TENAGA: Keep BUY and RM11.50 Target Price, 26% upside, and 5% yield.
Although the current electricity tariff schedule is unchanged, the actual earnings impact of the delayed rate hike to Tenaga Nasional remains unclear for now.
RHB sees the base case assumption for the delay as that WACC is lowered to 7%, but the magnitude is cushioned by growth in the regulatory asset base. RHB analysts continue to favour TNB for its commitment to energy transition via the ambitious renewable energy (RE) targets to fuel medium-to-longterm growth. Electricity tariff maintained under RP3. Recently, the Government approved the implementation of the delay under the Incentive Base Regulation (IBR) framework for the period of Feb 2022 to Dec 2024.
The Government also decided to maintain the current electricity tariff schedule for all customers in Peninsular Malaysia. ICPT mechanism approved for the first half of 2022. The Government has also approved a 3.7sen/kWh surcharge for non-domestic users while maintaining a 2sen/kWh rebate for domestic users for 6 months (starting February).
In the Energy Commission’s press statement, the surcharge was to cater to generation costs in Peninsular Malaysia, which has surged 45% as a result of escalated coal prices. In order to maintain the rebate for domestic users, RM715million was utilised from the Kumpulan Wang Industri Elektrik fund.
