TNB renegotiating 4,000 contracts with vendors ahead of GST

by **Cals** Fri 13 Mar 2015, 02:46

TNB renegotiating 4,000 contracts with vendors ahead of GST

By Ahmad Naqib Idris / theedgemarkets.com | March 12, 2015 : 10:51 PM MYT

KUALA LUMPUR (Mar 12): Utilities company [size=14]Tenaga Nasional Bhd (TNB) ([You must be registered and logged in to see this image.] Financial Dashboard) said it is in the process of renegotiating over 4,000 of its contracts ahead of the Goods and Services Tax (GST) implementation in April.

TNB chief procurement officer, Syed Abu Hanifah Syed Alwi, said the renegotiation is essential as TNB (fundamental: 1.3; valuation: 1.8) includes a sales and services tax (SST) of 10% in its previous contracts, as opposed to GST’s 6%.

“We have to look into the legal aspect of it. For some contracts, the sales tax is clearly defined. This is what we call as a renewable contract such as the supply contract, which is quite straight forward.

“But for non-renewable contracts, which involve the supply of materials, works and services, we have to determine where the 10% portion has been included,” he told a press conference today, held in conjunction with TNB’s selection of its strategic suppliers.

He added that while the renegotiation will not result in a change of works of the contracts, it will affect the final value of the contract.

TNB aims to finalise the negotiations within one to two months’ time.

Asked if the change will affect TNB’s costs, he said that the change will have minimal impact, adding that the group spends approximately RM9 billion per annum on procurement costs.

At its event today, TNB selected six strategic suppliers out of a total 991 vendors under its Bumiputera Vendor Development Programme.

The six picks were Amat Sinar Sdn Bhd, Hyrax Oil Sdn Bhd, Item Industrial Engineering Sdn Bhd, Indkom Engineering Sdn Bhd, Intra Bekal (M) Sdn Bhd and Tenaga Prisma Manufacturing Sdn Bhd.

As at Dec 31, 2014, TNB has awarded contracts worth RM8.3 billion to its vendors since 1995.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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