Tenaga will no longer enjoy the benefit of higher average base tariffs from changes in customer mix under regulatory period 2 (RP2) as the Distribution Network is now under a revenue cap instead of a price cap.
KUALA LUMPUR: PublicInvest Research is maintaining its Outperform call on Tenaga Nasional with an unchanged target price of RM16.86 after the purchase of an additional stake in an Indian company building a hydroelectric power plant within the Himalaya Range.
Tenaga will subscribe to a compulsorily convertible debenture (CCD) issued by GMR Bajoli Holi Hydropower Private Ltd (GBHH) of India for 2,256mil rupees (c.RM133.2mil).
The CCD has a tenure of 30 years and will be converted into an equity stake of c.30% before the end of tenure.
This is to facilitate GBHH’s construction of a 180MW run-of-river hydroelectric power plant within the Himalaya Range in the state of Himachal Pradesh, India.
Overall progress of the project stands at 78% and the plant is expected to commence its commercial operations by October 2019.
“We understand the acquisition will not have a significant impact on Tenaga’s earnings in the near term and therefore maintain our forecasts and estimates,” it said.
The Bajoli Holi Hydroelectric project will have an installed capacity of 180MW. It is a greenfield project with a 40-year concession from the state government of Himachal Pradesh, India.
“We understand that it offers attractive and stable returns with a 17-year power purchase agreement (PPA) with a reputable AA-rated off-taker.
“Overall progress of the project stands at 78% and the hydroelectric plant is expected to commence its commercial operations by October 2019. The completion of this investment is subject to approval from Bank Negara Malaysia and Ministry of Finance of Malaysia,” it said.
PublicInvest Research said this acquisition will fit into Tenaga’s expansion plan to increase its renewable energy (RE) portfolio. Once fully operational, the proposed investment will raise Tenaga’s total international RE portfolio to c.370MW.
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