Again don't use past data to judge as mentioned in my other posts, as earning of TNB for near future surely will go down because of high fuel price. It is not as cheap as you think aka PER 8x.

Cheers.

This post has been edited by cherroy: Jul 21 2008, 09:05 PM

[quote=cherroy,Jul 21 2008, 10:05 PM]
Again don't use past data to judge as mentioned in my other posts, as earning of TNB for near future surely will go down because of high fuel price. It is not as cheap as you think aka PER 8x.

Cheers.

[/quote


Of course we cannot predict the future. But we know that tenaga monopolize the electricity supply sector. Now is down cycle for all stock. I mean we should try to accumulate a potential stock when the market is down. Buy when everybody run away, and run when everybody buy

Continued Increase In Global Energy Prices Drive Up TNB's Generation Cost


- Net Profit for the 3rd Quarter reduced to RM298.8 million compared to RM1,091.7 million in the same period last financial year

- Operating expenses for the quarter rose by RM1,002.3 million

- Unit electricity demand growth for the 9-month period ended 31 May 2008
o 5.5% - Group
o 6.6% - Peninsular Malaysia

- 17.0% increase in operating expenses

- RM1,464 million increase in generation cost

- Coal price per metric ton
o USD71.2 - average price for 9 months FY2008
o USD160 - current spot prices (cv basis 5,500 kcal/kg)

- EBITDA margin at 34.0% compared to 38.6% the year before

- Economic loss of RM944.2 million as a result of the deterioration in operating margins from higher generation cost.

Thursday, 24 July 2008 - Tenaga Nasional Berhad (TNB) today announced a net profit of only RM298.8 million for the 3rd Quarter in the financial year ending 31 August 2008 (FY2008) result from global impact of higher energy prices. This is in marked contrast to the net profit of RM1,091.7 million achieved in the same period in the last financial year.

Correspondingly, Group profitability for the 9-month period was lower at RM2,876.9 million compared to RM3,892.7 million the year before or a reduction of 26.1%.

Although the electricity demand in Peninsular Malaysia for the 9-month period of 6.6% continues to reflect the resilience of the Malaysian economy in facing the global slowdown, rising operating costs continues to impinge on TNB's profitability.

At Group level, although revenue for the 9 months rose by RM1,467.2 million, operating expenses rose by RM2,257.6 million principally from the higher cost of electricity generation. Apart from higher IPP cost, the average contracted coal price rose from USD45 per metric ton in FY2007 to the current average of USD71.2 per metric ton (based on the volume of coal consumed for the current period). EBITDA margin consequently declined from 38.6% reported in FY2007 to the current 34.0%.

Commenting on the Group's performance, TNB's Chairman, Tan Sri Datuk Amar Leo Moggie said that "utilities globally are experiencing the impact of higher energy costs driven by global market conditions. In Malaysia, whilst gas is heavily subsidized by the Government, the Group has had to manage the impact of rising coal prices, as coal fired generation currently accounts for approximately 28% of units generated in Peninsular Malaysia. This is expected to increase to 36% following the commissioning of Jimah Energy Ventures in January 2009."

Tan Sri Leo added that "as a result of efforts taken in FY2007 to lock-in a considerable volume of coal contracts for FY2007 and FY2008, the current average coal price for the period of USD71.2 per metric ton is significantly below current market average price of USD160/- per metric ton. However, the impact of the higher coal prices currently will result in a significant increase in our coal prices for FY2009."

On 4 June 2008, the Government announced its decision to increase the gas price to the Malaysian power sector and a corresponding adjustment to the electricity tariff, both effective from 1 July 2008. This adjustment allows TNB to recover in full the increase in the price of gas which has been increased from RM6.40 per mmBTU to RM14.31 per mmBTU and provide partial relief for the 170% increase in coal price since 2006.

TNB's President/Chief Executive Officer, Dato' Sri Che Khalib Mohamad Noh commented that "IPP cost and fuel cost continues to be on the rise and currently accounts for 59.6% of the Group’s operating expenses excluding finance cost. IPP and fuel cost for the period increased by RM1,463.6 million."

Let me add that these are historical costs incurred up till 31 May 2008. Taking into account the higher cost of gas and the current coal prices, and not forgetting Jimah Energy Ventures which is expected to be commissioned in FY2009, operating costs are expected to rise further and will place further pressure on the Group's EBITDA margin."

The introduction of the Windfall Profit Levy (Electricity) Order 2008 by the Government will also impact TNB's bottom line as 2 key subsidiaries will be levied. On an annualized basis, TNB Janamanjung Sdn Bhd and Kapar Energy Ventures Sdn Bhd will be levied at about RM43.8 million and RM24.0 million respectively.

Dato' Sri further added that "while we are not able to change or influence the market forces that are driving fuel costs higher, we will continue improving the efficiency of our operations to keep costs low, excel in the services to our customers and at the same time create value for our stakeholders. This is reflected to a significant extent from our current status of the Group's Headline Key Performance Indicators and Company-Wide Initiatives for FY2008."

