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2 October2009
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Malaysia may raise power tariff in 2010

Malaysia’s state power agency Tenaga Nasional Bhd (TNB) may get an electricity tariff hike early next year when the Government reviews gas prices in January, local business daily the StarBiz reported, quoting OSK Research.

“With the previous gas price review on July 1 turning out to be a non-event as the Cabinet did not approve the new price, the upcoming gas price review in January 2010 is overdue,” the research house said in its latest report. “We think the

The Malaysian government may raise the price of gas with an associated electricity tariff hike to ensure a continued reduction of subsidies, although we are currently unable to make an estimate of the quantum of increase.”

The report said that at the current oil price of $66 per barrel, the reference price of gas would come in at around 26.50 ringgit per million British Thermal Unit (mmBTU). (1$=3.4 Malaysian ringgit)

With the government originally planning to cut its subsidy on electricity generation by gas to zero from 70 percent over 15 years, this would translate into a theoretical price of 9.30 ringgit to 10.60 ringgit per mmBTU for gas used in power generation, it said.

“This theoretical price is still lower than the present RM14.31 per mmBTU,” OSK noted. “The government may wish to be more aggressive in cutting back on subsidies or may be projecting a higher price of oil for 2010.”

Any electricity tariff increase by TNB would build in a buffer to allow for the possibility of further increases in coal price and should in general be positive for its margins, the brokerage added.

OSK also said it did not expect to see “spectacular numbers” in TNB’s upcoming fourth-quarter results.

“Although electricity demand has picked up, with Peninsular Malaysia demand between May and July growing 12.4 percent compared with the preceding three months, the additional electricity was likely to have been generated by (the more expensive) coal-fired power plants,” it said.

“As such, although revenue growth should be strong quarter-on-quarter, margins may remain lacklustre,” it added.


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