MIDF Amanah Investment Bank Bhd maintained a 'buy' recommendation and target price (TP) of RM11.80 on Tenaga Nasional Bhd (TNB) following the government's decision to maintain the Unbalanced Cost Relief (ICPT) rebate of two sen per kilowatt hour (kWh) to all customers in the second half of this year.
In a research note today, the investment bank said the rebate position was a result of a reduction in actual generation costs in the first half of this year following the ICPT being determined based on a six -month retrospective.
“Although the average coal price for the period increased to US $ 70.06/tonne, which is up 3.9% from the benchmark coal price extended to the second regulatory period (RP2) of US $ 67.45/tonne, the reference market price for gas is RM17.16/tonne. mmbtu (million metric British thermal units) was 36.9% lower than the RP2 extended gas benchmark price of RM27.20/mmbtu.
"The rebate is funded by net fuel cost savings, channeled through the Electricity Industry Fund (KWIE) and income neutral to TNB," he explained as reported by Bernama.
Meanwhile, the investment bank added, the electricity discount announced under the People's Protection and Economic Recovery Package (PEMULIH) has the potential to reduce collection risk for TNB as the government essentially takes over as financier from financially distressed consumers despite being limited to the part of the bill that receives discount.
Under the PEMULIH stimulus package announced by Prime Minister Tan Sri Muhyiddin Yassin yesterday, domestic consumers will also enjoy discounts of between 5% and 40% on July-September electricity bills.
