Published: Friday May 25, 2012 MYT 11:21:00 AM
UOB Kay Hian Research: Tenaga may not benefit from lower IPP payments
KUALA LUMPUR: UOB Kay Hian Malaysia Research said Tenaga Nasional Bhd might not benefit from the lower independent power producers (IPP) capacity payments.
The research house said on Friday "it is up to the government to decide" whether the savings (from lower IPP payments) are passed on to end-users in the form of lower electricity tariffs, or if the savings are channelled towards mitigating higher fuel (gas and/or coal) costs.
It said more than 40% of Tenaga's total operating expenses (opex) were attributable to payments to the IPPs.
News reports said Tenaga expected about 50% of the power purchase agreements (PPA) due to expire between 2016 and 2017 to be renewed so as to encourage competitive pricing for the extension.
Tenaga chief executive officer Datuk Seri Che Khalib Mohd Noh was quoted saying the IPPs, as a precondition, would be required to offer rate reductions to the current PPA rates.
This would qualify them to be considered for a further extension of five to 10 years to the current tenure of the PPAs.
The news reports said a total 4,300MW is supplied by the first generation IPP (with PPAs expiring 2016-2017) is involved, representing more than 40% of total IPP capacity.
Hence, about 20% of Tenaga's opex is subject to reduction. The IPPs involved include YTL Power, Genting Sanyen, Segari Energy Venture, Powertek and PD Power.