PETALING JAYA: There seems to be little regulatory risk for Tenaga Nasional Bhd
(TNB) since the government is continuing to uphold the imbalance cost pass-through (ICPT) framework with consistent payment to the powerhouse.
As such, the ICPT receivables is expected to trend lower thereby relieving working capital pressure amid moderating coal prices.
This bodes well for the powerhouse, but RHB Research also believes that TNB should pursue its expansion in renewable energy (RE) more aggressively in order to achieve its 8.3 gigawatt (GW) target by 2025 (first quarter of 2023: 3.9GW).
Last Friday, the government announced several tariff adjustments.
This includes high-consumption domestic users with 1,500 kWh and above or equivalent to a monthly bill of RM708 will be imposed with a 10 sen per kWh surcharge.
A surcharge reduction of 20 sen per kWh to 3.70 sen per kWh for the new category of non-domestic consumers, namely state water and sanitation operators.
Besides that a surcharge reduction of 20 sen per kWh to 17 sen per kWh for medium-voltage and high-voltage industrial and commercial users.
Domestic users with consumption of less than 1,500 kWh will continue to enjoy the same two sen per kWh rebate.
Following that, TNB said the ICPT mechanism will remain in place for the second half of 2023 (2H23).
RHB Research said such adjustments are somewhat within expectations as the domestic segment remains largely subsidised and reflects a slight decrease in average fuel prices.
The total ICPT cost to be recovered in 2H23 is estimated at RM9bil, based on the current fuel price trend.
As the government is committed to subsidising RM5.2bil in 2H23, RHB Research estimates that the remainder will be collected from the surcharges imposed.
It said TNB has received RM9.13bil out of total RM10.4bil ICPT cost recovery from the government.
This demonstrates the government’s commitment in upholding the incentive based regulation framework and ICPT mechanisms.
As such, it expects ICPT receivables to be lower on the back of the lower ICPT charge.
It kept its earnings estimates and upgraded TNB to a “buy” with an unchanged target price of RM10.40 a share.
This is so since it foresees limited regulatory risk thereby ensuring its defensive earnings profile coupled with lesser working capital strain given the moderation of coal prices.
However, the downside risks cited include higher operating costs and greater-than-expected plant outages.
