Tenaga Nasional Bhd (TNB) is likely to be affected by higher coal prices following massive floods in Australia and this may strengthen its case for higher power prices.
Australia, the world's second biggest exporter of thermal coal, has been hit by devastating floods over an area the size of France and Germany combined.
Thermal coal is used to fuel power plants while coking coal is used by steel mills to fuel their furnaces. Australia is also the world's biggest exporter of coking coal.
Coal prices for delivery in March have already risen to some US$130 (RM398) a tonne, according to Bloomberg data. It was around US$100 (RM306) a tonne at the start of December last year.
TNB(5347) purchases about 17 per cent of its coal from Australia. The bulk of its coal comes from Indonesia.
Currently, about 40 per cent of Malaysia's generation capacity comes from coal-fired plants.
"Thermal coal prices have been steadily increasing over the past few weeks due to the overall demand and supply disruptions, which has resulted with the tightness in the market.
"The massive flood situation in Australia is the latest supply disruption for seaborne coal trade and it is expected that thermal coal prices will be affected by the situation," TNB said in reply to questions from Business Times.
On December 10, TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the group was still able to absorb the increase in fuel prices but should they continue to rise, the power company's bottom line will definitely be hurt.
"There is no way we are able to sustain and absorb these additional costs," he had said then, noting that a revision request will be made to the government.
But analysts don't think the government would agree to a tariff hike as it could be preparing for an early general election, as widely expected.
"I'm sure that TNB will continue to make their case but I think they will only get it after the election," said OSK Research's head of research Chris Eng. - by Shahriman Johari, btimes.com.my.
Thermal coal is used to fuel power plants while coking coal is used by steel mills to fuel their furnaces. Australia is also the world's biggest exporter of coking coal.
Coal prices for delivery in March have already risen to some US$130 (RM398) a tonne, according to Bloomberg data. It was around US$100 (RM306) a tonne at the start of December last year.
TNB(5347) purchases about 17 per cent of its coal from Australia. The bulk of its coal comes from Indonesia.
Currently, about 40 per cent of Malaysia's generation capacity comes from coal-fired plants.
"Thermal coal prices have been steadily increasing over the past few weeks due to the overall demand and supply disruptions, which has resulted with the tightness in the market.
"The massive flood situation in Australia is the latest supply disruption for seaborne coal trade and it is expected that thermal coal prices will be affected by the situation," TNB said in reply to questions from Business Times.
On December 10, TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the group was still able to absorb the increase in fuel prices but should they continue to rise, the power company's bottom line will definitely be hurt.
"There is no way we are able to sustain and absorb these additional costs," he had said then, noting that a revision request will be made to the government.
But analysts don't think the government would agree to a tariff hike as it could be preparing for an early general election, as widely expected.
"I'm sure that TNB will continue to make their case but I think they will only get it after the election," said OSK Research's head of research Chris Eng. - by Shahriman Johari, btimes.com.my.
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