KUALA LUMPUR: Tenaga Nasional Bhd (TNB) may have obtained a favourable court decision on its tax dispute for 2018, but the extremely elevated coal prices means concerns over the Imbalance Cost Pass-Through (ICPT) mechanism will continue to take centre stage, Maybank Investment Bank Bhd (Maybank IB) said.
Maybank IB said TNB presently had RM5.42 billion worth of tax disputes with the Inland Revenue Board (IRB) in relation to its entitlement of reinvestment allowances.
The High Court had on Feb 8 allowed TNB’s judicial review to set aside the IRB’s notice of RM1.81 billion of additional assessment for 2018.
The High Court ruled that TNB was in the business of manufacturing electricity and was thus entitled to claim reinvestment allowances on the capital expenditure (capex) incurred in 2018.
“It is unclear when Tenaga would be able to recover its tax advance.
“While valuations are attractive, we think the stock is unlikely to re-rate significantly due to lingering concerns over the ICPT mechanism,” it said.
Maybank IB said given the prevailing structure of power purchase agreements (PPAs) in Malaysia, coal would continue to feature prominently in Peninsular Malaysia’s generation mix for at least the next decade.
“This means the ‘coal stigma’ will continue to accompany TNB for the foreseeable future.
“Should such pressure increase, TNB could consider accelerating its renewable expansion (it already has international solar and wind platforms) or potentially de-merging or spinning off its generation unit,” it said.
Maybank IB added that the push into renewables had seen the increased adoption of solar via solar farms and rooftop solar.
“From a land optimisation perspective, the technology is probably better suited for rooftops.
“With the right incentives, TNB’s panel leasing business could become more significant in contribution,” it added.
Maybank IB has maintained its “Hold” call on TNB, with an unchanged target price of RM9.60.
Source: New Straits Times
