Selangor may charge Tenaga for use of land

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THE SELANGOR GOVERNMENT is mulling over charging Tenaga Nasional Bhd a fee — much like a rental — for many of the utility giant’s landed structures located in the state, industry sources say.

It is understood that initial overtures to this end have been made to Tenaga, and some of its officials are already aware of Selangor’s plan but have yet to make any decisions because a formal proposal has yet to be made known.

“The state has yet to deliberate or fine-tune the plan … there is some apprehension about how Tenaga will handle it,” a source familiar with the matter says. “Electricity rates is a very touchy subject matter,” he adds.

A state lawmaker, who spoke on condition of anonymity, says while he is not aware that the initial overtures for Tenaga to pay a fee for the land its structures sit on had already been forwarded to the utility company, he is aware of such a plan by the state.

“For the state, there are very few ways of generating revenue. This is one of the obvious methods we had planned earlier, so I’m not in the least bit surprised that it is being implemented,” he says.

A source from the utility giant confirms that he had heard of the plan, but says it is still too early to speculate on the outcome. “Basically, building transmission lines is going to get more difficult,” he says.

Other details of the plan are not known as officials of the state were not available for comment.

It is not clear if such charges will come under Selangor’s investment arm Kumpulan Darul Ehsan Bhd (KDEB) or the state’s 63.3% unit Kumpulan Perangsang Selangor Bhd (KPS).

KPS is 57.8% controlled by KDEB and 5.5% owned by another state-owned entity, Perbadanan Kemajuan Negeri Selangor or the Selangor State Development Corp.

At present, other utility businesses in Selangor, such as those related to water, involve KPS.

KPS has a 30% stake in Syarikat Bekalan Air Selangor Sdn Bhd, or better known as Syabas, the company with the mandate to supply treated water to Selangor, Putrajaya and Kuala Lumpur. Syabas also almost wholly owns water treatment outfits Titisan Modal (M) Sdn Bhd and has 30% equity interest in Syarikat Pengeluar Air Sungai Selangor Sdn Bhd or SPLASH.

It is noteworthy that the four water concessionaires in Selangor are being nudged into giving up their concessions to the state. Other than SPLASH, the other parties are Titisan Modal and Puncak Niaga Holdings Bhd, which has a 70% stake in Syabas and wholly owns water treatment company Puncak Niaga (M) Sdn Bhd.

This takeover of the water assets has been ongoing since 2008, and has yet to be concluded, despite Selangor’s taps almost running dry.

Nevertheless, for the six months ended June 30, KPS posted a net profit of RM59.3 million from RM151.6 million in sales.

For Tenaga, meanwhile, it is unlikely that the state will be unreasonable, but such a move by Selangor may prompt other opposition-led states such as Penang and Kelantan to follow suit and charge the utility company a rental fee for its landed structures.

Selangor, being the most developed state in Malaysia, could receive the most payment from Tenaga.

For the nine months ended May 31, Tenaga posted a net profit of RM5.1 billion from RM31.1 billion in revenue. As at end-May, Tenaga had deposits, cash and balances of almost RM11 billion, while its long-term debt commitments were RM23.9 billion and short-term debt commitments were RM2.5 billion.

To put things in perspective, Tenaga at its close of RM12.52 last Friday, which is close to a record high, had a market capitalisation of RM70.6 billion. While the state’s request for a fee could be a thorn in the utility giant’s side, it is unlikely to make a significant dent in its coffers.

The shareholding of Tenaga is largely institutional, considering its steady dividends and strong earnings.

Tenaga’s largest shareholder, with a 32.4% stake, is Khazanah Nasional Bhd, a company within the purview of the federal government and controlled by the Ministry of Finance. Other substantial shareholders include the Employees Provident Fund, which has a 12.2% stake, and Permodalan Nasional Bhd with about 7.5% equity interest.

While Tenaga can easily absorb any increase in costs brought about by the rental payments to Selangor, it does have a number of options available to pass on the cost of the rental. But an increase in tariffs for the consumer would not be well received as well as being politically unpopular.

This article first appeared in The Edge Malaysia Weekly, on October 20 - 26, 2014.