Source: The Star
3rd April 2008
PETALING JAYA: Shares in Tenaga Nasional Bhd (TNB) ended flat yesterday on muted reaction to the Sabah government’s decision to drop plans to build a 300MW coal-fired power plant near Lahad Datu.
Coal-fired Power Plant
The state has also directed TNB to look for alternative sources of energy and site.
“The decision (to scrap the project) has no impact on our forecast for TNB,” said AmResearch Sdn Bhd analyst Ng Yong Yin when contacted yesterday. TNB’s share price was unchanged yesterday at RM7.50 with six million shares transacted.
The RM1.3bil coal-fired power plant project was won by a TNB-led consortium in June last year via an open tender process carried out by the Economic Planning Unit of the Prime Minister’s Department. The contract to build the power plant was later awarded to China National Electric Equipment Corp.
The proposed plant was expected to be operational by 2011, and was targeted to supply electricity to palm oil mills and industrial areas in the east coast region stretching from Sandakan to Tawau. The project “is expected to boost and stabilise the Sabah state grid and supply to the eastern coastal area,” TNB said in a statement to announce that it had submitted a detailed Environmental Impact Assessment report on the project yesterday.
Among other things, the proposed coal-fired power plant would replace several existing diesel power plants in the state, which are more expensive to run due to the higher fuel price. The project, however, drew strong opposition from environmentalist groups due to its location.
Critics also argued that Sabah could draw electricity from neighbouring Sarawak, which has several new hydroelectric dam projects in the pipeline, including the massive Bakun Dam. With Bakun about 600km away from the east coast of Sabah, transmitting the power overland would cost significantly more than the coal-fired power plant project, sources said.
Finding a new location for the plant would also mean further delay to the project that had taken at least six years to get off the drawing board. Meanwhile, TNB’s near-term prospects continued to be weighed down by rising coal fuel cost and its ability to adjust tariff charged to consumers. At yesterday’s close, the stock was down 22% year-to-date versus the KL Composite Index 14% drop over the same period.
In an update on TNB yesterday, AmResearch said the immediate concerns on the group remained on the rising coal price that was expected to hit the group’s performance from the third quarter of its fiscal year ending Aug 31, 2008 (FY08) onwards.
Notwithstanding that, TNB was expected to benefit from the stronger ringgit, as about 47% of its outstanding loans are denominated in foreign currencies. AmResearch has a target price of RM9 for TNB and a “hold” call on the stock.
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