TNB announced on Bursa that it has been selected to champion Project 3A,  a  1,000MW  coal-fired  power  plant  development  at  Manjung,  Perak. This  is  within  our  expectation  given  that  TNB,  together  with  partner Marubeni Corp from Japan, was previously rumoured to have put in the lowest bid of 22.78 sen per kWh. Maintain BUY, with our FV unchanged at MYR8.98 pending the official release of its 3QFY13 results tomorrow. 
 
- The chosen one. Tenaga Nasional (TNB) has been selected to develop the  1,000MW  coal-fired  power  plant  in  Manjung,  Perak.  The  letter  of award for the project, with a construction period of 45 months, will soon be issued and the plant is expected to come online on 1 Oct 2017.

- Not  surprised.  The  announcement  came  within  our  expectations  given that  TNB,  together  with  its  partner  Marubeni  Corp  from  Japan,  was rumoured to have put in the lowest bid at 22.78 sen per kWh. The other finalist i.e. 1Malaysia Development, which teamed up with Mitsui Japan, is believed to have submitted a bid of 24.86 sen per kWh.

- MYR2.5bn-MYR3bn  capex  likely.  With  this  project  in  the  bag,  we estimate that TNB’s generation capacity would  breach  the  15,000MW mark come 2018. This takes into account its existing expansion projects, which  include  the  2x535MW  site  in  Prai,  Penang,  as  well  as  its  hydro plants  of  265MW  in  Hulu  Terengganu  and  372MW  in  Ulu  Jelai.  We estimate  that  this  new  1,000MW  coal-fired  power  plant  would  cost MYR2.5bn-MYR3bn over the next four years, with the project IRR likely to hover between 8%-11%.

- Maintain BUY. All in, we are positive on the news as TNB continues to expand  its  footprint  within  the  power  generation  segment.  We  make  no changes  to  our  forecasts,  FV  of  MYR8.98  and  BUY  recommendation pending the official release of its 3QFY13 results tomorrow evening.

Source: RHB