How a new UK business is cementing the Malaysian utility’s renewable and ESG credentials. By Melissa Fitzgerald.
The UK has proved to be a fertile business destination for Malaysian utility Tenaga Nasional Berhad (TNB).
In less than five years, it has acquired and now operates roughly 400MW of renewable energy investments in the UK. This is why the company is now expanding its reach even further into Britain with the launch of a new venture.
Vantage RE is a clean energy investment and asset management company that will oversee and operate a suite of renewable assets in the UK and throughout Europe.
“This was a strategic move,” says newly appointed Vantage RE CEO Vian Davys, who adds that the company will also be an integral pillar of its environmental, social and corporate governance.
“My top priority is to support the broader ESG agenda of TNB,” explains Davys. “That goes to the heart of what we’re about, and for me, I think that means focusing on three things.
“Firstly, it’s about driving growth in renewable capacity here in the UK and Europe. Secondly, it’s about delivering our financial promises. Vantage RE is part of TNB’s International Assets Group, which has set a target of around 20% of the group’s operating profit from renewables by 2025 – Vantage RE plays a really important part in that strategy.
“Then the third area is how we go about executing our strategy in line with the values of TNB, and we also need to execute it by managing health, safety and the environment in a professional way.”
Criteria for new markets
Vantage RE’s tactics took shape when TNB was looking abroad for the best way to engage with other markets.
“We thought long and hard about this when we were developing the strategy for Vantage RE,” says Davys. “We looked at the depth and the liquidity of the market, the availability of assets, and we reflected on our existing portfolio.
“Currently, solar makes up about 93% of the installed capacity for our portfolio, so we recognize we needed to think about three things: diversification of technologies; diversification of revenue streams; and diversification of markets.”
According to Davys, Vantage RE’s current roadmap springs from several components, including the desire to increase capacity in assets supported by Renewable Obligation Certificates and Feed-in-Tarrifs – subsidy regimes he says the company knows very well.
Additionally, Vantage RE will attempt to diversify its portfolio with alternative revenue streams for its markets in utility-scale solar and onshore wind assets in the UK and broaden into Ireland, which is the initial base growth.
Davys says Vantage RE has strong growth potential in Europe for a number of reasons: “It has huge renewable energy growth targets, so lots of opportunities for us. Secondly, it provides a natural hedge in terms of energy production – if the wind isn’t blowing in the UK, the chances are it is blowing in Europe and the same for the sun. And finally, it allows us to diversify our revenue streams across a number of different countries.
Also, it allows us to have that continual growth because when one market is particularly growing another market might not be because the subsidy might not be available.”
He adds that the ideal approach is being able to play in a couple of different markets, which allows the opportunity for continual growth. “We’re not going to have a scattergun approach to our market entry into Europe.
We’re looking to go into one or two markets, and then grow our portfolio and our capability in that market and then build out from there.” Attention to detail This forensic attention to details is characteristic of TNB’s international expansion strategy, which has seen it enter India, Pakistan, Saudi Arabia, and Turkey as well as the UK.
TNB’s Chief International Officer, Shahazwan Harris, explains: “When we grow, it has to add value as well as leveraging of our existing capabilities and experience.
“So we won’t do a 20% investment into a market in South America, even though it’s a great market, because we don’t really have presence there. That’s where we started looking internally at our core strengths.”
Currently, two of those core strengths sit in the UK in the form of wind parks and solar farms, which produce approximately 400MW.
“We knew that the UK was a market that we wanted to focus on and grow,” says Harris.
Harris stresses that while TNB executives are keen to branch out into other countries, they are equally careful to not overreach their position. Yet that does not stop them from being highly ambitious.
“We wanted to prove to people we’re actually not just a Malaysian champion – we’re a global RE champion. We can bring this capability outside of Malaysia because, as a utility company, we understand other utilities and we understand the regulations.”
Harris explains that “in some cases, especially in Southeast Asia, we work with regulators in helping them to design their own regulations to promote RE. So that’s why we are working to grow our Southeast Asia focus currently in Vietnam, in Singapore, and with our partners”.
This focus on partners is one which Harris is keen to emphasise. “Partnerships are key for us. I think we know many utilities with a traditional utility mindset that says, ‘we’re a national utility, we can do everything alone’.
” This mindset is not one shared by TNB: “I am very impressed with the way this has changed in TNB because we realize that to work well in a market like Vietnam, we not only need to partner with the local developers, but also other investors or partners who are looking into the market.
“We are open to explore opportunities with equity partners who are interested to join us as we accelerate our international business growth.”
And he adds that a perfect example of this international growth will be Vantage RE, which he says will also serve to cement TNB’s ESG credentials.