KUALA LUMPUR: Tenaga Nasional Bhd
posted lower net profit in the first quarter ended March 31, 2019 on higher forex translation losses and higher finance costs.
The power giant announced on Tuesday net profit fell by 26.5% to RM1.55bil from RM2.12bil but this was a turnaround from the net loss of RM134.30mil in the preceding quarter.
Commenting on the results, Tenaga said the reduction in Q1 net profit from a year ago as a result of other regulatory adjustments to be returned, impairments for its international investments and higher tax in the quarter due to reinvestment allowance incentive is no longer available in the current year of assessment.
It said the group’s earnings before interest, tax, depreciation and amortisation (Ebitda) rose by 17.6% to RM4.96bil, given an Ebitda margin of 37.5% due to the impact of the Malaysian Financial Reporting Standards (MFRS) 16.
Tenaga's revenue rose by 7.9% to RM13.24bil from RM12.27bil mainly due to the increase in group’s sales of electricity of 7.8% or RM943.3mil from RM12.06bil to RM13bil from a year ago. Earnings per share were 27.38 sen compared with 37.41 sen a year ago.
“The return on regulated business under the Incentive Based Regulation (IBR) framework which mainly consist of transmission and distribution businesses is reported at RM708.5mil,” it said.
When compared with the preceding quarter ended Dec 31, 2018, Tenaga said its operating profit rose to RM2.50bil from RM697mil.
“This was mainly due to the increase in revenue of RM698mil and lower operating expenses of RM1.168bil.
“Additionally, the profit attributable to owners of the company also increased from a loss of RM134.3mil recorded in the preceding quarter to a profit of RM1.556bil in the current quarter, an increase of RM1.691bil,” it said.
Tenaga said electricity sales grew 5.2% to 28,471.1 GWh in the first quarter from a year ago mainly due the 4.5% growth in GDP in Malaysia for the same period.
“Higher sales in this period are expected to be due to increase in electricity usage, partly due to current hot weather in the country.
“The Ebitda margin seen by Tenaga in 1QFY2019 is positive given Tenaga has undertaken a major initiative to restructure its internal business services to increase productivity to support Tenaga’s expansion at scale as well as initiatives to expand the business into the sphere of unregulated businesses such as rooftop solar PV system and High Speed Broadband,” it said.
Tenaga had set a target to grow its renewable energy capacity to 1,700MW both domestically and internationally by 2025.
It said this was in tandem with the Malaysian government’s target to grow renewables’ proportion of the total generation capacity mix from 2% currently to 20% by 2025.
Tenaga said under its new CEO/ president Amir Hamzah Azizan, the power giant had begun executing strategic initiatives to ensure that its business models are well poised to succeed within the pillars of future generation sources, smart grid and customer centricity.
Amir Hamzah said due to the current economic climate, Tenaga was focusing upon strengthening its businesses and position in the countries in which it operates, by taking prudent positions on the investments and ensuring that the business models in those countries are on sound footing as well.
“Tenaga has taken the bulk of its impairments and is exploring hedging options to mitigate foreign exchange losses as part of its plan to mitigate consequential financial impacts from the investments.”
“Specifically, electricity demand in Turkey is expected to rise and the portfolio of assets owned in Gama Enerji AS, is a lucrative one given the generation plant quality and water concession. Despite having faced financial challenges, Tenaga’s strategic investment team projects positive long-term return on the investment.
“Investments in India, on the other hand, have shown affirmative potential for growth as the utilisation of electricity in the country is projected to intensify. The country is also opening doors to new and upcoming power projects to cater for the large demand volume of energy in India,” he said.