Grim picture for TNB; RM3bil more needed for power generation

Should we start worry!!!???

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Thestar: Wednesday September 14, 2011

PETALING JAYA: Tenaga Nasional Bhd (TNB) president and chief executive officer Datuk Seri Che Khalib Mohamad Noh has painted a grimmer picture for the national utility firm, estimating that TNB will need to spend another RM3bil on power generation for this year due to a shortage of gas supply.
Bernama reported yesterday quoting Che Khalib as saying that TNB would need to go to the market to raise money for operations, for the first time, if no immediate solution was found to address the gas crisis.
He added that all fund raising done previously was for capital expenditure.
TNB has been experiencing gas curtailment from its supplier, Petroliam Nasional Bhd (Petronas), and has seen the gas shortage impact its bottom line, prompting the company to issue a warning on its profitability and dividend payment.

“Power plants in the country were not made to burn distillates. To generate 1,000 MW using the alternate fuel, it costs us about an extra RM10mil daily. It’s time for the country to review the gas allocation policy,” Che Khalib(right in pic) said at TNB's Hari Raya open house.

On average, TNB is getting about 900 million standard cu ft per day (mmscfd), far from the usual rate of 1,250 mmscfd.
TNB needs to replace the shortfall in gas volume by utilising more oil and distillates which are five times more expensive than gas.
“Power plants in the country were not made to burn distillates. To generate 1,000 MW using the alternate fuel, it costs us about an extra RM10mil daily. It's time for the country to review the gas allocation policy,” he told the news agency at TNB's Hari Raya open house.
Che Khalib said the financial impact of gas shortage for TNB was more apparent this year, with the extra cost for power generation estimated at a minimum of RM2.6bil for 2011.
“At the moment, we are using internal reserves which are draining out fast. Our debt level, which stood at RM32bil in 2001, is down to RM18bil, and this gives us room to borrow but we can't sustain ourselves for long. We need a permanent solution,” he added.
It is expected that gas supply to TNB will likely normalise by the middle of next year when Petronas' regasification terminal for liquefied natural gas in Malacca becomes ready.

Analysts also expect that Petronas' RM15bil gas-exploration project in the North Malay Basin will benefit TNB as the project will increase gas volumes for Petronas' customers, including TNB.
However, they said that the RM15bil gas-exploration project would not solve the immediate gas-shortage problem for TNB as the first gas from the project was expected in 2013.
Based on TNB's current gas power-generation capacity, the volume needed is about 1,700 mmscfd. The power sector is entitled to about 1,350 mmscfd.
Meanwhile, Bernama also reported that TNB has lobbied for the additional fuel costs to be shared with Petronas and independent power producers.
Last month, TNB submitted a proposal for cost sharing as an immediate solution to the Government but there has been no decision yet.
In its report on TNB yesterday, AmResearch Sdn Bhd upgraded its call on the stock from “hold” to “buy”, stating that the company's valuations had become compelling for a utility firm, with its share price having fallen below its book value at RM5.32 per share.
“TNB is currently trading at highly attractive single-digit financial year 2012 forecast price earnings valuation of only 8 times at the bottom of its five-year band of 8 times to 15 times,” AmResearch said.
TNB's share price ended seven sen higher at RM5.21 yesterday.