Tenaga (2) ... Oct 2008

National power company Tenaga Nasional Bhd (TNB) does not want the Government to make the same mistake twice by extending the concession period for power plants operated by independent power producers (IPPs).

The Government should look carefully at the repercussions of extending the concession periods of IPPs as the earlier agreements had burdened TNB for a long time due to the high rates it was charged with. TNB is still making huge payouts to the IPPs with renegotiations of the power purchase agreements (PPAs) nowhere in sight.

The first IPP concession agreements will end in seven years.

Going Forward …

It is expected to turn in even weaker performance in 2009 following its below-expectation financial year 2008 results. This is due to lower demand growth, advancing fuel costs and higher capacity payments to independent power producers (IPPs).

TNB registered a lower net profit of RM2.59bil for its financial year ended Aug 31, 2008 (FY08) versus consensus estimates of RM3.14bil. For the fourth quarter 2008, TNB incurred a net loss of RM282.9mil against a net profit of RM168.4mil a year ago due to forex losses, higher fuel costs and slowing demand.

For financial year 2009, estimate TNB’s core net profit (excluding adjustment items) will further decline to RM1.6bil due to continued concerns on higher coal and gas prices, rising fuel costs and energy charges by independent power producers (IPPs) and lower demand growth.

TNB itself has projected its performance in 2009 would further decline “given the scenario of lower electricity demand and higher operating costs.

And with the commissioning of the 1,400 MW Jimah Power Plant, its capacity payments and reserve margins would increase to 47% from 40.8%.

As at Aug 31 2008, TNB had RM21.7bil of debt, of which about RM1bil would be repaid in 2009 and another RM1bil in 2010. About half of its borrowings were denominated in ringgit and the remaining in US dollars and yen. The ringgit has been depreciating in value against the US dollar and yen in the past six month (March – Oct 2008).