Based on the lower operating profit margin reported and the increase in the Group's average invested capital, the Group reported an economic loss of RM944.2 million for the period compared to an economic loss of RM322.0 million reported for the corresponding period last year.
The Malaysian Institute of Economic Research ("MIER") has recently in its second quarter Malaysian Economic Outlook, cut its GDP forecast yet again from 5.4% to 4.6%. In its report, MIER is of the view that "the economic condition could deteriorate during the second half of the year due to the knock-on effects of higher oil prices and slower global growth."

The global power industry is currently facing an unprecedented challenge. Demand for reliable electricity supply and customer service excellence however continues. The extent to which increases in electricity generation cost can be recovered will determine the financial condition of TNB and affect its ability to make future investments in a timely manner.

Given the foregoing, concerns over the impact of global energy prices, especially the volatility in coal prices, increase in IPP capacity payments and inflationary pressure will continue to pose the main challenges for the Group. The result for the 3rd Quarter ended 31 May 2008 is a clear manifestation of this phenomenon.
Under this current scenario, the Board of Directors is of the view that the Group will remain profitable in FY2008. However, it will be lower than the year before as a direct consequence of the higher operating expenses and lower demand growth.

---

Added on September 12, 2008, 9:23 pmThe government has reversed its earlier decision to levy the windfall profit tax on independent power producers (IPPs) with immediate effect and replace it with a one-off payment instead. The earlier windfall profit tax is a 30% levy on any excess above 9% of the fixed assets. The excess is based on earnings before interest and tax.


The Windfall Profit Tax story (in brief). [Source: Business Times]

The imposition of the "30% windfall profit tax on the IPPs in June sent shockwaves throughout the industry. RAM Ratings had warned that a third of the RM30 billion IPP-related bonds it rated were likely to be affected. Bankers also said that the move would make it costlier for IPPs to finance future projects." as reported by Business Times (go here).

The government has now decided that the IPPs would make a one-off payment equivalent to the levy for one year as well as to suspend power purchase agreement (PPA) renegotiations pending a comprehensive study into the restructuring of the electricity supply industry. Last month, the IPPs had made their first quarterly payment of the the windfall profit tax. With this decision, I believe the IPPs will soon make another payment equivalent to 3 times of the amount of the first payment & that will be the end of the story.


IPPs' first quarterly payment made in August 2008 (Source: The EdgeDaily)

This decision will be "negative" for Tenaga, but "positive" for all the IPPs as well as tolled-road concession-holders. The latter was supposed to be the next batch of concession-holders to be hit by the windfall profit tax.

From the chart below, I expect Tenaga to test its immediate support at the previous gap-up level of RM7.50. If the RM7.50 support level cannot hold- which I think will be the likely scenario- then, Tenaga will drift to the support level of RM7.00 & RM6.50. For now, we should avoid Tenaga.



This post has been edited by darkknight81: Sep 12 2008, 09:23 PM

Tenaga closed at RM 7.20 today. My personal view is can buy in below RM 6.50 for this counter.

i don think TNB share can get that low unless something happen in out politic in this few day..

We don know what will happened. RM 6.50 is the price ;which I feel comfortable to buy in this counter. If it does not reached RM 6.50 then I will not touch it…
Maybe influence by Dreamer and Cherroy, my impression on GLC is not that positive like last time.

1. Operating profit remain high for tenaga unless the oil price ease further.
2. Suspension of PPA with IPP
3. Depreciation of RM which are very costly for tenaga as it owes a lot of bond in USD.
4. Political uncertainties

rm6.50 almost the same price their employee get for ESOS.. the lowest price for ESOS is rm6.33.. then their staff die..lol.

Sarawak Energy ESOS is at RM 2.15...Last time it ever dropped till RM 1.90 which is way below ESOS price. Both Tenaga and Sarawak carried a lots of debt in hand. So for me at current situation the price for them are still high though

darkknight81,

TNB is NOT a long term buy and hold counter.

1) It is SUPPORTED by 15 billions of GAS subsidy every year. Without GAS subsidy, it will lose a lot of money.

2) The debt is in foreign currency. And, it needs to borrow more to maintain transmission line.

3) Due to politic, it will not be allowed to raise tariff that much.

4) It does not have MONOPOLY in power generation.

5) Power transmission is a money losing business world wide.

6) West Malaysia has TOO MUCH power capacity.

I HATE any business that has a huge CAPEX and SUNK cost. Looks what is happening to airline now. Ditto for hotels. They are at the mercy of business cycle. Given that they have HUGE sunk cost, when recession hit, they cannot down size easily.

Dreamer

TNB is NOT a long term buy and hold counter.

