TNB determined to cut debt


  • Business
  • Thursday, 07 Oct 2004

BY B.K. SIDHU

BARELY a hundred days in office, Datuk Che Khalib Mohamad Noh has put in place several initiatives at Tenaga Nasional Bhd (TNB) to make it “the best organizsation in the country,’’ and to regain the glory of its heydays. 

The most significant of these is to lower the giant power utility's gearing ratio to no more than 1.5 times from the current two times over a five-year period.  

Other initiatives include a revamp of its organisational structure into three main units; “putting the house in order in 12 to 18 months’’ through reviewing processes and improving efficiency and performance; driving up collections; increasing connectivity to new areas; tightening credit control; reducing electricity thefts; and staying on home turf for the next 12 to 18 months, unless it involves exporting its expertise. These will make TNB a more focused organisation.  

Che Khalib, the president and chief executive officer of TNB, who would be 100 days in office tomorrow, told reporters at a luncheon briefing yesterday: “We want to reduce the level of gearing to a more comfortable 1.5 times over five years.’’ 

The level of reduction may seem marginal, but it means slashing RM7bil off its current debts of RM29.7bil to RM23bil. The high gearing level has been a cause of concern among analysts, who feel TNB should pare its debts.  

Also, whatever profit each year is being ploughed into its RM4bil-RM5bil capital expenditure (capex), leaving little to bring down debts. TNB has been on an asset divestment exercise, using the proceeds to pare debts. It has also refinanced some loans to reduce cost of borrowing. 

Datuk Che Khalib Mohamad Noh

Che Khalib did hint that a cash call might be in the offing, though not right now.  

In its efforts to pare debts, TNB is adamant about recovering RM852mil owed by several companies.  

Of the amount owed, RM587mil is due from five steel companies. Che Khalib said agreements had been drawn up with four. Some had begun repaying, and TNB should recoup the entire sum within 15 to 24 months. 

“We are talking to several banks, especially foreign banks, to pay off some debts, one of which is a yen loan,’’ he said.  

So serious is he about bringing down the debts that TNB has hired consultants to work out a 20-year cashflow proposal so that TNB can plan ways to reduce its debts.  

Analysts say a tariff rise is the answer to TNB's woes; the additional revenue will help. But the Government has made it clear that there will be no increase this year.  

Che Khalib did say that capex would be reduced to about RM3bil between now and 2007, as no new replanting was required.  

The financials aside, Che Khalib said TNB was being reorganised into three units.  

The first will comprise its core business of generation, transmission and distribution; the second, all non-core assets such as IT and investment management; and the third, management support services to oversee security, corporate services and human resources.  

Che Khalib said: “The core business is key to our operations. We must give it the most emphasis. We are restructuring the organisation to best support me in my duty.’’  

On putting the house in order, he said: “We are not saying that there is a problem, but there are areas which need improvement. We have to concentrate on making TNB the best organisation in the country.’’  

To him, becoming the best would involve retraining of its workforce, benchmarking with the best, and improving on its processes.  

He has also set targets for the generation division to achieve higher performance levels and for its transmission unit to complete all projects on time. A monitoring system that can identify tripping or theft of electricity will be installed for its distribution unit.  

But speculation that TNB would team up with a telecommunication company in the Internet business is not on the cards. Che Khalib confirmed that TNB would not venture into uncharted waters, but would remain focused on its core business. He also does not see TNB re-negotiating its existing agreements with independent power producers, but it would seek reduced rates for any excess supply.  

On TNB’s investment in Liberty Power in Pakistan, Che Khalib said no decision had been made to develop the second phase of the project. On the rising cost of fuel, he said this had minimal impact as 60% of TNB's plants were gas fired, and the existing pricing was valid till 2005.  

However, should there be increases in the future, he was quick to point out that the additional costs would be passed on to consumers. 

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