed-in tariff wind portfolio in the U.K., comprising 53 medium wind turbines with combined capacity of 26.1 megawatts.

"This acquisition will strengthen TNB's RE portfolio to its asset base and enhancing technical and commercial insights in RE market space," Tenaga Chief Executive Azman Mohd said in a statement. "TNB looks forward for future investments that will bring synergy to the company."

The deal comes as Tenaga grapples with slowing growth in its home market where the company has near monopoly in electricity distribution. To boost revenue from non-regulated business, Tenaga Nasional is seeking foreign acquisitions and grow other businesses such as maintenance services.

Tenaga now owns an international renewable energy portfolio with total net installed capacity of 280 mega-watts that was bolstered by last year's acquisition of Vortex Solar Investments, which owns 24 solar farms in Britain, and purchase of other assets in Turkey and India.

"The acquisition could benefit Tenaga's portfolio and technology in longer run," said BIMB Securities' analyst Annuar Rahman. Compared to traditional power assets, the wind sector has relatively lower risk and better prospects within U.K.'s renewable energy push, he said.

Tenaga said revenue from the latest acquisition is equivalent to 85 mega-watts wind projects or 150 MW solar farms. At least 97% of the portfolio's revenue is contracted through the U.K. government-backed renewable feed-in-tariff support mechanism and guaranteed export tariff.

The company has also signed Longspur Capital, a power infrastructure asset manager and investor, to manage the acquired wind portfolio and source new renewable investment opportunities for Tenaga in the U.K., it said.

Tenaga produced a total 14,510.9 mega-watts of power in the last fiscal year with coal and natural gas making up 78% of its overall capacity. Renewable sources only make up less than 2% of its generation capacity. The remainder comes from oil and hydel sources.

As per the company's stated goals, its longer-term aim is to grow earnings before interest and tax to 20 billion ringgit by 2025. Under the 10-year program, Tenaga is targeting to build a portfolio of international assets that would account for 20% of its earnings.

Shares of Tenaga ended Thursday unchanged at 15.70 ringgit apiece, while the benchmark FTSE Bursa Malaysia KLCI closed 0.3% higher.

--Jason Ng

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