RAM Ratings expects Tenaga Nasional Berhad (TNB) to stay resilient despite the respective 5.8% (2.25 sen/kWh) and 3.5% (1.20 sen/kWh) reductions in electricity tariffs for Peninsular Malaysia and Sabah, to take effect on 1 March 2015.
The tariff reduction is in line with the fuel-cost-pass-through mechanism under the incentive-based regulation (IBR), which was implemented in January 2014 and has led to fuel cost savings for TNB amid lower coal prices. Assuming the latest revised tariffs are maintained beyond June 2015, RAM estimates a revenue dip of less than 5% for TNB's full-year financials. "We expect a correspondingly minimal impact on its debt-protection metrics," observes Chong Van Nee, RAM's Co-Head of Infrastructure & Utilities. Barring any revision in the subsidised price of piped gas, we anticipate additional fuel cost savings in the coming months in view of the continued downtrend in coal and LNG prices.
We maintain our view that TNB (rated AAA/Stable) will continue enjoying government support, as evidenced by the IBR framework, which seeks to sustain the utility giant's long-term financial profile.
Media contact
Adeline Poh
(603) 7628 1021
adeline@ram.com.my
© Press Release 2015
