Tenaga Nasional Bhd loses $2.2bil in value over six day

PETALING JAYA: The mere speculation of purchasing the power assets under 1Malaysia Development Bhd (1MDB) had caused Tenaga Nasional Bhd (TNB) to lose some RM6bil (S$2.2 billion) in value over the last six trading days.

On the back of poor sentiment affecting the stock market, TNB's shares had lost RM1.06 since May 18, largely due to the dominant electricity provider being touted as one of the possible purchasers of 1MDB's power generation assets.

The counter continued its losing streak yesterday, shedding 46 sen, or 3.36 per cent, to close at RM13.24 - its lowest since mid-December 2014 and off its intra-day low of RM12.98 yesterday - and erased 3.36 points off the benchmark FTSE Bursa Malaysia KL Composite Index.

Last week, TNB president and chief executive officer Datuk Seri Azman Mohd had said that the company would not pay a premium for 1MDB's power assets. But it had not stopped the market from viewing the possible deal negatively.

"Given the sensitivities surrounding the 1MDB issue, having anything linked to the fund will somehow bring about a not-so-positive response until valuations become clear," an analyst with a local bank said.

"It goes to show how sensitive the market perception towards 1MDB is," he explained.

Reports emerged about the possibility of TNB taking over 1MDB's power generation assets last Friday in a deal that could be worth RM16bil.

According to the reports, the buyout would be followed by a proposal calling for the unbundling of TNB's business into three separate entities - power generation, transmission and distribution. The plan is expected to be tabled for discussion by the Cabinet next month.

UOBKayHian said while TNB's acquisition of the power assets of Edra Global Energy Bhd (1MDB's utility arm) could be positive in the long run for TNB, pricing remained a major contention.

"If TNB is to pay RM16bil for Edra's 3,190MW of generation capacity, we consider this to be expensive. We estimate Edra's assets to be worth RM11.6bil, based on current replacement market value," UOBKayHian said, adding that its assumption was based on a gas-fired power plant replacement cost of RM2.3bil and a coal-fired power plant replacement cost of RM6.7bil.

"Given the wide pricing discrepancy of almost 40 per cent, we believe the deal may face a stumbling block in the near term," it said.

Azman was reported as saying that the group could not allow 1MDB's Jimah East power plant project, coded Track 3B, to fail, as Malaysia urgently needed the 2,000MW capacity from the planned coal-fired power plant to meet future demand.