KUALA LUMPUR (Sept 2): Tenaga Nasional Bhd (KL:TENAGA) is exploring supplying power to DayOne Data Centers in Selangor in a deal that, if successful, could provide a sizeable earnings boost to the national utility firm, an analyst said.

An initial pact was signed to explore the possibility of Tenaga providing 1.5 gigawatt of on-site power generation to DayOne, according to RHB Research. Tenaga is likely to explore renewable energy supply to DayOne under the Corporate Renewable Energy Supply Scheme (CRESS), the house noted.

If Tenaga delivers solar power generation with a 50% battery capacity and holds a 70% stake, the project could contribute RM448 million in earnings, or 8% of the projected earnings for 2028, RHB Research said.

The memorandum of understanding signed will see Tenaga and DayOne conduct feasibility studies to determine the final capacity, configuration and implementation of on-site power generation with battery energy storage system.

The development also comes on the heels of a government mandate to have renewable energy make up 30% of energy supply to all data centres. Any new data centres are also required to sign an electricity supply agreement with Tenaga for power supply from the grid.

Earlier this year, Tenaga signed a 21-year CRESS agreement to supply renewable energy to the Singapore-based DayOne from a 595-megawatt hybrid hydro floating solar project in Kenyir.

The Terengganu project is estimated to contribute 3% of Tenaga’s 2028 net profit, according to RHB Research’s estimates.

The collaboration with DayOne should result in more electricity supply agreements in the pipeline, which should drive Tenaga’s capital expenditure utilisation “positively,” the house added.

However, the house is not making any changes to its earnings forecast for now, but kept its 'buy' call and target price of RM16.50 on Tenaga. The stock was a tad lower at RM13.66 on Wednesday.