· YTL Power International Bhd (YTLP) yesterday announced on Bursa Malaysia that it had won a short-term extension to supply power from its Paka plant.

· YTLP will supply power from its Paka plant for a period of two years and 10 months commencing 1 March 2016.

· Its wholly-owned subsidiary, YTL Power Generation Sdn Bhd was selected as the successful bidder under the short-term capacity bid called by the Energy Commission.

· The award is not surprising as YTLP had disclosed in the last quarterly notes that it was discussing terms and conditions for a new agreement for its Paka plant (780MW).

· Just yesterday, reports quoted Energy Commission CEO Datuk Ahmad Fauzi Hasan as saying that YTLP had won the extension with a capacity of 585MW. This is alongside 1MDB’s Powertek and Malakoff’s Port Dickson Power Sdn Bhd.

· We believe that YTLP’s Pasir Gudang (the PPA of which ended in 30 Sept 2015, alongside that of Paka) did not receive an extension.

· Based on reports, the generating capacity under the short-term extension is half of Paka and Pasir Gudang’s combined capacity of 1,212MW. Based on this, our calculations shows that the extension will only contribute to 2% of YTLP’s SOP. YTLP’s earnings will continue to be mainly driven by its water & sewerage division (73% of group PBT in FY15).

· We maintain our HOLD call on YTLP with our fair value of RM1.52/share under review.

Source: AmeSecurities Research - 9 Oct 2015