• The Star reported that the government has announced additional electricity discounts worth RM942mil for domestic users.

• Bantuan Prihatin Elektrik Tambahan is on top of the existing discounts announced under previous stimulus packages.

• Users of electricity consumption of 300kWh and below per month would enjoy free electricity for the months of April, May and June 2020.

• Users of electricity consumption of more than 300kWh over the same period would receive a discount of RM77/month. The rebates would be reflected in the July bill.

• We believe that the bulk of the cost of the electricity discounts of RM942mil would be borne by the Energy Industry Fund and Malaysia government.

• Tenaga Nasional (TNB) will be contributing RM100mil out of the total cost of RM942mil.

• Under the previous budgets, the cost of the electricity discounts was RM1,030mil. TNB contributed about RM150mil.

• Including the new electricity discounts, TNB would be bearing RM250mil worth of electricity discounts. This is 6.4% of TNB’s FY20E net profit of RM3.9bil.

• In December 2019, TNB transferred RM774mil to the Energy Industry Fund to aid in the stabilisation of the electricity tariff via a build-up of the fund. TNB returns savings from renegotiated power purchase agreements and excess returns when its revenue exceeds the price and revenue caps in the RP2 guidelines, to the Energy Industry Fund every year.

• We maintain BUY on TNB with a fair value of RM13.95/share.

Source: AmInvest Research - 22 Jun 2020