KUALA LUMPUR, June 26 — Tenaga Nasional Bhd’s (TNB) share price slipped in the early trade today following the latest implementation of the Imbalance Cost Pass-Through (ICPT) mechanism announced on Friday.

At 10.51am, TNB’s shares fell by one sen or 0.11 per cent to RM9.19 sen per unit from RM9.20, with 338,400 shares traded.

Last Friday, the company said the latest ICPT decision would not affect its business operations and financial position.

The decision was made to address the additional generation costs resulting from higher fuel prices for electricity supply between January 1, 2023 and June 30, 2023.

To date, the government has implemented 18 cycles of the ICPT since the introduction of the mechanism in 2015.

MIDF Research said the latest ICPT review for the second half of 2023 (2H 2023) reflects easing global fuel prices, particularly coal price which has more than halved its peak levels of US$463 per metric tonne in 2H 2022.

As such, the research house maintained its ‘neutral’ call on TNB, with a target price (TP) of RM10.00.

“We expect TNB’s ICPT under-recovery position to remain in the near-term, albeit at much lower levels than that in 2H 2022.

“Easing under-recovery is expected to drive lower working capital requirement, ease TNB’s receivables and allow it to retire some of its previous short-term financing positions,” it said in a note today.

Meanwhile, RHB Research said the adjustments are somewhat within expectations as the domestic segment remains largely subsidised, and reflected the average fuel prices which decreased to US$173.50 per tonne in 1H 2023 from US$224 per tonne in 2H 2022.

Based on the current fuel price trend, the total ICPT cost to be recovered in 2H 2023 is estimated to be RM9 billion.

“As the government is committed to subsidising RM5.2 billion in 2H 2023, we estimate that the remainder will be collected from the surcharges imposed,” it said.

RHB Research noted that TNB received RM9.13 billion out of a total of RM10.4 billion ICPT cost recovery from the government, which demonstrates the government’s commitment to upholding the Incentive Based Regulation (IBR) framework and ICPT mechanisms.

“As such, we expect ICPT receivables to be lower on the back of the lower ICPT charge,” it said.

Consequently, it has upgraded its ’neutral’ call on TNB’s shares to a ‘buy’ call, with an unchanged TP of RM10.40, premised on the limited regulatory risk as the government continues to uphold the ICPT framework with consistent payment to TNB. — Bernama