The reduced tariff rebate for electricity usage at 1.52 sen per kWh for Peninsular Malaysia from January to June 2016 is expected, given the higher gas/LNG consumption in the second half of 2015 on the outages of coal-fired plants, coupled with the recovery of coal prices.

Kenanga Research said the 1.52 sen/kWh tariff rebate is based on fuel cost savings of RM762.9 million from July to December 2015 under the Imbalance Cost-pass-Through (ICPT) mechanism.

"This latest tariff review is earnings neutral to Tenaga Nasional Bhd (TNB), given the fuel cost risk is now being transferred to the end users," it said in a research note.

In addition, Kenanga Research said the price for subsidised piped gas will be raised by RM1.50/MMBtu to RM18.20/MMBtu for January-July 2016 (July-December 2015 at RM16.70/MMBtu), while the base tariff of 38.53 sen per kWh remains unchanged.

"This is in line with the mechanism, whereby, the subsidised piped gas price will increase RM1.50/MMBtu every six months, while the 38.53 sen/kWh base tariff is maintained until end-2017," it added.

Outperform rating

Kenanga said it was maintaining an outperform rating for the national utility company.

On outlook, it remains positive on the ICPT mechanism, which ensures earnings certainty, as the fuel cost risk is fully-passed through on a six month laggard basis.

Thus, future earnings would depend mainly on TNB's operational efficiency.

On Tuesday, Energy, Green Technology and Water Minister Maximus Ongkili said the rebates and tariff reduction would be passed on to all categories of consumers of TNB in Peninsular Malaysia and Sabah Electricity Sdn Bhd (SESB) in Sabah and Labuan, except for domestic consumers with a consumption of 300kWh of electricity or less per month.

Ongkili said the power tariff rate was decided by the cabinet.

- Bernama