KUALA LUMPUR: Tenaga Nasional Bhd’s (TNB) shares gained in early trade on Friday following its proposal to increase electricity tariffs starting July 2025, creating potential trading opportunities in the sector.
The utility giant rose 66 sen, or 4.65%, to RM14.84 with 2.72 million shares traded at 9:48 am. The counter has gained 48% year-to-date.
TNB announced that the base tariff of electricity will be raised by 14.2% to 45.62 sen per kilowatt-hour, starting July 1, 2025, under the fourth phase of regulatory period (RP4) of the incentive-based regulation framework.
The current base tariff is set at 39.95 sen/kWh.
However, for the first six months of RP4 until June 30, 2025, there will be no change in the electricity tariff rate and tariff structure.
Under RP4, the allowed capital expenditure (capex) is RM42.821bil, which consists of RM26.554bil base capex and RM16.267bil contingent capex.
The total allowed capex for RP4, according to TNB, is set to bring significant economic benefits towards stimulating the nation’s economy and preparing the electricity network to facilitate the nation's energy transition agenda.
The allowed operating expenditure (opex) is RM20.782bil, which supports the planning and execution of necessary operational and maintenance activities for all of TNB’s electrical infrastructures.
TA Securities remains broadly positive on RP4's outcome, citing the increased allowable capex and sustained rate of return, which support TNB's regulated earnings growth.
The research house has reaffirmed its "buy" call on TNB, maintaining a DCF-derived target price of RM17.30 (WACC: 7%, TG: 2%).
It added that the latest development underscores its thesis of TNB being one of the key beneficiaries of the energy transition, driven by an increase in grid capex due to its monopoly over the domestic power grid infrastructure.
"In addition, we believe Genco is well positioned to benefit from data centre-driven demand growth. At just 6.0x FY25F EV/EBITDA, TNB is currently trading at a discount to the historical mean of 7.2 times. The key risk to our call is unfavourable changes to the policy and regulatory framework," TA said.
Meanwhile, PublicInvest Research said that, given the limited disclosure from TNB, it maintains a neutral stance on the 5.67 sen tariff increase, assuming it stems from the generation cost component.
The imbalance cost pass-through (ICPT) review, conducted every six months, already accounts for fuel cost volatility throughout the RP.
The 7.3% rate remains unchanged from RP3, and the RM42.821bil capex aligns with expectations.
“We are still awaiting further details on forecasted base sales and the tariff breakdown to assess the impact on TNB.
“However, we anticipate a significant increase in forecasted base sales as TNB recently raised its demand outlook to 5.8%-6.3% from 3.0%-4.0% for 2024. We maintain an ‘outperform’ call and target price of RM16,” the research house said.
Separately, TNB received a letter of notification as a shortlisted bidder from the Energy Commission (EC) to develop a 500 megawatt alternating current large scale solar photovoltaic plant at Kuala Muda, Kedah.