The  current  electricity  tariff  will  be  maintained  until  June  2015,  said Energy,  Green Technology  and  Water  Minister  Datuk  Seri  Dr  Maximus Ongkili. The government will also defer increasing the price of piped gas, which  means  Petroliam  Nasional  Bhd  (Petronas)  will  have  to  forgo RM836m in revenue from July this year to June 2015, he said. He also said  the  government  will  manage  the  cost  of  RM1.683bn  for  fuel  and generation  costs  by  using  savings  generated  through  the  renegotiated power purchase agreements with the first generation independent power producers. (Source: Financial Daily)

Comment: While positive in the short term, we believe this development has  been  largely  anticipated  by  the  market.  We  believe  that  once  the savings from the renegotiated power purchase agreements with the first generation  independent  power  producers  (c.RM600m)  have  been exhausted by next year, this will likely pave the way for future revisions in electricity  tariffs,  which  is  positive  for  Tenaga  in  the  longer  term.  In addition, against a backdrop in soft oil prices, we believe the government will not be able to defer the next electricity tariff hike for too long, since Petronas  is  currently  forgoing  revenue  from  defering  an  increase  in subsidised gas. Hence, we maintain BUY on Tenaga with an unchanged PT of RM16.50.

Source: Affin Hwang Capital Research - 6 Nov 2014