TNB – A Step Back To Go Forward - BizweekPrint this page
Date: 09 July 2005
Judging from the slew of analyst reports that followed Tenaga’s decision to buy NUR, the move has turned out to be its best yet. Most analysts seemed neutral on the purchase, although their main beef was the high purchase price. Even so, Tenaga’s shares fell 20 sen the next day on a market that gained marginally. The price, whilst not over the top, is not a bargain and comes at a time when market sentiment is not the best. Add in the fact that Tenaga is paying for capacity it really doesn’t need at this point and it is easy to appreciate the views of critics of the plan. Still, an analyst says if Tenaga manages to retire some of its old plants by taking on the NUR asset (which it will), then the deal looks a lot better. A local research house estimates that the plant would have to operate at an utilisation rate of more than 60% in order to break even. A sensitivity analysis shows that the plant would incur losses of just under RM60 million per annum if based on the Kulim High Technology Park’s current demand of 60MW. The analysis assumes an operating cost of about RM50 million per annum and interest cost of RM56 million – RM58 million annually. Even if the actual impact of the RM59 million pre-tax loss from NUR on Tenaga’s bottom line is minimal, analysts point out that the acquisitions run counter to the latter’s current efforts to are down its debts. The cost of the exercise would increase Tenaga’s net borrowings by just over 3% to RM29.3 billion.