Tenaga ... March 2009

TENAGA TACKLES ITS FOREIGN CURRENCY DEBTS

TENAGA NASIONAL is serious in addressing its foreign curreny debt problems by repurchasing and cancelling a portion of its USD- -denominated bonds.

TENAGA in a filing on Feb 17, 2009 reported that the Utility distribution monopoly repurchased USD165.3m (RM595.1m) of nominal value debt papers, reducing its Total Debts by 2.6% to RM23.39 bil. The utility company also stated that it planned to repurchase more of its debt papers over the next six months.

The Company added that its plans to repurchase 2011 & 2015 notes, 2025 debentures and 2096 debentures amounting to a total of USD300m over the next six months.

Analysts are of the opinion that the reduction in USD debt will remove a financial weakness in the Company. TENAGA, despite having a strong cashflow, has been saddled with translation losses or gains in its Profit & Loss statement due to its forex-denominated borrowings. For instance, for 1QE Nov 2008, TENAGA had translation losses amounting to RM1.4 bil, which resulted in the Company recording a loss of RM944.1m

STRONG CASH FLOW & POSITION
TENAGA's CFO - IZZADDIN IDRIS said that it was an opportune time for the Company to reduce its debts given its strong cash pile. " .... We have the cash and took advantage of the slump in the current bond market to utilise it to reduce our gearing ...." said IZZADDIN to THE EDGE FINANCIAL DAILY.

TENAGA's Deposits, Bank and Cash Balances amounted to RM5.17 bil at end Nov 2008. The notes which were repurchased and cancelled carry a coupon of 7.62%. The amount outstanding after the cancellation is USD404.7m.

IZZADDIN explained: " .... A big chunk of TENAGA's Bonds are due in 2011, some RM3.7 bil. So before that we try to buy back these bonds, thus reducing our refinancing risk ....". The CFO also added that TENAGA would not use all its cash to repurchase its bonds going forward, but that it would look to do so only if the rates turned favourable.

" .... It was also a chance for us to reduce our exposure to foreign currency debt ...." said IZZADDIN addeding that the Group might also borrow in Ringgit to retire some of its USD loans instead of dipping into its cash pile.

As at Nov 30, 2008, TENAGA's borrowings in USD represented 27.5% of the Group's Total Debts, while Japanese yen borrowings accounted for 22.8%.