Company Coverage
Tenaga Nasional (TNB MK): Government Shelters Citizens From Higher Tariffs, IBR Shelters TNB’s Earnings
BUY (Maintained)
Current price:
Target price:
Upside:
RM13.32
RM16.30
+22.3%
Analyst
Highlights
- The government is protecting domestic users from tariff shock by exempting household usage of up to 800kWh (from 600kWh) from the AFA surcharge from Sep to Dec 26.
- Since May 26, the government has been covering the AFA surcharge for domestic users consuming up to 600kWh. This amounted to RM380m of compensation to TNB (May-Jul 26), and the government has been progressively paying TNB using the KWIE fund drawdown. We expect TNB’s earning to remain neutral as the government protects the Rakyat from fuel price shocks.
- We believe the recent share price weakness is due to potential rising regulatory receivables from the government. In the past decade, the IBR framework has been upheld. We maintain BUY with a DCF-based target price of RM16.30.
Analysis
- Households using up to 800kWh to be exempted from Automatic Fuel Adjustment (AFA)... Amid the haze and rising temperatures, the government has expanded electricity bill protection for domestic users to now cover those consuming 800kWh per month (from 600 kWh previously) from September to 31 Dec 26. This was announced by Prime Minister Datuk Seri Anwar Ibrahim in a Facebook post yesterday, following a meeting with the Energy Transition and Water Transformation Ministry (PETRA), the regulator Energy Commision, and Tenaga Nasional (TNB).
- …amid higher household electrlcity consumption. The government deems the measure as an immediate step to ease the cost-of-living pressures faced by households, particularly as the haze and hotter weather have driven up electricity consumption in some homes.
- Rising AFA due to the Middle East crisis. Based on Tenaga Nasional’s (TNB) forecast, the AFA has been rising since May 26 and is expected to continue rising to a peak surcharge of 5.48 sen/kwh in Dec 26. This is a result of higher gas and coal prices globally.
Highlights
- The government is protecting domestic users from tariff shock by exempting household usage of up to 800kWh (from 600kWh) from the AFA surcharge from Sep to Dec 26.
- Since May 26, the government has been covering the AFA surcharge for domestic users consuming up to 600kWh. This amounted to RM380m of compensation to TNB (May-Jul 26), and the government has been progressively paying TNB using the KWIE fund drawdown. We expect TNB’s earning to remain neutral as the government protects the Rakyat from fuel price shocks.
- We believe the recent share price weakness is due to potential rising regulatory receivables from the government. In the past decade, the IBR framework has been upheld. We maintain BUY with a DCF-based target price of RM16.30.
Analysis
- Households using up to 800kWh to be exempted from Automatic Fuel Adjustment (AFA)... Amid the haze and rising temperatures, the government has expanded electricity bill protection for domestic users to now cover those consuming 800kWh per month (from 600 kWh previously) from September to 31 Dec 26. This was announced by Prime Minister Datuk Seri Anwar Ibrahim in a Facebook post yesterday, following a meeting with the Energy Transition and Water Transformation Ministry (PETRA), the regulator Energy Commision, and Tenaga Nasional (TNB).
- …amid higher household electrlcity consumption. The government deems the measure as an immediate step to ease the cost-of-living pressures faced by households, particularly as the haze and hotter weather have driven up electricity consumption in some homes.
- Rising AFA due to the Middle East crisis. Based on Tenaga Nasional’s (TNB) forecast, the AFA has been rising since May 26 and is expected to continue rising to a peak surcharge of 5.48 sen/kwh in Dec 26. This is a result of higher gas and coal prices globally.
BUY (Maintained)
Current price:
Target price:
Upside:
RM13.32
RM16.30
+22.3%
Analyst
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