KUALA LUMPUR: Tenaga Nasional Bhd (TNB) may see its total allowed capital expenditure (capex) for Regulatory Period 4 (RP4) increase by up to 21 per cent above the estimated RM35.5 billion, according to CIMB Securities Sdn Bhd.
The firm noted that for every additional RM1 billion in capex beyond the RM35.5 billion, TNB's discounted cash flow (DCF)-based fair value would increase by 3.6 sen per share.
For instance, if the allowed capex reaches RM42.8 billion, this would translate to a 26 sen per share rise in TNB's fair value, equivalent to a 2.0 per cent increase.
"This assumes no changes to our projected allowed capex beyond RP4. Our current financial year 2025 to 2027 (FY25–27) core earnings per share (EPS) forecasts may also be enhanced by two to seven per cent, based on the maximum allowed capex of RM42.8 billion," CIMB Securities added.
TNB on Dec 26 had announced that the Malaysian government approved the implementation of RP4 under the incentive-based regulation (IBR) framework for Jan 2025–Dec 2027.
The current electricity tariffs will be in effect until Jun 2025, with TNB proposing a 14 per cent base tariff hike to 45.62 sen/kWh from Jul 2025.
This is mainly to factor in higher projected coal costs of US$97 per tonne compared to US$79 per tonne in RP3 and gas prices of RM35-46 per million British thermal units (MMBtu) from RM30-33/MMBtu in RP3.
These projected figures are closer to current levels, which in the third quarter of last year, coal was at US$112/MT and gas at RM35–46/MMBtu.
The firm said the average effective tariff was 46.16/kWh in 1H24, after including imbalance cost pass-through (ICPT) surcharges, which is what customers pay to partly bear the additional fuel cost above RP3 projections.
For RP4, CIMB Securities estimates there may still be some ICPT surcharges as the current coal cost is higher than the RP4 projection, which may bring the average effective tariff to 48–49 sen/kWh.
"Based on this, the actual increase in the average effective tariff could be about 5.0 per cent from 1H24.
"Regardless, the impact is neutral as the IBR framework provides regulatory adjustments such that TNB ultimately earns the regulatory rate of return on the regulated asset base (RAB)," it added.
CIMB Securities kept a "buy" call on TNB with an unchanged target price of RM15.80 a share, pending clarity on contingent capex.
The firm currently projects healthy core EPS growth of 12.1 per cent and 7.4 per cent year-over-year in FY25 and FY26, respectively.