A view of Tenaga Nasional Berhad headquarters in Kuala Lumpur, Malaysia, October 13, 2015. Malaysian utility heavyweight Tenaga is inching towards a multi-billion dollar purchase of energy assets from 1MDB after a rival bidder dropped out, a deal that would bring welcome financial relief to the scandal-hit state fund. Hong Kong-listed CGN Meiya Power Holidings Co, the only firm beyond Tenaga to have openly expressed an interest for some 1MDB assets, said in regulatory filings on Friday it was no longer considering the transaction. REUTERS/Olivia Harris
KUALA LUMPUR: Tenaga Nasional Bhd
’s net profit in its first financial quarter fell 16% mainly due to the recognition of imbalance cost pass through (ICPT) over-recovery and the strengthening of the US dollar and Japanese yen against the ringgit.
In its quarterly results filing with Bursa Malaysia, the utility firm said it made RM1.976bil in profit attributable to its owners for the quarter ended Nov 30, 2015, down from RM2.351bil a year earlier. Revenue, meanwhile, slid 3.2% to RM10.68bil.
Basic earnings per share declined to 35.01 sen from 41.67 sen previously.
Foreign exchange (forex) translation loss, which ballooned 80% in the last financial year to RM819.3mil, continued to dog TNB in Q1. TNB incurred a forex loss of RM58.5mil for the quarter under review, against a forex gain of RM45.9mil a year earlier.
TNB said the lower revenue - despite a 3.9% increase in electricity sales to RM11.179bil - was due to the recognition of ICPT over-recovery for Q1 amounting to RM681.8mil.
The ICPT over-recovery were savings derived from lower generation costs, mainly as a result of reduction in world commodity prices. These savings are being passed back to consumers in the form of tariff rebates.
“The reporting of the ICPT amount in TNB’s financial statements was done for the first time in the third quarter of FY2015 after a thorough review and deliberation between TNB and the relevant parties. As such, the ICPT over-recovery was not reflected in Q1 of FY2015 and this caused the negative year-on-year variance in revenue,” it said.
In a press statement, TNB said by adjusting the ICPT over-recovery and removing the effects of the forex translation and reinvestment allowance, the group made an adjusted after-tax profit of RM1.63bil, a 5.5% improvement from RM1.55bil a year earlier.
TNB attributed the improvement mainly to steady unit electricity demand growth of 3.2% for Peninsular Malaysia.
Its president and chief executive officer Datuk Seri Azman Mohd said the company was mindful of the prevailing challenges and risks in the current economic landscape.
“TNB is fortunate to some extent for the implementation of Incentive Based Regulation (IBR) and ICPT. The former allows TNB to have a fair level of return so that we can operate efficiently, while the latter naturally insulates TNB from fluctuations in generation costs,” he said.
“We will continue to monitor TNB primary exposures on the short to medium term growth prospects, as well as long-term forex cost impact on our current on-going projects.”
On its prospects, TNB noted that the International Monetary Fund on Jan 19 had revised downwards forecasts for global growth by 0.2 percentage point for both 2016 and 2017. “The pickup in global activity is projected to be more gradual, especially in emerging market and developing economies,” it said.
Additionally, it said, the Government on Thursday announced the recalibration of the 2016 Budget to ensure the Malaysian economic growth remains on track with a reduced 2016 GDP growth outlook of 4.0% to 4.5%.
“Given the foregoing scenario and the volatility of the ringgit, the board of directors recognises the challenging prospects of the group for the year ending Aug 31, 2016,” TNB said.
TNB shares rose 20 sen to close at RM13.20 on Thursday, with 11.64 million shares changing hands.
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