Tenaga Nasional Bhd may need to increase its debt to fund its working capital if the government fails to offer an interim solution to share the burden of higher fuel costs.
Moody's Investors Service, in its special commentary today, said the national utility company has estimated that it was incurring an added RM300 million a month for an additional RM1.2 billion in such costs in the fourth quarter of this year.
"Any rise in Tenaga's debt will have a negative impact on its credit profile for financial year 2012. "Nevertheless, despite rising pressure on interest coverage, the utility firm's rating still has sufficient headroom for higher leverage before it reaches the downgrade trigger of 60 to 65 per cent leverage," it said.
TNB has been tapping its cash reserves to fund higher needs for working capital. As a result, its cash at hand fell to RM3.9 billion from RM6.3 billion as of Aug 31, 2011 as compared to three months earlier.
The overall leverage remained adequate with adjusted debt to capitalisation at 53 per cent as of Aug 31. The research house said gas supplies are expected to improve after Petronas completed its construction of a Mobile Offshore Platform Unit (MOPU) at Bekok C early October and shortages will ease further after a regasification terminal begins operations in July next year.
"Although acute shortages will diminish, the overall shortfall will not disappear. Tenaga expects to receive in financial year 2012 an average allocation of natural gas of 950-1,050 million metric standard cubic feet per day (mmscfd) -- an amount still below its required levels for full operations," it said.
It said its rating and stable outlook for TNB assuming that the gas shortage will gradually diminish over the near term and the government would likely decide on an appropriate cost-sharing mechanism over the next six to eight months to compensate TNB's added costs. -- Bernama
Moody's Investors Service, in its special commentary today, said the national utility company has estimated that it was incurring an added RM300 million a month for an additional RM1.2 billion in such costs in the fourth quarter of this year.
"Any rise in Tenaga's debt will have a negative impact on its credit profile for financial year 2012. "Nevertheless, despite rising pressure on interest coverage, the utility firm's rating still has sufficient headroom for higher leverage before it reaches the downgrade trigger of 60 to 65 per cent leverage," it said.
TNB has been tapping its cash reserves to fund higher needs for working capital. As a result, its cash at hand fell to RM3.9 billion from RM6.3 billion as of Aug 31, 2011 as compared to three months earlier.
The overall leverage remained adequate with adjusted debt to capitalisation at 53 per cent as of Aug 31. The research house said gas supplies are expected to improve after Petronas completed its construction of a Mobile Offshore Platform Unit (MOPU) at Bekok C early October and shortages will ease further after a regasification terminal begins operations in July next year.
"Although acute shortages will diminish, the overall shortfall will not disappear. Tenaga expects to receive in financial year 2012 an average allocation of natural gas of 950-1,050 million metric standard cubic feet per day (mmscfd) -- an amount still below its required levels for full operations," it said.
It said its rating and stable outlook for TNB assuming that the gas shortage will gradually diminish over the near term and the government would likely decide on an appropriate cost-sharing mechanism over the next six to eight months to compensate TNB's added costs. -- Bernama