<<1) It is SUPPORTED by 15 billions of GAS subsidy every year. Without GAS subsidy, it will lose a lot of money.>>
Agree with this one

2) The debt is in foreign currency. And, it needs to borrow more to maintain transmission line.
Their debt is in USD

3) Due to politic, it will not be allowed to raise tariff that much.

I think this statement is corelated with statement Number 1. Due to this government got to subsidy on the generation source. So actually tenaga will still earn money, if government want to reduce the burden of rakyat they got to subsidy gas to tenaga so that tenaga no need to raise tariff on electricity.

4) It does not have MONOPOLY in power generation.

Why you said it does not have monopoly? they monopolize on west malaysia power generation business right? IPP got to sell their power through tenaga. Which means they have the PPA with IPP upon the fix unit charge. Then they can charge to customer with the price they feel comfortable with.

5) Power transmission is a money losing business world wide.
Base on what you make this statement? Any example? If power business is really so bad then y ppl are still bidding for power plant?

6) West Malaysia has TOO MUCH power capacity.

They are going to shut down some of the old plant as i know.

From what i know tenaga now are having 29.6 billion ringgit debt in USD. This is what i more concern on their cash flow. Further more they are taking parts in bakun dam (at least 50% stake) which i think they should better buy it from bakun. It will raised their debt ratio further. As hydro dam is very costly, they need many years to earn back that investment..... the earlier you start earning the better it is for the company that y i see the bakun dam acquisition by tenaga as a bad news.

darkknight81,

<<5) Power transmission is a money losing business world wide.
Base on what you make this statement? Any example? If power business is really so bad then y ppl are still bidding for power plant??>>

I am ENGINEER. I do not write ambiguous word.

I said POWER TRANSMISSION. I did not said POWER GENERATION.

A power plant generate power. It is not the transmission facilities.


<< 4) It does not have MONOPOLY in power generation.

Why you said it does not have monopoly? they monopolize on west malaysia power generation business right? IPP got to sell their power through tenaga. Which means they have the PPA with IPP upon the fix unit charge. Then they can charge to customer with the price they feel comfortable with. >>


The PPA agreement is one sided. TNB has to take the power even it does not need it. And, TNB pay at higher rate than it can generate itself.

<<Then they can charge to customer with the price they feel comfortable with.>>

This is subject to political pressure.

So, imagine a business that has to buy input at HIGH COST regardless of whether you can sell it. And, the price that you can charge is subject to political pressure. Regardless of whether BN stay or BR take power, the existing or new government will be pressured to keep electricity tariff low to buy vote.

Dreamer

So your advice is better don touch this stock even it comes to RM 6.00 or even lower?

darkknight81,

1) IMHO, it is NOT a stock that you can INVEST in. Aka, not a long term buy and hold stock. If you want to gamble on this, it is up to you.

2) I think some of the TNB's debt is in Japanese dollar too.

Dreamer

Actually by seeing at the debt alone already scare me away from this stock. Even though by looking at EPS looks alright for this counter. Last few months i did buy at RM 6.0+ and sold at RM 8.00+. I can say tat time i din consider the debt ....

Maybe can consider quite lucky that time...

Looking back at this stock again now make me got to think twice even it is RM 6.00...

Trying to dig up more information from expert here ....

I won touch this stock unless it really reached very low price.

darkknight81,

In short term, you are speculating on the direction of FOREX when you buy this stock. RM versus USD and Japanese Yen. The debt payment is such a HUGE part of TNB that, if RM went down, it loses money. When RM went up, it makes money.

<<Last few months i did buy at RM 6.0+ and sold at RM 8.00+.>>

You got lucky.

Dreamer

Sifu Dreamer is right. You won't want to touch malaysian companies with debts tied to usd and yen. Especially now malaysia's inflation is still pretty high and growth rate is timid.

Thanks Dreamer and Adam sifu

Yup tats right by playing on this counter we are involve in some forex speculation.


This post has been edited by darkknight81: Sep 15 2008, 08:14 AM

Tenaga rebound ...............for those who join yesterday should be happy today la ................

By reading this thread.....we can conclude that Tenaga

1. High debt and mostly USD and YEN.

2. Cost high related to High Coal / Fuel price.

3. Contract with IPP not yet reviewed, thus need to purchase all power from IPP.

Today Tenaga hit as low as 5.85 and sustain at 6.00 and quite a huge buy bid and sell bid... with almost > 15000 lots (100 share) waiting to dispose....

One thing for sure, from Bursa Malaysian Recent Capital Change, EPF is buying into this stocks.....

So pointed out from all the sifus is this is not a long term stock that we should hold, very high volatility......

I will never be interested in Government linked or Politically linked counters.....All has no healthy structure especially financially, why all of them should be involved in high debt and problem with cost control ? They remind me of corruption or something. Very dull to know.

Why they never be foresighted and no guts to compete globally ? Why they always hide inside the shelter of our local shore and fight for protection to survive ?
Aiyo, sick of them. What a shame.

This post has been edited by rayloo: Nov 1 2008, 07:33 AM