News & Articles Consumers to pay more for electricity, but TNB's earnings won't be higher
Consumers to pay more for electricity, but TNB's earnings won't be higher
9 Dec 2015
PETALING JAYA: Despite consumers in Peninsular Malaysia having to pay 0.73 sen per kilowatt hour (kWh) more for electricity for the next six months beginning Jan 1, the impact of the rebate’s implementation is neutral on Tenaga Nasional Bhd (TNB).
This is because the utility company will return some RM762mil in net savings to electricity consumers in the first half of next year, which translates into a rebate of 1.52 sen per kWh from 2.25 sen per kWh now. TNB, in a stock exchange filing yesterday, said the rebate would be applicable to all consumers except domestic consumers with a monthly consumption of 300kWh or below.
This category of consumers enjoy lower rates and are not affected by the tariff adjustments.
Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili announced an imbalance cost pass-through (ICPT) rebate to customers of 1.52 sen per kWh in the January-June 2016 period for Peninsular Malaysia, to come down from the 2.25 sen per kWh consumers have been enjoying since March this year.
The rebate for electricity users in Sabah and Labuan will remain the same at 1.20 sen per kWh.
“The savings in fuel and other generation costs amounted to RM762.03mil for July to December 2015,” Ongkili told a press conference.
“They (TNB) know the situation and they also have seen an improvement in their power plant efficiency, which will not see much impact on their financials,
“But, of course, they have been knocking on our door to revise the tariff, but we will see that in six months’ time,” he added.
Ongkili explained that although liquefied natural gas (LNG) and coal prices have reduced significantly, consumers cannot enjoy the full benefits of lower rebates because of the weaker ringgit and the Government’s continuous subsidy in the power industry.
“Every six months, we would need to reduce our subsidy for piped natural gas. Thankfully, we have some savings from lower input prices, and hence, there are no changes to the base tariff, but there is a slight decline for the tariff rebate” he said.
The savings to be returned to consumers are part of the ICPT mechanism that was introduced by the Energy Commission on Jan 1, 2014, which, in turn, was part of a wider regulatory reform called the incentive-based regulation.
The ICPT mechanism allows TNB to reflect changes in power-generation costs in the electricity tariffs every six months, subject to the Government’s decision and approval.
The base tariff for the period between 2014 and 2017 is 38.35 sen per kWh. With a rebate of 1.52 sen per kwh, the effective rate is estimated at 37.01 sen per kWh. At the moment, the effective electricity tariff is at 36.28 sen per kWh for Peninsular Malaysia because the rebate is higher at 2.25 sen per kWh. Meanwhile, TNB in its regulatory filing said the net savings of RM762.03mil came from savings in fuel and generation costs for the period between July and December this year.
On the fuel and generation cost savings, it said these were mainly contributed by a reduction in the use of LNG for electricity generation supported by the high performance of coal power plants.
On the additional gas cost, the company attributed it to the Government’s decision to further increase the piped gas price from the original RM15.20 per million metric British thermal units (MMBtu) in the base tariff to RM18.20 per MMBtu. This new price, to take effect next month, was part of the Government’s subsidy rationalisation plan.
Alliance DBS Research analyst Quah He Wei when contacted said, “Consumers will end up paying more in the beginning in January compared with 2015 due to the lower rebate ... but the impact would be neutral for TNB, as the fuel cost pass-through mechanism reflects changes in fuel and generation, which is translated into the electricity tariff revision every six months.”
TNB – the sole electricity distributor for Peninsular Malaysia and Sabah – has been enjoying lower fuel costs for a while. However, the weaker ringgit has impacted its profitability, which came in 5.4% lower to RM6.12bil.
It had reported a forex translation loss of RM819.30mil and transaction loss of RM113mil in the financial year 2015.
For the fourth quarter, its earnings came in at RM820.90mil – down by 39.4% from RM1.356bil a year ago.
There was a minimal ICPT over-recovery recognition of about RM30mil during the quarter due to lower coal-based generation.
Lower commodity prices, namely, coal and LNG, contributed to the lower generation costs. The average coal price recorded in the fourth quarter was at RM236 a tonne, compared with RM244.6 a tonne last year, while the average LNG price was RM45.21 per MMBtu versus RM46.45 per MMBtu last year.
Alliance DBS in a recent report said that TNB was expected to benefit from lower LNG prices going forward, “which we understand have been fixed at RM31.3 per MMBtu for the fourth quarter of the 2015 calender year – the lowest since it started to purchase LNG via the Malacca regasification terminal”.
The trading of TNB shares, which were suspended yesterday, will resume today.
At last look on Monday, the stock closed at RM13.46 for a market capitalisation of RM75.62bil.
