Taxes bite into TNB bottomline
Utility giant’s Q3 earnings 15% lower to RM1.96bil
PETALING JAYA: Tenaga Nasional Bhd’s (TNB) tax bill for the third quarter jumped to RM400mil, which is an increase of 18 times from the same period last year, causing the dominant power-generation company’s earnings to slip by some 15%.
The group’s bottomline for the third quarter ended May 31 fell to RM1.96bil from RM2.3bil in the same period last year.
TNB said that the reduced profit position was due to an increase in a deferred taxation expense, resulting from a higher capitalisa- tion of assets during financial year 2016 (FY16) and FY17 that was recognised in the third quarter.
TNB is currently embroiled in a dispute with the Inland Revenue Board (IRB), where the latter claims that TNB has unpaid taxes amounting to some RM2.07bil for the assessment years of 2013 and 2014.
In December last year, TNB had said that the High Court had granted it leave to commence judicial review proceedings to set aside notices from the IRB’s RM2.07bil additional tax bill.
However, in the last few quarterly results, TNB’s deferred tax payments have been on the rise. The amount of RM400mil set aside in the latest quarter is the biggest. Year-to-date, it has set aside RM508.8mil in deferred taxes, which is higher than the RM73.8mil in the corresponding period last year.
On TNB’s financial results, the group said its revenue for the third quarter increased by RM420.5mil or 3.5% to RM12.55bil from RM12.13bil in the same quarter last year.
“The increase in revenue was mainly due to an under-recoverability of the imbalance cost pass-through (ICPT) recognised during the current quarter amounting to RM507.1mil
as compared to an over-recoverability of RM537.6mil recognised in the corresponding quarter,” TNB said in the notes accompanying its financial results.
For the first nine months, TNB’s revenue increased by 5% or RM1.65bil to RM34.95bil from RM33.29bil in the same period last year, mainly due to the recoverability of the higher generation costs via the effective implementation of the government-approved ICPT mechanism.
“The ICPT mechanism, a part of the wider regulatory reform called the incentive-based regulation (IBR), allows for TNB to be financially neutral from any variations in generation costs and fuel prices,” TNB’s president and chief executive officer Datuk Seri Ir. Azman Mohd said.
Its net profit in the first nine months to May 31 stood at RM5.18bil compared with the RM5.6bil recorded in the previous corresponding period, a decrease of RM420.6mil or 7.5% due to the increase in finance cost from the recognition of interest in amounts owing to the government, and from new borrowings acquired during the current period.
TNB said the return for the regulated business under the IBR framework that mainly consists of the transmission and distribution businesses was recorded at RM3.088bil for the current period.
“We will remain committed towards unlocking values across the group, from both our regulated and also non-regulated businesses.
“Our transmission and distribution achievements for the past few years have been consistently at par with those in developed countries, with system minutes being recorded at below one minute and a System Average Interruption Duration Index or SAIDI of below 50 minutes. For the non-regulated business, our Generation Plant Availability Factor or EAF has registered a sustainable improvement since FY14,” Azman added.
Commenting on its prospects, TNB said its board of directors said they are expecting electricity demand to grow in line with the projected gross domestic product growth.
“The board remains cautious on the group’s outlook for the year ending Aug 31, 2017, given the prospect of volatility in the global commodity and energy prices,” TNB said.