Higher Opex Under RP4 To Support TNB's Operational, Maintenance Activities - RHB IB

KUALA LUMPUR, Dec 27 (Bernama) -- RHB Investment Bank Bhd (RHB IB) is positive on Tenaga Nasional Bhd's (TNB) three-year Regulatory Period 4 (RP4) announcement, as the higher allowed operating expenditure (opex) could support the planning and execution of necessary operational and maintenance activities for all of the utility company's electrical infrastructure.

Analyst Sean Lim said under the RP4, the allowed capital expenditure (capex) is RM42.8 billion, which consists of RM26.6 billion base capex and RM16.3 billion contingent capex, translating to RM14.3 billion average annual approved capex, which is 108 per cent higher than the approved capex in RP3.

"The allowed opex is also lifted by 16 per cent to RM20.8 billion as compared to RP3," he said in a note today.

Meanwhile, Lim said the total allowed average annual capex of RM14.3 billion is higher than the investment bank's expectations of RM8.6 billion to RM9.6 billion.

"However, pending further disclosure by TNB, we are still uncertain whether the company will be entitled to the full total regulated net returns based on total allowed capex," he said.

Yesterday, state-owned utility firm TNB announced that under the RP4, which will run from 2025 to 2027, the new base electricity tariff for Peninsular Malaysia has been set at 45.62 sen per kilowatt-hour (kWh), effective July 1, 2025, while the regulatory rate of return has been maintained at 7.3 per cent as per RP3.

Under RP3, which runs between 2022 and 2024, the base tariff was set at 39.95 sen/kWh.

Lim said that, overall, RHB IB was positively surprised by the higher capex announced under the RP4, while the rate of return remained unchanged at 7.3 per cent. 

"We see an upside of five to seven per cent to our net regulatory return estimates if the full capex numbers are pencilled in. 

"Separately, we are also positive on the 500-megawatt (MWac) large-scale solar photovoltaic plant (LSSPV) under the fifth large scale solar (LSS5) bidding round, which will continue to strengthen its domestic green footprint," he said.

He added that RHB IB maintains its "buy" call on TNB with an unchanged target price of RM16.60 per share.

At 11.19 am, TNB was the top gainer on Bursa Malaysia, with its share surging 74 sen, or 5.22 per cent, to RM14.92, with 9.01 million shares traded.

-- BERNAMA