MAYBANK Investment Bank Bhd (Maybank IB) says the direct award of the Track 4A power plant project in Johor to a consortium comprising YTL Power International Bhd, Tenaga Nasional Bhd (TNB) and SIPP Energy Sdn Bhd will not unravel industry reforms.
The exercise does not necessarily imply lucrative terms, the firm added.
“The Energy Commission has stated that tariffs would need to be benchmarked to that of Prai (1,071MW gas-fired plant awarded to TNB in 2012 via competitive bidding),” Maybank IB said in a note yesterday.
The commission awarded the job to the consortium to build a 1,000MW-1,400MW power plant in Pasir Gudang, Johor.
The award, however, courted controversy as it was done through direct negotiations, rather than competitive bidding.
“The commission opted for a direct award in order to fast-track the project. Originally slated for commissioning in 2020, the EC now expects the plant to commence operations in 2018.
“The decision to fast track Track 4A was likely related to the May 7 outages, in our view. A few states in Peninsular Malaysia experienced blackouts after all three blocks at TNB’s Janamanjung plant unexpectedly tripped. With one of Jimah’s two blocks already down for repairs, TNB was forced to shed load, which led to the blackouts,” it said.
The consortium is expected to submit technical and commercial proposals to the commission for approval.
Maybank IB is placing a “buy” call on TNB, with a target price of RM14, and “hold” on YTL Power, with RM1.66 target price.
It said new generation projects have little impact on TNB’s financials and investment thesis, while YTL Power is more leveraged on this award.
