The ministry, in a statement yesterday, clarified the situation on the short-term agreements
KUALA LUMPUR: PublicInvest Research is reaffirming its Outperform call on Tenaga Nasional Bhd
(TNB) with an unchanged target price of RM15.55.
It said on Thursday the power giant announced the government has decided the current electricity tariff rebate of 1.52sen/kWh will continue from July 1 to Dec 31, 2016 under the Imbalance Cost Pass-Through (ICPT) mechanism.
The government also increased the regulated piped gas price for the power sector by RM1.50/mmBTU to RM19.70/mmBTU from July 1, 2016 as part of the energy subsidy rationalisation programme.
“There will be neutral impact to TNB as tariff rebates and any savings or additional expenses incurred from lower- or higher-than-estimated fuel costs would be reflected in the ICPT account and does not affect TNB’s earnings.
“We continue to like TNB for its defensive nature, resilient earnings and undemanding valuation which is trading at a forward PE of 11 times. ICPT structure further provides earnings stability and visibility to the group,” it said.
PublicInvest Research said arising from favourable fuel and generation costs, the current ICPT rebate of 1.52sen/kWh will be extended end-2016 for domestic consumers with consumption above 300kWh per month and all commercial and industrial users.
The government had also announced the increase of regulated piped gas price for the power sector from RM18.20/mmBTU to RM19.70/mmBTU with effect from July 1, 2016.
Under the Incentive Based Regulation (IBR) framework, the regulated gas price for the first 1,000mmscfd would be increased by RM1.50/mmBTU every six months until it reaches parity with market prices, as part of the energy subsidy rationalisation programme. The ICPT rebate has taken into account the additional cost associated with the gas price increase.
“Lower coal and liquefied natural gas (LNG) prices, coupled with favourable generation costs contributed by strong performances of coal-fired power plants have reduced the consumption of LNG, resulted in net ICPT savings of approximately RM758m.
“TNB will benefit from the ICPT mechanism as it would shield the group from exposure to fluctuations in fuel and generation costs moving forward, resulting in earnings stability and visibility.
“The ICPT framework allows TNB to reflect changes in fuel and generation costs in consumers’ electricity tariff every six months, subject to government approval. We expect the next announcement for the subsequent review period to be in December 2016,” it said.
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