Recall that TNB shares took a beating when the Government surprised the market with its decision to cut electricity tariffs by 2.25 sen or 5.8% in Peninsular Malaysia on Feb 11. Within minutes, RM7.34bil had been wiped out from its market cap before closing 3.1% lower to RM14.40 on that day.
This is because the utility company will return some RM762mil in net savings to electricity consumers in the first half of next year, which translates into a rebate of 1.52 sen per kWh from 2.25 sen per kWh now. TNB, in a stock exchange filing yesterday, said the rebate would be applicable to all consumers except domestic consumers with a monthly consumption of 300kWh or below.
This category of consumers enjoy lower rates and are not affected by the tariff adjustments.
Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili announced an imbalance cost pass-through (ICPT) rebate to customers of 1.52 sen per kWh in the January-June 2016 period for Peninsular Malaysia, to come down from the 2.25 sen per kWh consumers have been enjoying since March this year.
The rebate for electricity users in Sabah and Labuan will remain the same at 1.20 sen per kWh.
“The savings in fuel and other generation costs amounted to RM762.03mil for July to December 2015,” Ongkili told a press conference.
“They (TNB) know the situation and they also have seen an improvement in their power plant efficiency, which will not see much impact on their financials,
“But, of course, they have been knocking on our door to revise the tariff, but we will see that in six months’ time,” he added.
Ongkili explained that although liquefied natural gas (LNG) and coal prices have reduced significantly, consumers cannot enjoy the full benefits of lower rebates because of the weaker ringgit and the Government’s continuous subsidy in the power industry.
“Every six months, we would need to reduce our subsidy for piped natural gas. Thankfully, we have some savings from lower input prices, and hence, there are no changes to the base tariff, but there is a slight decline for the tariff rebate” he said.
The savings to be returned to consumers are part of the ICPT mechanism that was introduced by the Energy Commission on Jan 1, 2014, which, in turn, was part of a wider regulatory reform called the incentive-based regulation.
The ICPT mechanism allows TNB to reflect changes in power-generation costs in the electricity tariffs every six months, subject to the Government’s decision and approval.
The base tariff for the period between 2014 and 2017 is 38.35 sen per kWh. With a rebate of 1.52 sen per kwh, the effective rate is estimated at 37.01 sen per kWh. At the moment, the effective electricity tariff is at 36.28 sen per kWh for Peninsular Malaysia because the rebate is higher at 2.25 sen per kWh. Meanwhile, TNB in its regulatory filing said the net savings of RM762.03mil came from savings in fuel and generation costs for the period between July and December this year.
On the fuel and generation cost savings, it said these were mainly contributed by a reduction in the use of LNG for electricity generation supported by the high performance of coal power plants.
On the additional gas cost, the company attributed it to the Government’s decision to further increase the piped gas price from the original RM15.20 per million metric British thermal units (MMBtu) in the base tariff to RM18.20 per MMBtu. This new price, to take effect next month, was part of the Government’s subsidy rationalisation plan.
Alliance DBS Research analyst Quah He Wei when contacted said, “Consumers will end up paying more in the beginning in January compared with 2015 due to the lower rebate ... but the impact would be neutral for TNB, as the fuel cost pass-through mechanism reflects changes in fuel and generation, which is translated into the electricity tariff revision every six months.”
TNB – the sole electricity distributor for Peninsular Malaysia and Sabah – has been enjoying lower fuel costs for a while. However, the weaker ringgit has impacted its profitability, which came in 5.4% lower to RM6.12bil.
It had reported a forex translation loss of RM819.30mil and transaction loss of RM113mil in the financial year 2015.
For the fourth quarter, its earnings came in at RM820.90mil – down by 39.4% from RM1.356bil a year ago.
There was a minimal ICPT over-recovery recognition of about RM30mil during the quarter due to lower coal-based generation.
Lower commodity prices, namely, coal and LNG, contributed to the lower generation costs. The average coal price recorded in the fourth quarter was at RM236 a tonne, compared with RM244.6 a tonne last year, while the average LNG price was RM45.21 per MMBtu versus RM46.45 per MMBtu last year.
Alliance DBS in a recent report said that TNB was expected to benefit from lower LNG prices going forward, “which we understand have been fixed at RM31.3 per MMBtu for the fourth quarter of the 2015 calender year – the lowest since it started to purchase LNG via the Malacca regasification terminal”.
The trading of TNB shares, which were suspended yesterday, will resume today.
At last look on Monday, the stock closed at RM13.46 for a market capitalisation of RM75.62bil.
Recall that TNB shares took a beating when the Government surprised the market with its decision to cut electricity tariffs by 2.25 sen or 5.8% in Peninsular Malaysia on Feb 11. Within minutes, RM7.34bil had been wiped out from its market cap before closing 3.1% lower to RM14.40 on that day.
Source: thestar.com.my