TNB's earnings forecast cut after Janamanjung outage

KUALA LUMPUR: Tenaga Nasional Bhd's earnings forecast has been trimmed by seven per cent by Affin Hwang Capital following the outage at TNB Janamanjung Sdn Bhd.

It also revised TNB's core net profit to RM4 billion for this year, which is 10 per cent below the consensus forecast. This had yet to factor in the outage.

TNB Janamanjung's 1,010 megawatt (MW) coal-fired power plant (GF2) has been offline since the beginning of December last year due to unexpected severe fractures in the intermediate pressure steam turbine.

The damaged plant components have been sent back to General Electric's facility in Germany for a detailed assessment.

"The length of time required to restore GF2's operations will depend on findings on the root cause of the disruption, the extent of damage to other parts of the steam turbine and subsequent remedial action," Affin Hwang said today.

"However, the results can only be ascertained in the coming months. Prior to this, GF2's performance remained volatile, registering a rolling unscheduled outage rate of 9.48 per cent as at end-September 2023 , according to RAM Ratings," it added.

TNB Janamanjung is a wholly-owned subsidiary of TNB that owns and operates four coal-fired power plants located on a man-made island in Manjung district, Perak.

It generates 3,100MW of electricity from its three units of 700MW and one unit of 1,010MW coal-fired power plants.

The three units of 700MW are known as generating facility 1 (GF1) and the 1,010MW unit is known as Generating Facility 2 (GF2) or Manjung 4.

TNB Janamanjung contributed RM148 million to RM286 million of net profit per annum during 2020-2022, on the back of RM6.2 billion to RM7.2 billion of revenue.

"Judging from RAM Ratings' press release, the issues at Manjung 4 sound major and we believe the repair works may take several months.

"Assuming the repair works take three to four quarters and the plant to only resume its operation in the fourth quarter of 2024, we estimate that TNB may miss out on RM400 million of capacity payments.

"While the group should also see some reductions in energy payments and higher repair costs, these should be cushioned by higher energy payments to its other power plants and insurance claims," it added.

Notwithstanding the potential earnings setback from the major outage from Manjung 4, the firm maintained its "Buy" rating on TNB due to optimism on Malaysia's energy transition agenda, where TNB is poised to be a key beneficiary due to ample new business prospects and the opportunities to improve its  ESG rating.

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