Shares of Malaysian state power firm Tenaga Nasional Bhd surged today after the government said it is raising electricity tariffs by 15 percent on average from the start of next year.

Tenaga’s stock jumped at the opening in Kuala Lumpur, briefly rising as much as 27 percent before settling back at RM11.22, up 13.5 percent, as of 0136 GMT. The benchmark stock index was up 0.54 percent.

Malaysia’s Energy, Green Technology and Water Minister Maximus Ongkili said yesterday that electricity rates across the country, with the exception of eastern state Sarawak, will rise effective Jan 1.

The hike comes as the government is under pressure to rein in spending and boost tax collection to tackle Malaysia’s high budget deficit and fast-growing debt pile. The government also announced in October a new consumption tax that will come into force in 2015.

PublicInvest Research said the increase in electricity rates was good news for Tenaga’s stock.

“We are positive on the development as it is a step towards incentive-based regulation which includes fuel cost pass-through and will see its earnings being based on rewards for efficiency

instead of subject to forces beyond its control,” the research house said in a note today.

PublicInvest house reiterated its ‘outperform’ rating on Tenaga and raised its target price to RM10.72  from RM10.48 previously.

- Reuters