Malaysia's power giant secures tariffs, subsidy

Malaysia's power giant secures tariffs, subsidy

KUALA LUMPUR (AFP): Malaysia's power giant Tenaga Nasional
Bhd. yesterday secured an earnings boost when the government
approved an eight-percent rise in electricity tariffs despite
consumer opposition.

Energy, Telecommunications and Post Minister Leo Moggie said
power tariffs would be raised by an average of eight percent, or
1.8 sen (0.72 cents), to 23.5 sen a kilowatt/hour effective
Thursday.

The government also agreed to cap the price of gas sold to
Tenaga and independent power producers (IPP) at 6.40 ringgit per
million British thermal unit (mmbtu) until 2000, Moggie said.

"The tariff increase is unavoidable given the high cost of
power generation based on fuel, development, machinery and
equipment, loans and other factors," he told reporters.

"A major portion of equipment for power supply is still
imported and Tenaga is facing pressure in terms of development
and operational costs. The present tariffs do not reflect the
true cost borne by Tenaga," he said.

Moggie said the new rates were reasonable and dismissed
suggestions that they would unduly burden consumers or affect
Malaysia's competitiveness compared to other countries in the
region.

"The impact on production cost is minimal as electricity makes
up less than five percent of total operating cost for most
industries. Most sectors would see a mere increase in cost at
below one percent," he said.

On the cap on gas prices, Moggie said it was aimed at reducing
fuel cost for the energy sector and avoiding higher tariff rates
as the current gas cost is pegged at around seven ringgit per
mmbtu.

National oil company Petroliam Nasional Bhd. would have to
bear the additional costs beyond the price cap.

Moggie said Malaysia's electricity demand was expected to rise
by 12 percent annually until 2000 from 13 percent last year.

Analysts said the tariff increase was in line with market
projections and said the news would help boost the local bourse,
which had recently been depressed by a host of negative domestic
news.

Tenaga stock was 70 sen higher at 11.60 ringgit on the local
bourse Wednesday following the tariff announcement.

Hike

"The eight-percent hike would add some 250 million ringgit to
Tenaga's revenue this year and another 900 million ringgit next
year," Elsie Lim, power analyst with South Johore Securities,
told AFP.

Lim said the cap on gas charges would stabilize fuel costs and
boost the earnings of Tenaga and independent power producers in
the long run.

Publicly-listed Tenaga generates nearly 70 percent of
electricity production and has a monopoly on power transmission
and distribution across peninsular Malaysia, which contains more
than 80 percent of the population.

Tenaga, which had raised US$800 million in overseas bond last
week, had said an increase in power tariffs was vital for the
company to remain financially viable.

It plans to invest 18 billion ringgit between now and 2002 to
expand and upgrade its infrastructure in order to cope with
electricity demand in the rapidly industrializing country.