Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD
Research House: OSK



The Department of Environment's rejection of the Lahad Datu coal plant detailed environmental impact assessment is likely to mean that Tenaga Nasional Bhd needs to find alternative power plant solutions for the east coast of Sabah.

In stating this, OSK Research said the main reason cited for the rejection was that the environmental impact assessment report did not address numerous important environmental parameters in respect of the proposed project

"Given that the Department of Environment has exercised independent judgment on the matter, we believe Tenaga Nasional, which has a 40.8 per cent stake in the Lahad Datu plant, would be forced to consider other alternatives such as biomass given the abundance of oil palm plantations in Sabah or the long discussed Liwagu dam in central Sabah," it said in a research note today.

"For now, given the uncertainty over possible alternatives, we leave our assumptions on the Lahad Datu plant unchanged as an investment in associates in Tenaga Nasional's balance sheet forecast," it added.

OSK Research said while this could mean costlier biogas plants given the ample oil palm plantations in Sabah, it was leaving "assumptions intact for now".

"Thus, we are maintaining a ''buy'' call on Tenaga Nasional, given the growing foreign interest in the counter recently as well as weaker coal prices," it said.

"Fair value is unchanged at RM9.90, while we await further developments with regard to the 2,000-megawatt new plant," it added. -- Bernama