KUALA LUMPUR: Tenaga Nasional Bhd's (TNB) incentive-based regulation's (IBR) third regulatory period (RP3, 2022-2024) paper is currently ready and awaiting approval from the cabinet and will be revisited after the flood situation has eased.
CGS-CIMB Research said, for now, the government has decided to continue with the current parameters of the IBR RP2 extension and imbalance cost pass-through (ICPT) mechanism effective from January 1, 2022, until further notice.
To recap, the regulated return for RP2 extension (2021) was 7.3 per cent with an expected closing regulated asset base (RAB) of RM62.4 billion.
Besides that, the higher fuel costs for July to December 2021 will likely be borne by the government and the Kumpulan Wang Industri Elektrik (KWIE) fund.
"We expect the RP3 parameters and new electricity tariff to be revealed in the near term as Energy and Natural Resources Minister Datuk Seri Takiyuddin Hassan said in an article in Bernama dated January 9, 2022, that the government has studied the new electricity tariff and will make an announcement soon.
"The minister said the new tariff under RP3 (2022-2024) will not burden the people as the government has considered the country's recovery from the economic crisis following the pandemic, especially domestic account holders.
"While the potentially lower regulated return in RP3 could be negative for TNB, the higher asset base will likely mitigate earnings downside, in our view.
"We forecast a 30 basis points (bps) cut in regulated return and three per cent RAB growth per annum for RP3 (FY22-FY24 forecasts)," it said in a note today.
CGS-CIMB Research saw potential earnings risk from less favourable RP3 parameters/ICPT mechanism and possible additional contribution for electricity rebates to ease the people's burden given the recent news flow.
CGS-CIMB Research has reiterated its 'Add' call on TNB, with a lower target price of RM10.88 from RM13.60 previously.
ends