AmResearch maintains Tenaga earnings forecast, TP after 1MDB solar-power deal

by **Cals** Tue 15 Apr 2014, 11:47

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Tuesday, 15 April 2014 10:23

KUALA LUMPUR (Apr 15): AmResearch Sdn Bhd maintained its earnings forecast for Tenaga Nasional Bhd after the company said it had signed a power-purchase agreement with 1MDB Solar Sdn Bhd.

AmResearch also maintained its “buy” call on Tenaga with an unchanged fair value of RM14.90.

“We maintain Tenaga’s FY14 to FY16 forecasted earnings, which will not be affected by additional payments for renewable energy (RE),” said AmResearch in a note today.

AmResearch said the electric utility company would not bear the higher costs of RE as it collects 1.6% of all electricity bills for Sustainable Energy Development Authority Malaysia’s (SEDA) renewable fund to pay for the costs.

Yesterday, Tenaga announced that the agreement involved the purchase of electricity from 1MDB’s planned 50MW solar photovoltaic plant in Kedah.

Today, AmResearch said the plant required special approval from the Energy, Green Technology and Water Minister as its capacity was above the maximum 30MW under SEDA’s feed-in tariff structure.

The research house, quoting a local daily, said 1MDB’s tariff rates were between 40 sen/kWh and 46 sen/kWh which is higher than Tenaga’s current rate of 40 sen/kWh.

“Due to annual degression rates, this is much lower than the first generation of applicants back in January 2012 which secured tariff rates of up to 95 sen/kWh for 1MW-10MW plants,” said AmReseach.

On Tenaga's financial outlook, AmResearch expects weaker results from the company for the second quarter ended February 28, this year. AmResearch said this was due to tax-rate normalisation, and gas costs increase earlier.