Tenaga’s continued ICPT in 1H19 ‘not unexpected’
KUCHING: Analysts were not overly surprised by the extension given for the Imbalance Cost PastThrough ( ICPT) up to the first half of 2019 (1H19) as announced by Tenaga Nasional Bhd (Tenaga Nasional).
The peninsula power supplier last Friday said that the government, via the Energy Commission (EC), had approved the continuation of the ICPT for 1H19.
This means that the average base-tariff remains unchanged at 39.45 sen per kWh and that due to higher fuel and generation costs for 2H18, additional cost of RM948 million or 2.15 sen per kWh ICPT surcharge will be passed through.
Meanwhile, the surcharge will only be applicable to non-domestic customers while the surcharge for domestic customers amounting to RM308 million will be funded by Kumpulan Wang Industri Elektrik (KWIE).
“We were not surprised with the surcharge given rising fuel costs, especially coal prices in the past few months,” observed Kenanga Investment Bank Bhd (Kenanga Research).
We were not surprised with the surcharge given rising fuel costs, especially coal prices in the past few months. Kenanga Research
“The applicable coal prices in 3Q18 and 4Q18 were RM359.87 per metric tonne and RM428.42 per metric tonne respectively, much higher than the benchmark coal price of RM315.9 per metric tonne for the Second Regulatory Period (RP2) in 2018-2020.
“Thus, the additional generation cost in the second half of 2018 was RM1.82 billion. With RM308 million subsidy for domestic customers from KWIE and cost and revenue adjustment of RM564 million, this resulted in the ICPT surcharge of RM948 million.”
This surcharge will be staggered across 1.35 sen per kWh in JanuaryFebruary 2019, and 2.55 sen per kWh in March- June 2019, the research house said.
“We are not overly excited about the ICPT surcharge as this is not the first surcharge while the available fund in KWIE to offset subsidy for domestic customers had also led us to anticipate a surcharge,” Kenanga Research added.
“We are more interested to see the situation after the KWIE fund is fully utilised.”
Earlier in July, it was announced by the Energy Ministry that the fund available for KWIE was RM760 million. Should fuel costs remain high at the current level, Kenanga Research believed that the KWIE is likely to be exhausted by 2020.
In any case, we still believe any extra fuel costs will be transferred to all customers under the principle or spirit of ICPT mechanism.”
Meanwhile, the research firm saw that Tenaga Nasional’s share price came under pressure in the past one month following the Energy Minister’s comment of disrupting the power industry by not limiting the focus to generation segment but improving efficiency across the supply chain, including transmission and distribution.
“We opine that efficiency-driven industry reform will benefit consumers while the opening of market to new players will help to achieve this aim,” it opined.
“However, we believe Tenaga Nasional should be able to face the challenges given its entrenched position with existing extensive infrastructures that should give it a cost-advantage over the newcomers.
“In addition, with its efficiency record, Tenaga Nasional should be able to stand up to the competition.”