TNB to raise ringgit loans

Published: 2009/05/01

Tenaga Nasional will raise the ringgit financing tranche by tranche for the US$2 billion undersea power line as the Bakun project will be spread out over seven years

Malaysia's biggest power producer, Tenaga Nasional Bhd (5347) , plans to raise ringgit-denominated loans to finance a US$2 billion (RM7 billion) submarine transmission line carrying electricity from Sarawak to the Peninsula, its chief said.

"We are looking at ringgit financing for the transmission line," chief executive officer Datuk Seri Che Khalib Mohamad Noh said in an interview on Wednesday, but said financing was not expected in the next 12 months.

"We will raise it tranche by tranche because the Bakun project will be spread out over seven years. We certainly don't need financing over the next 12 months," he said.

The cable project involves laying a 730km high-voltage direct current transmission line and a 670km undersea cable for the 2,400-megawatt Bakun hydroelectric dam.
TNB, the Ministry of Finance and Sarawak Energy, a unit of the Sarawak state government, are still working out the shareholding structure of the consortium tasked with the cable project, said Che Khalib.

"We are negotiating but we will definitely not own more than 50 per cent (in the consortium). It will only be at the associate level," he said.

Analysts said at US$2 billion and assuming debt financing of 80 per cent and TNB's equity shareholding of 30 per cent in the consortium, the company would require about US$120 million (RM427 million).

"Funding shouldn't be a problem. They have internal funds and they are not stretched. Gearing up (for the cable project) won't put a significant strain on their balance sheet," said an analyst at RHB Research Institute, who asked not to be named.

Electricity demand in Malaysia has been growing at an annual rate of 6-7 per cent since 1997, but will likely contract by 3-4 per cent this year due to the global economic crisis, Che Khalib said.

TNB is also looking for a new site to build a 300-megawatt coal-fired power plant in the east cost of Sabah.

"We are in discussions with the state government of Sabah about the location of the power plant," Che Khalib said but declined to comment on the cost of the project.

The plant was to have been built in Lahad Datu in Sabah last year but was scrapped following environmental protests.

Armed with a war chest of RM4 billion, Che Khalib said TNB was looking for investment opportunities in the region and in the Middle East, but is currently not in any active negotiations.

At the end of last year, the company made an offer to buy back a 40 per cent stake in the Kapar power plant owned by independent power producer Malakoff, a unit of MMC Corp.

"We have made them an offer but they have not come back to us," Che Khalib said, adding that the offer is part of Tenaga's strategy to cut some of the costs associated with buying power from independent producers.

As of Wednesday's close, TNB's shares have risen nearly 14 per cent so far this year against a 10 per cent gain in the benchmark index. - Reuters