KUALA LUMPUR: Tenaga Nasional Berhad (TNB) said yesterday that it has yet to know the net effects of the falling ringgit and coal prices on the tariff.

“Coal price has been coming down [and as for] the impact of the ringgit movement versus coal price movement, we’ll have to see. It is difficult to say what the impact will be now,” said its chief financial officer Fazlur Rahman Zainuddin.

He also doesn’t know whether the lower coal price will translate into lower electricity tariffs for consumers.

“We don’t know [but] the government had earlier announced that there would not be any adjustments to the tariff until June 30 [next year],” he added.

He stressed that any tariff adjustment would depend on the government’s decision and the movement of coal price.

Meanwhile, about 12% of TNB’s borrowings are denominated in US dollar, said Fazlur, so there will be some translation losses when the ringgit depreciates against the US dollar.

“However, it is just on the book, it’s unrealised. We will try to mitigate the exposure,” he added.

TNB is also buying coal in US dollar, said Fazlur, and he noted that falling crude oil pricse will sometimes have an indirect effect on prices of other commodities.

However, he reiterated that “at this point, we will have to see [what the effect will be]”.

On TNB’s projection for coal prices, president and chief executive officer Datuk Seri Azman Mohd said they should remain at current levels until next year.

“There is no reason to assume coal prices will go drastically high as China is still depressed. We believe they will be at the same level, lower than US$70 (RM242.90), until next year,” Azman said.

Nevertheless, because of the imbalance cost pass through (ICPT) mechanism, Fazlur said TNB “will remain neutral” on the impact of lower coal prices, adding that the movement of fuel prices will not affect TNB’s performance in the financial year ending 31 August, 2015.

ICPT was introduced by the government to allow the tariff rate to be reviewed every six months, according to the fluctuating fuel price in the market. Any changes in the fuel cost due to fluctuation in fuel prices will be passed through in the end-user tariff.

According to TNB’s website, in the event of a reduction in fuel costs, TNB will also pass through the reduction to customers.

On a separate issue, Fazlur said the group has yet to sign the engineering, procurement and construction contract for Project 4A, a power plant in Johor that it is undertaking on a joint-venture basis with SIPP Energy Sdn Bhd. However, he assured that there is no delay on the project.

This article first appeared in The Edge Financial Daily, on December 19, 2014.