TNB & New Tariffs 
TENAGA Nasional Bhd reported a 57 per cent boost in net profit to RM1.28 billion for fiscal year 2005, due mainly to foreign exchange gains and higher electricity sales.
The net profit for the year ended August 31, however, came in lower than a Reuters Estimates consensus of RM1.45 billion.
President and chief executive officer Datuk Che Khalib Mohamad Noh said higher coal prices during the year, which pushed up fuel costs by a substantial 29 per cent, were what kept numbers from being higher. Tenaga’s operating profit fell to RM3.13 billion as a result of the increased expenses, but only by 5.7 per cent, as the group saw better cost management.
During the year, the group saw improvements in the collection of unpaid electricity bills from delinquent customers, a fall in general expenses and a reduction of transmission and distribution losses.
“For the whole year, we managed to add value of RM962.4 million, which come from collecting RM208.9 million from delinquent customers, and theft back-billing of RM225 million, (among other initiatives to improve efficiency),” he told reporters yesterday.
It was Tenaga’s first full-year results with Che Khalib at the helm. He joined the utility on July 1 last year. “If not because of our managed costs, our performance would not be as good as it is today,” remarked Che Khalib.
He said Tenaga had outlined a road map of things it aimed to do this year, which include efforts to further improve customer service, revamp its procurement policy and sell more electricity to Thailand.
“We want to be recognised as a regional leader against which other regional utility players will wish to benchmark themselves,” he said.
Tenaga realised a forex gain of RM141.8 million during the year as the ringgit strengthened against major currencies. The group, which made a forex loss of RM572 million a year ago, has total borrowings of about RM30 billion, of which half are denominated in foreign currencies. Turnover increased by 7.1 per cent to RM18.97 billion, as electricity sales rose by RM1.1 billion, or 6.4 per cent. Earnings before interest, tax, depreciation and amortisation costs, or EBITDA, declined marginally by 0.6 per cent to RM5.92 billion. Fourth-quarter profit too declined by 9.6 per cent from a year ago to RM403.6 million as higher fuel costs offset forex gains and an increase in electricity sales.
In the meantime, TNB says the Government is still reviewing its proposal for a tariff rebalancing, which will allow it to adjust electricity prices to better reflect rising fuel costs.
Chairman Tan Sri Amar Leo Moggie said Tenaga could not predict when the Government would approve the proposal as there were many factors for the Government to examine, such as how increased rates would affect the different type of users. “Looking purely from Tenaga’s financial and electricity requirements, the sooner the better for us,” he said. He reiterated that it was necessary for Tenaga to have a cost structure that reflected the actual cost of providing power to consumers. “Over the last three years, fuel costs have become more of a concern to Tenaga because we have embarked more in generating our power using coal. We don’t have any control at all over international coal prices,” said chief executive officer Datuk Che Khalib Mohamad Noh. Previously, power was generated using gas, the price of which was controlled by the Government. Tenaga saw the average price of coal increase to US$49.8 (US$1 = RM3.77) per tonne from US$34 in its fiscal year just ended August 31 2005, which led to higher operating costs for the group. Coal price alone increased by about RM500 million, he said, the cost of which had to be absorbed by Tenaga.
I wish to remind the Chairman and CEO of TNB that while they strive to increase their profit, they should remember their social obligations to the nation. It is always easier to make profit by transfering the cost to the mass population using the regulators to grant higher tariffs.
It made a stupidity of our system managers that their improve botomline results are large attributed to the raising of tariffs and sucking the mass population.
While it is commendable that the new CEO had introduce and improve the system efficiencies. Somehow, it is not visible that there is present in the system of a single most effective way of sustainable system of growth and profitability, that is, cost competitiveness and high productivity.
TNB had boasted of their better results. In Datuk Che Khalib Mohamad Noh words, "If not for improved cost control measures, Tenaga’s fiscal performance would not have been as good as reported".
Is that true? The 57% boost in net profit to RM1.28 billion for fiscal year 2005, largely attributed to foreign exchange gains and higher electricity sales, and collections of bad-debts amounting to RM208.9 million from delinquent customers, and theft back-billing of RM225 million.
It looks like more than half of the RM1.28 billion profits are non-productive income and income that is one-off with no repeat business and no productive efforts. What TNB should parade is their Productivity Index as benchmark against the industry best, and the effective cost cutting measurements, whether it is sustainable or is just a one-off savings.
Datuk Khalib, you can do better. You had proven to bet better than your predecessor. But your results are not that impressive; it is slightly better and indicates a potential to further improve; but the outlook of your system lacks sustainable programme and sustainable effectiveness. Anyhow, you had a good start - keep it up!
