Drop in power sales indicates Malaysian economy slowing


PETALING JAYA: Tenaga Nasional Bhd (TNB) saw weaker demand growth for electricity sales in its financial year ended Sept 31 (FY15), a signal of a slowing economy.

The national electricity company said yesterday demand growth had cooled down to 2.2% in FY15 compared with the 2.5% registered in the previous year.

It did not provide a projection for the current FY16, but said that demand is expected “to increase in tandem with the economy.”

The Government in presenting its budget for 2016 last week had projected the economy to grow at between 4% and 5% in 2016, boosted mainly by the expansion in the construction, services and manufacturing sectors.

Electricity demand is a leading indicator of the economy, and Malaysia, hit by the depreciating ringgit and the slowing global economy, is seeing a slowdown.

Malaysia’s gross domestic product is expected to grow at between 4.5% and 5.5% in 2015, down from the 6% expansion achieved in 2014.

The faltering growth, coupled with the sharp depreciation of the ringgit – which had fallen 23% since January – had crimped profits at TNB.

The firm said yesterday its net profit in the fourth quarter plunged 40% to RM820.9mil, or 14.55 sen a share, from the RM1.36bil, or 24 sen a share, made in the same quarter last year on higher foreign exchange (forex) translation losses.

Despite the decline, it has maintained its dividend payout of 19 sen a share for the fourth quarter.

The weaker-than-expected three-month results pulled down the group’s whole-year net earnings to RM6.1bil.

TNB reported a forex translation loss of RM819.30mil and transaction loss of RM113mil in FY15 compared with a forex translation gain of RM445.30mil and transaction gain of RM3.6mil in FY14.

“Given the impact of the slowdown in the global economy, including declining commodity prices, the depreciation of the ringgit and expected slower growth in major advanced economies, the board continues to remain cautious on the group’s prospect for FY16,” it said.

Commenting on the FY15 financial performance, TNB said it continued to have high investments in capital expenditure (capex) this financial year at RM10.8bil, as compared to the RM10bil invested last year.

Approximately 50% of the capex was spent towards ensuring system efficiency, security and reliability through investments in system maintenance and enhancements.

The remaining capex was spent on generation projects towards meeting future capacity requirements of about 4,100MW. One of the projects, Manjung 4 with a capacity of 1,010MW, was successfully commissioned on April 14, 2015.

Operating expenses for FY15 fell by 2.2% to RM35.5bil from the RM36.3bil reported in FY14 mainly due to lower generation costs resulted from lower consumption of liquefied natural gas (LNG), as well as oil and distillates as compared to the previous year.

Lower commodity prices, namely, coal and LNG also contributed to the lower generation costs. The average coal price was recorded at RM236 a tonne as compared to RM244.6 last year, while the average LNG price was RM45.21 per million metric British thermal units versus RM46.45 last year.

TNB president and chief executive officer Datuk Seri Azman Mohd stated that the FY15 performance illustrated the effectiveness of the Incentive-Based Regulation (IBR) framework in providing earnings stability and visibility to TNB.

“The IBR framework provides a fair level of return for TNB to operate efficiently; while the imbalance cost pass-through mechanism’s implementation ensures TNB’s neutral exposure to fluctuations in generation costs.

“The IBR implementation also benefited the consumers directly, whereby savings from the lower generation costs resulted from the reduction in commodity prices have been passed back to consumers in the form of tariff rebates from March 2015 until currently,” he said.

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