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Tenaga Reports Quarterly Profit After State Compensation

July 20 (Bloomberg) -- Tenaga Nasional Bhd., Malaysia’s biggest power producer, reported a second straight quarterly profit after booking another 777.8 million ringgit ($247 million) in state compensation for disruptions in gas supply.

The utility posted net income of 619.1 million ringgit, or 11.3 sen per share, for its fiscal third quarter ended May 31, compared with a restated net loss of 179.2 million ringgit or 3.3 sen per share a year earlier, Tenaga said in a statement yesterday. Revenue climbed 15 percent to 9.2 billion ringgit from a restated 7.98 billion ringgit a year ago, it said.

“The group is expected to record a better performance than the last financial year mainly due to expected higher demand, implementation of a fuel cost-sharing mechanism and higher coal plant availability,” Tenaga said in the statement.

The Kuala Lumpur-based utility is getting compensation from the g1overnment and state-owned energy group Petroliam Nasional Bhd. after disruptions in gas supply forced it to buy costlier alternative fuels to power its plants. This latest payout, yet to be received, is for additional costs incurred in the seven months to May.

Tenaga’s shares rose 1.2 percent to 6.83 ringgit in Kuala Lumpur, its highest close since June 8, 2011. The stock has risen 16 percent this year, outpacing a 7.3 gain in the benchmark FTSE Bursa Malaysia KLCI Index.

Price Estimates

Citigroup Inc., Hong Leong Financial Group Bhd., Maybank Investment Bank Bhd. and RHB Capital Bhd. raised their share-price estimate for Tenaga after the third-quarter earnings.

“Short-term sentiment on TNB should remain intact with the fuel cost-sharing mechanism in place until September,” Lim Tee Yang, an analyst at RHB, wrote in a report today.

Lim raised his price estimate to 7.80 ringgit from 7.60 ringgit and kept his outperform rating. That means the stock’s return is expected to exceed the benchmark index by more than 5 percentage point over the next six to 12 months, according to the brokerage report.

The compensation agreement is scheduled to end when Petroliam Nasional, or Petronas, is expected to boost supply with the opening of a regasification plant in Malacca state in September, Azman Mohd, Tenaga’s new chief executive officer, told reporters in Kuala Lumpur yesterday.

“We will remain neutral and shielded from any changes in gas prices” due to state subsidies, said Azman, who was promoted earlier this month when Che Khalib Mohamad Noh decided not to renew his contract.

Operating expenses fell 12 percent in the third quarter from a year earlier to 7.3 billion ringgit, as coal costs eased, said Azman, previously chief operating officer.

Tenaga paid an average $104.30 per metric ton for its coal during the three-month period ended May, down from $108.50 in the preceding quarter. The price may fall to $100 in the current quarter, Azman 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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