Posted on 10 Jun 2009
Rate payers hoping for a further cut in electricity tariffs may be disappointed come the July 1 deadline of the review by the Government, as analysts largely expect rates to stay unchanged.
In fact the deadline is unlikely to be met as Tenaga Nasional Bhd (TNB) had submitted its proposal to the Government only at end-April.
An analyst at a local bank-backed brokerage said: “TNB’s proposal would be regarding where (the amount of) its current cost items are, and it is the Government that will decide on the price. I don’t think the deadline will be met.”
On March 1, electricity rates were already cut by an average of 3.7% as fuel prices declined.
According to analysts, tariff rates were expected to remain unchanged at the review mainly due to TNB’s average costs remaining unchanged, particularly coal price.
An analyst at another local bank-backed brokerage said that under the tariff rates revised in March, TNB’s coal pass-through of US$85 per tonne was not much different from the average cost at this point in time.
Coal prices stand at US$70 to US$72 per tonne at present but the analyst pointed out that the power producer had suffered higher coal prices at US$100 per tonne earlier in the current financial year ending Aug 31 (FY09), paying an average of about US$85, he said.
Coal makes up only 25.3% of TNB’s power generation mix in the first half of FY09 but is the main variable component of its fuel costs.
Gas, which makes up the bulk of TNB’s power generation mix at 67.7%, is subsidised and the price fixed by the Government.
The price of gas for the power generation sector is set at RM10.70 per million British thermal unit (mmBTU) announced in February, reduced from RM14.31 per mmBTU previously.
Meanwhile, speakers at the ongoing 14th Asia Oil & Gas Conference in
The most pronounced drop was in
Analysts did not think this was likely to mean that gas prices would be revised downwards in
“The Government has just reallocated 100 mmscfd (million std cu ft per day) of gas from the power generation sector to the manufacturing sector in February. I do not think they will reverse this or allocate more gas to power generation again,” an analyst said.
At the same time, Petroliam Nasional Bhd (Petronas) gas business vice-president Datuk Wan Zulkiflee Wan Ariffin said at the same conference that the company could be seeking customers outside traditional north Asian markets to make up for the drop in demand.
Citi research analyst Ng Yong Yin, who has a “buy/medium risk” call on TNB, said in her latest report that the power utility had a rather volatile cash flow trend that was partly due to the lack of visibility in electricity rates and tariff policy.
However, she welcomed the more frequent review of electricity tariffs by the Government.
“The group is facing higher and volatile generation costs as coal-fired generation plants gain prominence in the group’s generation mix.
“Fortunately, electricity tariffs are expected to be reviewed annually which should help cushion the impact of volatile coal prices,” she said.
