KUALA LUMPUR: Tenaga Nasional Bhd (TNB) will be able to recover the current outstanding Imbalance Cost Pass-Through (ICPT) of RM4.8 billion by year-end, Hong Leong Investment Bank Bhd (HLIB Research) said.
The bank-backed research firm said that since fuel energy prices remained relatively stable from July 2022 until today, it expects the gap between the estimated and actual fuel energy prices to narrow significantly for the upcoming first half (1H) of the financial year 2023 (FY23) ICPT review.
Previously, the Energy and Natural Resources Minister has indicated a potential RM20 billion for the upcoming ICPT review.
"Despite the high fuel energy costs and the outstanding ICPT, we remain positive on TNB's earnings outlook.
"We believe the government remains committed to the ICPT framework in instilling long-term investors' confidence and ensuring the long-term sustainability of the power sector.
"The short-term cash flow mismatch will be addressed in the upcoming ICPT review by year-end, given the current stable fuel energy prices," it said in a note today.
HLIB Research said that as of November this year, coal prices remained stubbornly high, above US$300 per tonne since the spike in March, while the recent ringgit deterioration against the US dollar to more than 4.70 has further exacerbated the situation.
Similarly, gas prices continued to uptrend as it tracks international gas and liquefied natural gas (LNG) prices.
HLIB Research added that since its implementation in 2015, the ICPT framework has remained intact until now.
The latest ICPT approval was RM7 billion (RM5.8 billion subsidised by the government) for H2 FY22.
"TNB updated that it has received RM3.9 billion of the approved RM5.8 billion ICPT subsidy commitment from the government.
"We note there was a huge difference of RM9.4 billion ICPT (recognised in TNB's result for 1H FY22) combined with the outstanding RM2.4 billion ICPT from H2 FY21, as compared to the approved RM7 billion ICPT due to a mismatch of timing recognition.
"ICPT calculations by the Energy Commission only take into account two months actual and four months estimated fuel energy costs, which resulted in an under-estimation of actual fuel energy costs as fuel energy prices surged in month three," it added.
HLIB Research has maintained its 'Buy' call on TNB with an unchanged target price of RM11.65 as earnings are expected to remain stable in FY22.