TNB remains a ‘buy’

Business & Markets 2013
Written by Charlotte Chong of theedgemalaysia.com
Tuesday, 07 May 2013 10:13
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KUALA LUMPUR: AmResearch has maintained a “buy” rating on
TENAGA NASIONAL BHD [] (TNB) at RM7.78 with an unchanged fair
value of RM9.15, following the results of the general election on Sunday.
AmResearch analyst Alex Goh said in a note yesterday that the
continuation of the Barisan Nasional-led federal government maintained
TNB’s tariff re-pricing evolution as the opposition party had called for
reviews of power purchase agreements which were signed years ago.
“In our view, an opposition-led government could have resulted in a
deadlock on the expected regulatory changes for TNB as its
incentive-based regulation proposal awaits government approval in
August this year,” he said.
This would also mean that the fresh 150 million standard cubic ft per day (mmscfd) of natural gas from the Lekas
regasification plant in Malacca is likely to continue in June as expected, with a new electricity and gas tariff price structure in
place, Goh said.
“Given that TNB’s power grid remains the only off-taker for new power plants, we continue to view the group as the favourite
to secure new open tenders, and the competitive bids will drive down its fixed power generation costs even if the national
utility does not secure the tenders,” he said.
Goh said AmResearch also expects TNB’s new power plant build-up to be uninterrupted by political uncertainties. The group,
together with 1Malaysia Development Bhd-Mitsui, remains on the shortlist for the Project 3A involving a brownfield 1,000mw
coal-fired power plant.