Tenaga Returns to Profit After $652 Million Compensation

Tenaga Nasional Bhd. (TNB), Malaysia’s biggest power producer, returned to profit after three straight quarters of losses as it booked 2 billion ringgit ($652 million) in government compensation for disruptions in its gas supply.

Net income jumped more than fourfold to 2.82 billion ringgit, or 51.6 sen per share, for its fiscal second quarter ended Feb. 29, from a restated 641.1 million ringgit or 11.6 sen per share a year earlier, Tenaga said in a statement late yesterday. Revenue climbed 17 percent to 8.6 billion ringgit on higher electricity sales, it said.

“For financial year 2012, the group is expected to record a better performance than last year,” Chief Executive Officer Che Khalib Mohamad Noh said in the statement.

The Kuala Lumpur-based utility received compensation from Malaysia’s government and state-owned energy group Petroliam Nasional Bhd. (PET) for disruptions in gas supply last year which forced Tenaga to buy costlier alternative fuels for its power plants. The utility’s cumulative losses over the past three consecutive quarters amounted to 1.1 billion ringgit as costs escalated with increased usage of oil and distillates.

The stock was upgraded to “buy” from “hold” at Hong Leong Investment Bank Bhd. and TA Securities Bhd. today on improved earnings expectations, according to separate reports from the Kuala Lumpur-based brokerages.

‘Above Expectations’

The results were “above expectations,” Hong Leong analyst Daniel Wong wrote in the report, raising his so-called fair value to 7.16 ringgit from 6.54 ringgit.

Tenaga rose as much as 1.5 percent to 6.61 ringgit in Kuala Lumpur trading today, before paring gains to 0.8 percent at 10:17 a.m. The stock has risen 11.2 percent this year, outperforming a 4.7 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index.

While subsidized natural gas supply has improved since January, it will probably remain in limited supply until Petroliam Nasional’s new liquefied natural gas plant in Malacca is operational in September, Che Khalib told reporters in Kuala Lumpur yesterday.

Petronas and the government will continue paying compensation, with Tenaga likely to incur another 1 billion ringgit in additional extraordinary fuel costs by then, he said.

Improved Dividend

“From November until September, the government has decided that for whatever additional amount Tenaga has to incur as a result of insufficient gas, we will continue with the arrangement that was made before,” the CEO said.

Tenaga plans to reward shareholders with an improved interim dividend of 5.09 sen per share, compared with 4.5 sen a year earlier, according to its exchange filing.

Earnings were also boosted by currency gains on a stronger ringgit, it said. It spent on average $109.30 a metric ton on coal for the first half of fiscal year 2012, compared with $100 a ton in the same period a year earlier, according to the statement.

Che Khalib plans to retire when his contract expires this year after heading the national utility for eight years. A successor will be named by end-June, he said.

To contact the reporter on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net

To contact the editor responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net

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