Decision on TNB compensation by mid-December?

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) expects a decision on the compensation it is seeking from Petroliam Nasional Bhd (Petronas) to be finalised by mid-December or it risks a cash crunch soon.

The utility giant is seeking compensation over its huge losses due to severe gas curtailment. TNB spent an additional RM2.1bil on fuel oil and distillates to generate electricity due to severe gas curtailment in the previous financial year ended Aug 31, 2011 (FY11).

President and chief executive officer Datuk Seri Che Khalib Mohamad Noh said negotiation with all the relevant stakeholders was still ongoing. They are Performance Management and Delivery Unit (Pemandu), Economic Planning Unit, Petronas and TNB.

“Pemandu is basically co-ordinating and it has met both Petronas and TNB. Each party has its own view on the compensation that we've asked for. I think it is reviewing every party's view.

“Pemandu will soon present the views to the committee. And hopefully they can resolved it by middle of next month. As we have said earlier, we hope this matter can be resolved before year-end,” Che Khalib said at TNB's Deepavali 2011 gathering.

For 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.

TNB posted a net loss of RM453.9mil for the fourth quarter ended Aug 31 due to higher fuel costs, its second consecutive quarter of losses.

It reported a net profit of RM555.2mil in the same corresponding period a year ago. Loss per share was 8.33 sen compared with earnings per share of 10.22 sen.

The losses were mainly due to continued gas shortage resulting in an additional alternative fuel cost.

Asked if a writeback will happen in December, Che Khalib said the payment or compensation would come slightly later but it was more important to have a compensation policy in place.

“If a policy is in place, then we can at least know how to move forward. At least they can decided who should absorb or pay. Hopefully, they can make the decision soon.”

Che Khalib said the additional amount for alternative fuel for TNB was about RM3bil up to October and the amount kept on building.

“We've got November, December as well as January to go. We have also been informed that there will be some curtailment as a result of more maintenance work to be carried out. So, this problem is going to continue until next year. That is why we need to have the (compensation) policy in place... That's important,” he said, adding that once a general policy was in place, TNB would not need to go back to the decision-maker all the time.

“It is not so much the amount. We need a policy in place first,” he stressed.

Concurrently, the additional amount paid for alternative fuel such as oil and distillates which are five times more than gas, are putting a strain on TNB's cash position. As at Aug 31, TNB's cash and cash equivalents stood at RM3.25bil from RM8.01bil a year ago.

“This is why we need to resolve this matter quickly so that we will not face a cash-crunch. Hopefully a cash crunch doesn't happen. I do not deny that it is getting closer.”

However, he said its cash position had yet to reach an alarming level but added that TNB was quite concerned.

“We are putting a lot of hope that this can be resolved by mid-December,” he said.

“I think we want to make sure we have enough cash flow to sustain us. Profit and loss is one thing but whether we have enough cash to continue with our operation is important.”

For the current quarter ending Nov 30, TNB is bracing for yet another quarter in the red. This would be the third consecutive quarter it is reporting losses.