KUALA LUMPUR: Tenaga Nasional Bhd’s share price fell after the energy provider announced on Friday it is taking over 1Malaysia Development Bhd’s 70 per cent stake in Jimah East Power (JEP) from the Energy Commission.
TNB will take over the development of two 1,000MW coal-fired power plants for RM46.98 million via internal funds, versus the actual development cost of RM83.68 million incurred by 1MDB.
“We take positive note on the immaterial six per cent to seven per cent increase in the estimated project cost despite the significant 15 per cent depreciation of the ringgit against the US dollar over the year.
“The hike of 5.3 per cent in levelised tariff to 26.67sen/kWh may well compensate for the higher construction cost and improve the internal rate of return for the project,” Hong Leong Investment Bank Research said in a note.
The research house said TNB will not assume any guarantee on 1MDB but will only be obligated for the equity funding of JEP, existing project liabilities of JEP and upcoming debt fundings.
“We are positive on the revealed information, given TNB’s stand in upholding shareholders’ interests while ensuring long-term sustainability of power supply to the nation,” it said.
Hong Leong Investment Bank has maintained a ‘buy’ call on the energy provider with a target price of RM17.00.
Meanwhile, another research house, Kenanga Research, said TNB’s net gearing could rise to 0.66 times from 0.46 times, based on its second quarter 2015 results.
“In all, we are positive on the acquisition given the reasonable purchase cost.
“However, we maintain our opinion that so long as 1MDB’s asset sales of the remaining brownfield power plants (under Edra Global) are not settled, TNB’s share price will continue to come under pressure on fears of overpaying in case of its acquiring the assets,” it said, adding that it has maintained a target price of RM12.78 for TNB.
At closing, TNB’s share price stood at RM12.62, down by six sen with 6.81 million shares transacted. During the day, it reached a low of RM12.38 per share. — Bernama