Tenaga Nasional Bhd may be in line for a payment of about RM2 billion (US$641 million) after the government and Petroliam Nasional Bhd agreed to share extra fuel costs that have driven the Malaysian utility into losses.
Tenaga received a letter from the government agreeing to a fuel-cost sharing mechanism, with extra costs of RM3.069 billion caused by a gas shortage to be split equally between the three, according to a statement from Tenaga yesterday. As the company’s financial situation is “critical,” it will liaise as soon possible with the other two parties to implement the agreement, it said.
“It’s a welcome relief,” Lim Tee Yang, a Kuala Lumpur-based analyst at RHB Capital Bhd, wrote in a report today. “The fuel cost mechanism indicates that the government is sympathetic to Tenaga’s troubles and will step in when necessary.” Lim raised his rating on Tenaga to “strong buy” from “underperform”.
Disrupted production at gas platforms owned by Petroliam Nasional, or Petronas, has forced state-controlled Tenaga to buy costlier oil and distillate fuel for electricity generation. This incurs additional costs of RM400 million every month, chief executive officer Che Khalib Mohamad Noh said on Oct 28.
Tenaga’s stock gained 1.4 per cent to RM5.76 at 9:42 a.m. in Kuala Lumpur trading.
Tenaga’s shares were upgraded to “buy” from “hold” at Maybank-Kim Eng, which cited an improvement in its balance sheet health. The stock was raised to “neutral” from “underperform” at Credit Suisse Group AG, which increased its estimate for Tenaga’s profit for the year through August by 87 per cent.
Tenaga is facing higher costs from running plants on alternative fuels and from importing electricity from Singapore and Thailand, yesterday’s statement said. The extra costs covered by the fuel-cost sharing mechanism were incurred between Jan 1 last year and Oct 31 this year, it said.
“Although the compensation mechanism is a positive development for Tenaga, the deal only covers for costs up to October 2011,” Annuar Aziz and Tan Ting Min, Kuala Lumpur-based analysts at Credit Suisse, wrote in a report. “We remain concerned as the gas shortage is expected to persist.” -- Bloomberg
Tenaga received a letter from the government agreeing to a fuel-cost sharing mechanism, with extra costs of RM3.069 billion caused by a gas shortage to be split equally between the three, according to a statement from Tenaga yesterday. As the company’s financial situation is “critical,” it will liaise as soon possible with the other two parties to implement the agreement, it said.
“It’s a welcome relief,” Lim Tee Yang, a Kuala Lumpur-based analyst at RHB Capital Bhd, wrote in a report today. “The fuel cost mechanism indicates that the government is sympathetic to Tenaga’s troubles and will step in when necessary.” Lim raised his rating on Tenaga to “strong buy” from “underperform”.
Disrupted production at gas platforms owned by Petroliam Nasional, or Petronas, has forced state-controlled Tenaga to buy costlier oil and distillate fuel for electricity generation. This incurs additional costs of RM400 million every month, chief executive officer Che Khalib Mohamad Noh said on Oct 28.
Tenaga’s stock gained 1.4 per cent to RM5.76 at 9:42 a.m. in Kuala Lumpur trading.
Tenaga’s shares were upgraded to “buy” from “hold” at Maybank-Kim Eng, which cited an improvement in its balance sheet health. The stock was raised to “neutral” from “underperform” at Credit Suisse Group AG, which increased its estimate for Tenaga’s profit for the year through August by 87 per cent.
Tenaga is facing higher costs from running plants on alternative fuels and from importing electricity from Singapore and Thailand, yesterday’s statement said. The extra costs covered by the fuel-cost sharing mechanism were incurred between Jan 1 last year and Oct 31 this year, it said.
“Although the compensation mechanism is a positive development for Tenaga, the deal only covers for costs up to October 2011,” Annuar Aziz and Tan Ting Min, Kuala Lumpur-based analysts at Credit Suisse, wrote in a report. “We remain concerned as the gas shortage is expected to persist.” -- Bloomberg
