TNB said it had received an addendum to the letter of award dated 3 Jun 2014 for Project 3B, which stated that the scheduled commercial operation dates for the two units of Project 3B should respectively be not later than 15  Jun  2019  and  15  Dec  2019.  Project  3B  was  originally  scheduled  for commissioning in stages from 1 Oct 2018. The levelised tariff for Project 3B  would  be  fixed  at  26.67  sen/kWh  as  proposed  jointly  by  TNB  and Mitsui, 1.5 sen higher than when the project was first awarded to 1MDBMitsui early last year. TNB and Mitsui have  seven days from 29 Jun 2015 to accept the terms of the addendum. (Source: Bursa Malaysia)

Comments: There are no major surprises and we remain positive on TNB in relation to the developments at Project 3B, given the ability of TNB and Mitsui  to  procure  a  higher  levelised  tariff  to  account  for  higher  costs associated with project delays and forex fluctuation. We also note that the commercial  operation  dates  have  been  pushed  back,  which  is  not surprising  as  the  initial  commercial  operation  dates  were  no  longer realistic.  As  TNB-Mitsui  would  likely  earn  an  appropriate  internal  rate  of return on Project 3B with the proposed levelised tariff, we maintain our Buy rating on Tenaga with an unchanged TP of RM15.00.

Source: Affin Hwang Capital Research - 30 Jun 2015