Published January 20, 2009

Tenaga posts 2nd straight quarterly loss

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(KUALA LUMPUR) Tenaga Nasional Bhd, Malaysia's state-controlled power utility, posted a second straight quarterly loss as a weaker currency increased foreign debt payments and fuel costs climbed.

The net loss of RM944.1 million (S$395.3 million), or 21.78 sen a share, in the three months ended Nov 30, 2008, compared with a profit of RM1.51 billion, or 34.8 sen, a year earlier, the Kuala Lumpur-based company said yesterday. Analysts at Maybank Investment Bank Bhd expected a RM1 billion loss.

The cost of servicing Tenaga's borrowings soared after the ringgit fell against the Japanese yen and the US dollar. The Malaysian government, which fixes Tenaga's power prices, is also planning a power price cut, putting more pressure on earnings as the global recession crimps demand for electricity. Current-year results may be worse, the company said.

'The key question for this year is going to be demand growth, and whether demand growth goes into contraction if the economy goes into contraction,' said David Chong, an analyst at RHB Research Institute Sdn in Kuala Lumpur with an 'outperform' rating on Tenaga stock.

Economists at CLSA Asia-Pacific Markets expect the Malaysian economy to shrink 1.2 per cent in 2009. Malaysia may enter a recession in the first half and miss the government's 3.5 per cent growth target for the year, according to Citigroup Inc and Standard Chartered Plc.

Crude oil in New York surged to a record US$147.27 a barrel last July, sending fuel prices higher. Oil closed 54 per cent lower at the end of 2008 from a year earlier.

The company's October forecast for power demand growth of 3-4 per cent this fiscal year now looks 'very optimistic', Tenaga's CEO Che Khalib Mohamad Noh said yesterday.

Sales rose to RM7.9 billion in the three-month period from RM6.21 billion a year earlier. Power demand grew at a slower rate of 1.1 per cent in the fiscal first quarter compared with 8.6 per cent a year earlier.

Tenaga shares rose 5 sen, or 0.8 per cent, to RM6.05 yesterday. They have fallen 3.2 per cent this year on the Kuala Lumpur stock exchange, compared with the 1.5 per cent gain in Malaysia's benchmark index. The earnings were released after market close.

The utility posted a foreign exchange loss of RM1.44 billion from a gain of RM242.4 million a year earlier.

Debt denominated in the US dollar and the yen accounted for about half of Tenaga's borrowings of RM24 billion on Nov 30. The ringgit has lost 9.5 per cent against the dollar in the past six months and declined 23 per cent against the yen.

Malaysia's government said last Wednesday that it will consider a power-rate cut at Tenaga after reviewing the price the utility pays for natural gas. Petroliam Nasional Bhd, the Malaysian state oil producer, supplies gas to Tenaga at a subsidised, fixed rate.

Tenaga generated 54 per cent of its electricity from gas, and 28 per cent from coal in the year ended August 2008, according to the company's annual report. About 17 per cent came from hydroelectric power. -- Bloomberg