IPP cancellation has no effect on TNB, Malakoff
KUALA LUMPUR: The cancellation of four independent power producers’ (IPP) licences will not affect the existing power purchase agreement (PPA) and and current operating plants of Tenaga Nasional Bhd (TNB) and Malakoff Corp Bhd, said Public Investment Bank.
In a note yesterday, the investment bank upgraded its ratings on Malakoff to trading buy with the current weakness in share price provided an opportunity for investors to accumulate.
Meanwhile, it maintained its outperform call on TNB with an unchanged target price of RM17.81.
“To note, we had not taken into account the now cancelled projects into our current earnings forecasts on both TNB and Malakoff. Hence, we made no changes to our assumptions,” it added.
In the Dewan Rakyat previously, Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin said the government decided to cancel the IPPs’ licences for non-compliance to various conditions.
The four IPP are 700MW gas power plant in Kapar, Selangor (owned by Malakoff and TNB), 1,400MW gas power plant in Paka, Terengganu (Aman Majestic Sdn Bhd and TNB), 300MW gas power plant in Sandakan, Sabah (Sabah Development Energy Sdn Bhd and SM Hydro Energy Sdn Bhd), and 400MW solar power plant (Edra Power Holdings Sdn Bhd).
These IPPs were awarded the contracts via direct negotiations.
“Nevertheless, we understand that these were only at the planning stages with no agreements entered into as yet. Hence, no impact to the existing portfolio and earnings of both TNB and Malakoff. We maintain our neutral call on the sector,” said Public Investment Bank.
The investment bank said the development of a new gas-fired power plant with a capacity of 700MW in Kapar by Malakoff and TNB was a proposal which was supposed to be a potential re-powering of the existing Kapar Energy Ventures’s (KEV) Generating Facility 4 site upon the expiry of its PPA in July 2019.
No contracts have been officially awarded, with this still under the planning stages. — Bernama