Tenaga Nasional Bhd (TNB) is confident of maintaining net profit at above RM1bil in the current financial year ending Aug 31, 2003, says newly-appointed chairman Datuk Dr Awang Adek Hussin.
I don't see why we shouldn't be able to maintain a profit of RM1bil to RM1.5bil, he told Bernama in an interview.
For the financial year ended Aug 31, 2002, TNB posted RM1.4bil in after-tax profit on a revenue of RM15.4bil, against RM2.1bil after-tax on RM14.4bil revenue previously.
Dr Awang Adek's optimism was based on the conviction that no major problems would emerge in the short-term.
He said as long as the Malaysian economy grew at its projected rate of about 5%, TNB would be able to reap benefits from a projected 6% growth in electricity demand.
Prime Minister Datuk Seri Dr Mahathir Mohamad recently estimated the country's gross domestic product in 2003 to grow at a conservative 4%-5%, against up to 6% by some financial authorities.
Of course, the world economy can get very bad and we may not be spared but under the normal scheme of things, we should be able to maintain a profit of RM1bil to RM1.5bil, said Dr Awang Adek, who was appointed on Dec 1, 2002, in place of Datuk Dr Jamaludin Mohd Jarjis, who was made Second Finance Minister on Nov 21, 2002.
On another note, Dr Awang Adek said the huge capital expenditure (capex) that TNB had to incur annually (historically on average RM4bil to RM5bil) would not continue forever.
At some stage, when we have put everything in place, with our generation capacity well in place, our transmission line modernised and (becoming) more efficient, then perhaps some of this heavy capital expenditure will taper off.
Over the long term, he said it would lead to TNB being in a much better financial standing to handle its debt position.
He said TNB's debts, now standing at over RM29bil, was well within the norms of the power industry, and of a company of its size; and not something that should spook investors.
Our gearing level at 1.6 (times) as of last year was down from 1.7 the year earlier. It may appear that the amount is big. But, actually, it is under control for a company of our size.
He also dispelled the notion that TNB's debt would balloon as the company would have to borrow to part-finance its capex.
I don't think you should consider that this RM29bil (debt) is going to go up and up because there will be repayments, (and) because of our capacity to service, and our (strong) revenue base and our (large) shareholders' fund.
TNB, he said, would continue with efforts to reduce its gearing through raising more capital rather than borrowing; hiving off non-core assets, like disposing of stakes in some independent power producers; converting foreign borrowings to domestic borrowings; and converting fixed rates loans to floating rates to take advantage of the current lower interest rates.
Dr Awang Adek said, this year, TNB had budgeted RM4.4bil as capex to maintain its existing projects, of which around RM1.5bil to RM1.8bil was for distribution, to meet the 6% or even somewhat higher electricity demand forecast for 2003. Of this year's capex, 43% would be internally funded, and the rest from external sources.
I don't think there is any plan in 2003 to raise money. (But) only later on for bonds, he said.
On top of the RM4.4bil, TNB would set aside another RM1.8bil to take care of new projects, some of which will be carried forward in order to address issues like generation and transmission, he added. Bernama