More Comments On Tenaga Nasional

Published on Star Business: Multiple issues continue to confront TNB

• Wednesday January 21, 2009
  Multiple issues continue to confront TNB
  By FINTAN NG
  
  PETALING JAYA: Volatile fuel costs, higher reserve margins due to falling demand and foreign exchange (forex) losses will continue to haunt Tenaga Nasional Bhd (TNB) for the forseeable future.
  
  Analysts see a weaker outlook for the national utility operator, which reported a net loss of RM944.1mil on revenue of RM7.89bil for the first quarter ended Nov 30, 2008.
  
  The loss was mainly due to an unrealised forex translation loss of RM1.40bil as the ringgit weakened against the US dollar and the yen, which together made up 47.5% of its foreign debt or RM12.1bil.
  
  By the end of the quarter under review, the ringgit was 6.91% lower than the US dollar and 21.55% lower than the yen.
  
  The ringgit has continued to weaken against the yen but has stabilised against the US dollar since the start of the year.
  
  According to OSK Research Sdn Bhd associate director Chris Eng, TNB is not likely to reduce its exposure to the yen because the loan it took from the Japan International Cooperation Agency was a 30-year loan at an interest rate of less than 1%.
  
  “These are paper losses. In terms of translation loss, it was less than RM1bil for yen-denominated debt,” he said.
  
  Eng, in his report, said the ringgit might not weaken “significantly past the 3.60 per US dollar level” but still faced a strengthening yen.
  
  He told StarBiz yesterday that TNB needed another 6.2 million tonnes of coal. “Year-to-date, the company has acquired 5.2 million tonnes of coal at US$107.70 per tonne,” he added.
  
  TNB had switched to using more coal than gas due to the higher price of gas in the August to November period.
  
  Gas price had jumped to RM14.31 per million British thermal unit (mmBTU) from RM6.40 per mmBTU while coal had risen to US$113.90 per tonne from US$55.30 per tonne in that period.
  
  “There’s no way they can really hedge in terms of coal given the current market conditions. They buy from the spot market,” Eng said.
  
  Although the price of coal had fallen, coal price had proven “to be more sticky on the downtrend than oil prices,” he said in his report.
  
  Eng said in the report that TNB should brace for “more pain for two quarters” as new capacity payments for the Jimah power plant owned by Jimah Energy Ventures Sdn Bhd kicked in amidst poor demand outlook in the first half of 2009.
  
  Maybank Investment Bank Bhd analyst Ong Chee Ting said that “it’s really hard to renegotiate with the independent power producers over the power purchase agreements.”
  
  “These things take time and given the obstacles, they don’t know how to do that,” he said.
  
  Ong said in his report that a base tariff hike was unlikely in the triennial review of tariff rates because of a “heightened political risk” following Barisan Nasional’s failure to retain the Kuala Terengganu parliamentary seat.