News Tenaga Nasional (Tenaga) has signed a 2-year
MoU with PT PLN, the Indonesian owned power company, and PT Bukit Asam
(PTBA), a coal mining company, which
owns the Production Operation Mining Permit in Indonesia. The MOU includes
building a 275KV interconnection line from Telok Gong in Melaka to Garuda Sakti
in Sumatera, Indonesia and the development and construction of a mine mouth
coal fired power plant in Peranap, Indonesia.
Comments There are three parts to the MoU i.e. 1) coal
mining; 2) a c. 1000MW coal-fired power
plant in Indonesia and 3) 60-70km of 275KV submarine cable that will connect
Peninsula to Sumatera. Tenaga and PT PLN will only take a minority stake in (1)
and equal majority stakes in (2) and (3). However, the exact shareholding
structure and CAPEX details are not available yet as the parties are still
discussing the terms.
We are not surprised as Tenaga mentioned it will be exploring the ‘ASEAN grid’ idea with
Indonesia. This involves cross border electricity exchange, which will be handy
for both countries to share excess capacity during energy crisis periods.
We view this as long-term positive for Tenaga as it is exploring
new electricity sources instead of relying purely on its own or from the IPPs.
Outlook The last
couple of months’ gas supply continues to be weak at 1000-1150mmscfd.
Positively, it appears unit demand has softened to 4.3% since 7M12’s 4.9%, which
bodes well for Tenaga as it means burning less-expensive fuels. We will release our 3Q12 result preview
closer to Tenaga’s results date (July 2012).
Forecast No
changes to our FY12-13E core earnings of RM1.82b-RM2.98b (refer overleaf for assumptions).
Rating Maintain
OUTPERFORM
Investors should take a 6-9 months view as FY13E should see
improved gas supply and thus, lower fuel cost. Gas shortage supply
compensations will continue until Sept 2012, which is a decent substitute to
fuel cost pass-through via tariff revisions, which still shows strong
government support.
Valuation Unchanged Target Price of RM7.50 on an
average FY12-13E core EPS and target Fwd PER of 17.0x.
Risks High demand
will result in more
expensive fuel generations.
Unexpected gas supply curtailments.
Source: Kenanga
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