KUALA LUMPUR: Just six months after the nation saw a tariff hike in electricity rates, consumers may see another rate rise.

But the agency given the mandate to restructure and reform the country’s power sector has proposed that the Government utilise some RM500mil in savings derived from the renegotiations of the power purchase agreements (PPAs) with independent power producers (IPPs) to mitigate the potential impact on the people.

At a briefing yesterday, MyPower Corp Bhd stated that it would recommend to the Cabinet to stay on course with the implementation of the fuel cost pass-through (FCPT) mechanism, whereby the tariff will be adjusted based on the international gas price every six months.

The first adjustment is scheduled for next month, which could result in a tariff hike, as domestic gas prices are lower than international prices.

The last revision was done in January at a 15% hike to 38.53 sen per kilowatt-hour (kWh). But this was an increase in base tariff and not due to the FCPT mechanism.

“We have accrued a little bit, amounting to some RM500mil, slightly over a year when the first-generation IPPs reduced their capacity payment following a renegotiation of terms when their contracts were extended for another 10 years,” said Datuk Abdul Razak Abdul Majid, the chairman of the Energy Commission (EC) and the adviser of MyPower.

“This is savings that was derived from March 2013 after the PPAs were renegotiated for three IPPs,” said Abdul Razak at a briefing for select media.

According to him, the proceeds from the savings, amounting to RM500mil, are held in trust with Tenaga Nasional Bhd (TNB).

Two first-generation IPPs whose PPAs were renegotiated with an extension of 10 years were Genting Sanyen Power Sdn Bhd and Segari Energy Ventures Sdn Bhd, a subsidiary of Malakoff Corp Bhd.

A third IPP, TNB Pasir Gudang, has been awarded a five-year extension to its PPA. TNB Pasir Gudang, which is currently operating as a unit of TNB, will operate as an IPP after 2017.

It was previously reported that the rate for Genting Sanyen’s 675MW plant is 35.3 sen per kWh, while the rate for Segari’s 1,303MW plant is 36.3 sen per kWh. The rate for TNB Pasir Gudang’s 275MW plant is 37.4 sen per kWh. Gas used to power up these stations will no longer be subsidised under the renegotiated PPAs.

The savings came from the capacity payments that TNB used to pay the concessionaires because they no longer incurred the construction cost of building the power plant.

However, Abdul Razak said the decision to tap into the savings from the renegotiated PPAs rested with the Government.

“This is one of the recommendations we are putting forward to the Cabinet, but the end decision lies with the Government,” said Abdul Razak, who was previously the chief executive officer of MyPower until his recent appointment as EC chairman on April 1.

Without giving away any information on the possible rate hike, Abdul Razak said there was an increase in the price of gas.

“All I can tell you is that the price of liquefied natural gas (LNG) has increased. There’s a quantum that’s going up and there’s a quantum that’s going down.”

Apart from LNG, the other fuel components that determine the tariff under the FCPT mechanism are the market price of coal and distillates.

Another MyPower senior officer, Azimah Abdul Aziz, noted that between January and June, the price of LNG had gone up by 10%-25% but the price of coal was 10%-15% lower during the period.

She explained that a potential hike was needed to close the gap between the true cost of generating power and current subsidised tariffs.

“The true cost of power without subsidies is around 42 sen per kWh as opposed to the current tariff of 38.53 sen per kWh. As the fuel cost is expected to increase, the gap between the true cost and the current tariff is expected to widen.” Azimah noted that to maintain the current tariff rate, total subsidies could reach as much as RM12bil to RM14bil this year.

She added that the FCPT has to be implemented to avoid a steep hike in the future.

Countries such as the Philippines, Singapore and Australia had adopted a market-based pricing mechanism, she said.

Separately, Azimah said MyPower, which was set up in 2011, would be dissolved in September.

On another issue, Abdul Razak declined to comment on the status of Project 4A, following the withdrawal of YTL Power International Bhd from the consortium that had been invited along with SIPP Energy Sdn Bhd and TNB to undertake the building of a new power plant in Pasir Gudang in Johor.

“We will wait until the deadline of July 25 given to the parties before we look at the next course of action” was all he said. the star

TP 15.00

http://www.thestar.com.my/Business/Business-News/2014/06/25/But-MyPower-Corp-proposes-that-impact-from-higher-electricity-tariff-be-cushioned-by-the-hundreds-of/

what is the outcome of agm?

football SPAC?

why sona become football counter?

any intention to takeover Man United?

