Tuesday, November 8, 2011

Having faith in Tenaga Nasional Berhad

While pessimism grows over Tenaga Nasional Berhad's cashflow being affected by the shortage of gas for its power-generation operation, the government-owned utility conglomerate is still strongly-manageable amid reports that it runs on daily losses.

In it's latest report today, Moody's Investors Service has maintained its Baa1 rating with a stable outlook for TNB, as the shortage in gas -- the key component for its generation of electricity -- continues.

Moody’s said since 2Q11, Tenaga had been burning oil and distillates, which cost about five times more than gas, to replace the gas shortfall and generate its required level of electricity.

The rating agency was maintaining its current rating and outlook because it expects timely intervention by the Malaysian government, the largest shareholder of both Tenaga and its gas supplier, Petroliam Nasional Bhd.

"So far, Tenaga has absorbed the additional burden within its rating's financial parameters, which still have some headroom, but a prolonged imbalance in Malaysia's power sector and a lack of supportive measures from the government to relieve the burden could weigh on these metrics, and put pressure on the rating," it said.

In addition to continued governmental support, Moody's rating and stable outlook for Tenaga assume that (1) the gas shortage will diminish over the near term as new sources of supply become available; (2) the government will decide on an appropriate cost-sharing mechanism over the next 6-8 months to compensate Tenaga for its added costs; and (3) the negative impact on Tenaga's financial profile of having to use more-expensive oil and distillates will be temporary.

The utility giant's earnings have been severely impacted by the shortage of gas supply.

It has so far reported two consecutive quarterly losses. TNB has said that the losses stemmed from the need to replace the shortfall in the supply of gas to it, by utilising more oil and distillates which are five times more expensive than gas and this has resulted in TNB incurring an additional RM2.1bil to replace the shortfall in gas in the last financial year ended Aug 31 (FY11).

In FY11, TNB's net profit plunged to RM499.5mil from RM3.2bil in FY10. Revenue for the year was higher at RM32.2bil versus RM30.3mil.

However, such a business predicament will not likely force the utility giant to hike up its electricity tariff as mentioned in Anwar Ibrahim's blog.

TNB is also hoping to get some compensation on additional fuel bill that amounted to RM2.1 billion in FY11 that it had to incur because of a shortfall in gas supplied by Petronas.

The company indicated it expects to receive an average natural gas allocation of 1,100-1,150 million metric British thermal units (mmbtu) a day in FY12 compared with 950 mmbtu a day during the second half of FY11.

A regasification terminal in Malacca is expected to be ready by July next year, and this will help Petronas meet its commitment to supply 1,350 mmbtu a day of gas to the power sector in 2012.


dapur kayu said...

TNB will not go burst, bro. if it does, all of us will be affected. the people must have faith in its operation and stop disseminating bad rumors about it.

be it the govt of opp politicians, they must treat TNB as theirs and find ways to enhance its operation and boost its supply.

everybody needs TNB, aren't we?

musalmah said...

si anwar ni, benda kecik macam ni pun dia nak spin. baca la dulu laporan tu, tnb tak sebut pun kemungkinan nak naikkan tarif letrik. carilah bahan lain, bang nuar!

short and sweet said...

i am confident the utility co can manage the sfortfall due to the lack of gas supply.

however, i believe the govt and petronas will not allow anything to happen to tnb. as much as we need its service, the whole country depends on it.

so, that is business. its a normal phenomenon.

Anonymous said...

Since 1997 until FY2010, Petronas’s cumulative gas subsidy was at a staggering amount of RM116.4 billion – IPP enjoyed the lion share of RM49.3 billion (42.3%) follow by TNB (RM37.3 billion or 32%) and others such as small industrial, commercial, residential users and NGV who enjoyed RM29.8 billion or 25.6%. The fact that IPP and TNB alone enjoyed a combine RM86.6 billion or 74.4% of the total gas subsidy since 1997 is simply jaw-dropping.

Every year, Petronas pays billions of dollars in gas subsidy mainly to IPP and TNB. In 2008 alone, its gas subsidy reached the peak of RM19.7 billion with IPP and TNB taken the lion share of RM8.1 billion and RM5.7 billion respectively.

Another interesting area that you may not know is that TNB receives Government Development Grants every year, whatever that means. And the amount is not small to the tune of more than RM500 million each year. Whether the grants were another nicely packaged subsidy is everyone’s guess. Nobody knows what has TNB develop with the half of billion of Ringgit grants. What everyone knows is the company will cry to daddy government asking for electricity hike every year without fail. After all, this is the tax-payer money that the government is awarding to TNB.

fortune teller said...

could be a temporary setback due to lack of gas supply but it seems that tnb will have to spend more.

this will eat up from its purse and the only available option is to revise up its tariff.

Anonymous said...

harap tnb tak jadi macam GLC lain seperti mas yang rugi kerana minyak...