TNB sees return of foreign investors' interest

UTILITY firm Tenaga Nasional Bhd (TNB) (5347) expects foreign investors' interest in its shares to return once the government gives more clarity on the tariff structure and fuel pass-through formula.

Chief executive officer Datuk Seri Che Khalib Mohamad Noh hopes that an announcement will be made soon by the government on the matter, perhaps before the next power tariff review due in early July.

"If the government is going to remove (gas) subsidy, this more transparent cost pass-through formula has to come together, because you can't have a remo-val in subsidy on one side, while the power tariff is not certain," Che Khalib told reporters on the sidelines of Invest Malaysia 2010 in Kuala Lumpur yesterday.

Prime Minister Datuk Seri Najib Razak has said in his keynote address earlier that Malaysia will eventually do away with various subsidies as part of the economic reform.
"The gas price in Malaysia is far below market price and once the subsidy is removed, there will be additional cost in producing electricity. Tenaga is not in the position to absorb the additional cost," Che Khalib said.

He added that many investors have sold TNB shares as a result of this lack of clarity in power pricing in Malaysia.

Its foreign shareholding has fallen from a peak of 28 per cent to less than 10 per cent now, he said.

Che Khalib said since the gas price in Malaysia is currently heavily subsidised, it will be a gradual process for the government to fully remove the subsidy.

"If gas price is going up every six month, then power price needs to be adjusted accordingly as well to reflect the additional gas price that Tenaga has to pay, I think that's straight forward.

"The commitment by the prime minister this morning saying that the subsidy has to be eventually removed, I think that's one positive side towards providing more clarity to the power industry in particular.

"I was made to understand that Pemandu (Performance Management and Delivery Unit), which is the subsidy lab, is currently looking at all these. I hope they can put into recommendation to have the transparency in the tariff setting, because that is one important element for us to move forward," Che Khalib said.