TNB and Petronas launch RM10 billion green energy partnership

KUALA LUMPUR, 28 AUGUST 2026 —

Tenaga Nasional Bhd (TNB) and Petroliam Nasional Bhd (Petronas) will invest RM6.3 billion to repower the Sultan Ismail Power Station (SIPS) in Paka, Terengganu, using hydrogen-ready technology, the companies said on Tuesday.

The project is part of a broader collaboration to unlock RM10 billion in commercial value by 2035 through feasibility studies on green hydrogen and carbon capture.

The SIPS repowering will replace the retired combined-cycle gas-fired plant with high-efficiency units capable of running on blended natural gas and hydrogen, TNB president and CEO Baharin Din said in a statement. Demolition begins next year and construction starts in 2025, with commercial operation targeted for 2030.

Baharin said the upgraded 1,400 MW plant is expected to generate RM250 million annually in earnings before interest and taxes once operational. The project will also prevent 3.2 million tonnes of carbon dioxide emissions each year, equivalent to the annual output of about 700,000 cars.

The companies signed a memorandum of understanding on August 19 to collaborate on decarbonisation technologies that support Malaysia’s goal of becoming carbon-neutral by 2050. The partnership will focus on developing a green hydrogen ecosystem and carbon capture and storage (CCS) systems.

Baharin said the feasibility studies aim to reduce the levelised cost of electricity for green hydrogen, improving its competitiveness as a zero-emission fuel for power generation. He added that TNB plans to expand into energy supply and hydrogen production along the green hydrogen value chain.

The RM10 billion commercial value projection includes revenue from hydrogen sales, carbon credits and operating cost reductions, TNB said. The figure was not broken down further.

The repowering project is part of TNB’s broader energy diversification strategy, Baharin said. The company also intends to use the upgraded plant as a demonstration site for integrating hydrogen into the national grid.

Petronas will contribute technical expertise and resources to the feasibility studies, the statement said, though no details were provided about Petronas’ specific financial commitment. The companies did not disclose when they expect to release initial study findings.

The collaboration aligns with Malaysia’s renewable energy targets of 20% by 2025 and 50% by 2030. In January, the government raised its 2035 carbon neutrality target to 2050, accelerating the timeline for sector-wide decarbonisation.

Industry analysts said the partnership could accelerate Malaysia’s transition from fossil fuels while creating new revenue streams. “The SIPS repowering shows TNB is moving beyond incremental upgrades to strategic bets on low-carbon infrastructure,” said one Kuala Lumpur-based energy analyst. “If hydrogen costs fall as forecast, the plant’s blended-fuel capability could become a template for other gas-fired stations.”

The project’s long-term success depends on technology maturity and policy support, analysts noted. Green hydrogen costs remain higher than natural gas, while Malaysia lacks a national hydrogen roadmap. Baharin said the feasibility studies would address both challenges by identifying pathways to lower production costs and integrate hydrogen into the grid.

For investors, the RM6.3 billion capital outlay represents a multi-year commitment to sustainability-linked assets. TNB’s projected RM250 million annual EBIT from SIPS could provide a steady return while reducing the company’s carbon intensity, analysts said. The avoided emissions also position TNB to benefit from future carbon pricing mechanisms.

The partnership follows separate initiatives by both companies to expand their clean energy portfolios. TNB opened its first solar plant in 2020 and is developing offshore wind projects, while Petronas has invested in hydrogen pilot plants and CCS test sites.

Baharin said the SIPS repowering would serve as a model for future power plants in Malaysia. “This project proves that brownfield sites can be transformed into low-carbon assets,” he said. “The hydrogen-ready design gives us flexibility to scale up as technology and policy evolve.”

Related: Baharin Din