(EnergyAsia, June 28) — MayBan Securities has placed a ‘hold’ rating on the stock of Malaysia’s power company Tenaga Nasional Berhad (TNB), which recently agreed to buy a 22.5% stake in TNB Coal International (TCIL) equivalent to 26.6 million shares.

Upon completion of the deal, TNB will hold 92.5% interest in TCIL while individual Nik Sallahuddin Nik Hussein will hold the remaining 7.5% interest.

MayBan said it views the TNB move positively in light of the current high coal prices.


TCIL holds a 99.9% stake in coal mining contractor PT Dasa Eka Jasatama (DEJ). DEJ holds the exclusive mining and marketing rights to mine, exploit and sell coal extracted from five concession areas in Banjar Masin, South Kalimantan. The concession has proven reserves of 33 million tonnes and only one concession area is currently in operation.


MayBan said: “We expect the market to react positively to this development. In view of the current high coal prices, we believe that TNB is in a better position to retain ownership of TCIL and to maintain its own supply of coal. Although owning a coal mine is not part of its core business, TNB’s ability to control its own coal supply could reduce the risk of the fluctuating coal prices.


“Nevertheless, in times of high coal prices, the power industry is able to easily switch to gas as the cheaper alternative generation fuel. Gas is sourced from Petronas at a subsidised rate of RM6.40/mmbtu. (US$1=RM3.8).”


TNB sources its Indonesian coal from TNB Fuel Services under an offtake contract with TCIL starting January 1 2003 and is deemed perpetual until the coal reserves are exhausted. TCIL has contracted to supply the Indonesian coal to TNB at US$35/mt (vs international price of US$49/mt) for five years with a minimum offtake of 3 million tons.

MayBan said: “We have assumed that TNB sources 10% of the power industry’s coal requirement from its Indonesia mine (currently about 1 million ton). Therefore, this leaves an opportunity for TNB to export the remaining coal (to make up for the minimum 3 million tonnes offtake) at current prices.


“TNB’s demand from the Indonesian mine is expected to increase to 1.6 million tonnes in 2008 as the coal-fired Tanjung Bin power plant commences Phase 1 operation in August 2007 and reach full operations by August 2008. Coal is also sourced from Australia, China and South Africa.”