PPA renegotiations to take time - The government (via the Economic Planning Unit and Energy Commission) is expected to lead the renegotiation of power purchase agreement (PPA). Management, however, could not offer a timeline when the PPA renegotiation would be resolved but agreed it would take time.
§ Pushing for tariff formula - Meanwhile, Tenaga has submitted its proposal to the government on the adoption of a tariff formula, which encompassed a fuel pass-through mechanism and a base tariff review. Under the proposal, Tenaga suggested that the tariff be reset every 3 months. Tenaga expects the outcome of its proposal to be out by the end of this year or early next year. Generally, management hopes to achieve a ROA of approximately 6% compared with 4.2% recorded in FY08.
§ No major review expected in July - Following a review in March, management would not be surprise if the tariff review in July is skipped or deferred to December.
§ Coal price to average US$85 in FY09E - Coal costs continue to decline. Based on current commitments, average coal costs should reach US$85 a tonne in FY08E, as guided.
§ Unlikely to buy into coal mines but is considering power ventures - Tenaga is unlikely to buy into coal mines but opportunities present themselves; the group prefers to look at greenfield power generation projects in the Middle-East, India and Vietnam.
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