Analysts positive on TNB following surcharge announcement

Analysts positive on TNB following surcharge announcement

KUALA LUMPUR,. Analysts are positive on Tenaga Nasional Bhd’s (TNB) outlook following the announcement on the imposition of a 1.35 sen per kilowatt hour (kWh) surcharge for non-domestic customers.

At 12.15pm, TNB’s shares fell 22 sen to RM14.42 with 4.38 million shares traded.

Last Friday, the Energy Commission announced that the government has agreed to maintain the imbalance-cost-pass-through (ICPT) base tariff of 39.45 sen/kWh for the second half of this year with a surcharge of 1.35 sen/kWh for non-domestic customers.

Kenanga Investment Bank in a research note today said the surcharge is highly positive for TNB as it showed that the utility is able to pass through higher fuel costs to consumers, while the domestic segment remains subsidised.

“In fact, this is the first surcharge being charged to consumers since the implementation of the ICPT in January 2014. The latest ICPT surcharge should boost investors’ confidence as the Pakatan Harapan government is committed to the ICPT framework as well,” it added.

MIDF Amanah Investment Bank in a separate note said the decision to subsidise only residential consumers helps reduce the burden on the Electricity Industry Fund (EIF), which would have depleted to an estimated RM571 million post the first half 2018 subsidy.

“The residential segment accounts for just 22 per cent of total power demand. Extrapolating from this, we estimate only RM155 million of the total RM698 million of the second half 2018 ICPT surcharge, as well as RM175 million of an estimated RM785 million (1.52sen/kwh) in rebates will be funded by the EIF,” it said.

It said the remaining sales of electricity to non-residential sectors would be absorbed by an ICPT as well as elimination of the previous 1.52sen/kwh rebate.

In comparison, it said RM929 million of EIF funds were used to subsidise consumers across the board in the first half of this year.

Meanwhile, Public Investment Bank in another note said the ICPT mechanism shielded TNB from exposure to any fluctuations in fuel and generation costs, hence resulting in its earnings stability.

Kenanga Investment Bank and Public Investment Bank has each maintained an “outperform” view on TNB with target price set at RM17.90 and RM17.81 respectively.

MIDF Amanah has retained a “buy” call and target price of RM16.30 for the utility giant.

— Bernama