TENAGA Nasional Bhd reported a 57 per cent boost in net profit to RM1.28 billion for fiscal year 2005, due mainly to foreign exchange gains and higher electricity sales.
The net profit for the year ended August 31, however, came in lower than a Reuters Estimates consensus of RM1.45 billion.
President and chief executive officer Datuk Che Khalib Mohamad Noh said higher coal prices during the year, which pushed up fuel costs by a substantial 29 per cent, were what kept numbers from being higher. Tenaga’s operating profit fell to RM3.13 billion as a result of the increased expenses, but only by 5.7 per cent, as the group saw better cost management.
During the year, the group saw improvements in the collection of unpaid electricity bills from delinquent customers, a fall in general expenses and a reduction of transmission and distribution losses.
“For the whole year, we managed to add value of RM962.4 million, which come from collecting RM208.9 million from delinquent customers, and theft back-billing of RM225 million, (among other initiatives to improve efficiency),” he told reporters yesterday.
It was Tenaga’s first full-year results with Che Khalib at the helm. He joined the utility on July 1 last year. “If not because of our managed costs, our performance would not be as good as it is today,” remarked Che Khalib.
He said Tenaga had outlined a road map of things it aimed to do this year, which include efforts to further improve customer service, revamp its procurement policy and sell more electricity to Thailand.
“We want to be recognised as a regional leader against which other regional utility players will wish to benchmark themselves,” he said.
Tenaga realised a forex gain of RM141.8 million during the year as the ringgit strengthened against major currencies. The group, which made a forex loss of RM572 million a year ago, has total borrowings of about RM30 billion, of which half are denominated in foreign currencies. Turnover increased by 7.1 per cent to RM18.97 billion, as electricity sales rose by RM1.1 billion, or 6.4 per cent. Earnings before interest, tax, depreciation and amortisation costs, or EBITDA, declined marginally by 0.6 per cent to RM5.92 billion. Fourth-quarter profit too declined by 9.6 per cent from a year ago to RM403.6 million as higher fuel costs offset forex gains and an increase in electricity sales.
In the meantime, TNB says the Government is still reviewing its proposal for a tariff rebalancing, which will allow it to adjust electricity prices to better reflect rising fuel costs.
Chairman Tan Sri Amar Leo Moggie said Tenaga could not predict when the Government would approve the proposal as there were many factors for the Government to examine, such as how increased rates would affect the different type of users. “Looking purely from Tenaga’s financial and electricity requirements, the sooner the better for us,” he said. He reiterated that it was necessary for Tenaga to have a cost structure that reflected the actual cost of providing power to consumers. “Over the last three years, fuel costs have become more of a concern to Tenaga because we have embarked more in generating our power using coal. We don’t have any control at all over international coal prices,” said chief executive officer Datuk Che Khalib Mohamad Noh. Previously, power was generated using gas, the price of which was controlled by the Government. Tenaga saw the average price of coal increase to US$49.8 (US$1 = RM3.77) per tonne from US$34 in its fiscal year just ended August 31 2005, which led to higher operating costs for the group. Coal price alone increased by about RM500 million, he said, the cost of which had to be absorbed by Tenaga.
I wish to remind the Chairman and CEO of TNB that while they strive to increase their profit, they should remember their social obligations to the nation. It is always easier to make profit by transfering the cost to the mass population using the regulators to grant higher tariffs.
It made a stupidity of our system managers that their improve botomline results are large attributed to the raising of tariffs and sucking the mass population.
While it is commendable that the new CEO had introduce and improve the system efficiencies. Somehow, it is not visible that there is present in the system of a single most effective way of sustainable system of growth and profitability, that is, cost competitiveness and high productivity.
TNB had boasted of their better results. In Datuk Che Khalib Mohamad Noh words, "If not for improved cost control measures, Tenaga’s fiscal performance would not have been as good as reported".
Is that true? The 57% boost in net profit to RM1.28 billion for fiscal year 2005, largely attributed to foreign exchange gains and higher electricity sales, and collections of bad-debts amounting to RM208.9 million from delinquent customers, and theft back-billing of RM225 million.
It looks like more than half of the RM1.28 billion profits are non-productive income and income that is one-off with no repeat business and no productive efforts. What TNB should parade is their Productivity Index as benchmark against the industry best, and the effective cost cutting measurements, whether it is sustainable or is just a one-off savings.
Datuk Khalib, you can do better. You had proven to bet better than your predecessor. But your results are not that impressive; it is slightly better and indicates a potential to further improve; but the outlook of your system lacks sustainable programme and sustainable effectiveness. Anyhow, you had a good start - keep it up!
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