3Q results (March to May) out in July will be interesting. full impact of revised tariff.
Last year 3Q 2013 was 1.7b, EPS 30 cts

Todate, EPS already 60cts, if maintain 30cts, then total EPS 90cts (whole year probably around EPS 1.10)

true, if you are not interested in Sona, why spend time? might as well do something more productive

kos - your shark masters never taught you well

you only know and repeat the same few sentences like broken records

ex dividend 6 cts on 25/6

JamesRoger/Fauzan/Stokraider/Ong those who know Sona very well

why Salamandar taxes is so huge???? over 100m. what is the impact on Sona 40% stake?

King of stock - you can skip this question

http://www.theedgemalaysia.com/business-news/295017-highlight-ytl-power-backs-out-of-rm3b-power-project-to-dispel-misgivings-on-government.html

Immarsat satellite showed mas making U turn

MH004 cruising 25k ft, direction NE KT, Roger

mas very hot hot,

expect u turn soon?

wow, crippled mas flying high

big is coming back

if the IRR is good, that will very much can take care of the bank interest and bank loan.

If you check SK Petro - their loan is in billions. Loan for growth and expansion

welcome to new business world

flying low, not going to crash anytime soon

mas flying low, roger mh

haven't seen any analysts reports yet

JamesRogers, you seem to know much about Sona. What is the projected EPS?

Fauzan, assuming the IRR return is US42m, convert to RM42 x 3.2= RM134.4 million

Half year 2013, Sona lost RM5.1m, assuming full year cost is RM15m

Full year profit RM134.4 - RM15= RM120m/1410m shares= EPS 0.085

Just analysis of raw date, until actual projection from Sauna

IRR 15% is good return. IPP now only can get around 8% to 9% IRR from TNB (compared with old days of 15 to 18%)

How much is IRR 15%, roughly same as IPP first generation that made YTL Group super rich?

Sona said the expected IRR for the assets acquired is 15%, good return

i read somewhere that said sona will release some info after signing SPA on 26/6.

sona daily share of revenue of about 5k to 6k barrels per day existing wells and if there is positive results from exploration, then the upside will be superb

It is a good strategy not to buy further asset next 2 yrs.

1. sona need to generate income from existing wells and source for new fields in exploration areas too. Income generated from present wells can be used for new assets later years

2. new assets - need more $$$$

Good strategy

If you have faith in the company and the salamander deal, buy and keep. So far the projection is EPS 0.05 to 0.08. If the co projection is close to the figure, you cant be wrong in this stock

http://www.theedgemalaysia.com/business-news/294533-flash-sona-petroleum-expects-sc-approval-on-oag-asset-acquisition-by-4q.html

if the profit forecast is good, then the price will fly

PE for oil and gas easily 20 to 35 times and also swing with higher oil prices

with 40% stake, don't think sona has control over the oil business. probably only director's seats but will be out voted

nevertheless, shareholder should leave it to the wisdom of sona management on this

unless there is press release after AGM, then read in the Edge news after 12.30pm, otherwise just all items agendas tabled were approved in bursa website after 5.30pm

http://www.theedgemalaysia.com/business-news/294420-global-markets-asian-shares-slump-oil-firms-as-market-eyes-iraq.html

oil price surged, good news for Sona

http://www.theedgemalaysia.com/business-news/294391-iraq-unrest-insurgents-seize-two-more-iraqi-towns-obama-threatens-air-strikes.html

oil price will go up with unrest in Iraq

true, true

AGM today, all quiet

not easily to break 0.20, guess will go down

http://www.theedgemalaysia.com/business-news/294418-mas-unlikely-to-go-bankrupt-says-rhb-research-.html

so much forecasts by retailers can be answered once Sona issued their due diligence report, profit projection and growth prospect soonest. The latest will be once EGM is fixed.

With Sona's directors experience and wisdom in the business, i believed they cant be silly to invest rm900m if it is not beneficial and add value to the co

For the staunch critics, it is normal for any shares, you will find buy calls and sell calls and their own reasons.

http://www.themalaysianinsider.com/malaysia/article/mas-unions-blocking-efforts-to-turn-around-ailing-airline-says-mp

MAS unions blocking efforts to turn around ailing airline

yama, why high free float is good?

annual report is not very good to monitor if is issued months ago
between those time period, he could have sold.
you will only know the following year's annual report

what is JP Morgan TP?

aiyoo why sell so early, MIDF TP 2.90, can go above 3.00 if Q2 and Q3 results goody

wow wow, good show today
break new high and surged surged?

yup, good buy below 2.0

nice for punting after khazanah statement

good stock for medium to long term, kept is deposit box

spinoff, how you get the latest report?
most jokers got last year annual reports which are obsolete

http://www.themalaysianinsider.com/business/article/khazanah-registers-higher-pre-tax-profit-of-rm3.1-billion-for-2013