KUALA LUMPUR, July 14 (Bernama) -- Tenaga Nasional Bhd (TNB) share has the potential for an upward trend based on the possible tariff increase in tandem with the subsidy rationalisation programme, says ECM Libra Investment Research.

"We still like Tenaga Nasional for its low foreign shareholding of nine per cent which limits downside risk and potential for tariff increases in tandem with the subsidy rationalisation programme," it said in an equity note Wednesday.

ECM Libra said Tenaga Nasional is also gaining from a strong demand recovery and the strengthening ringgit.

Tenaga Nasional has been experiencing strong unit demand growth which grew by a robust 10 per cent year-on-year in the eight months of the current financial year on the back of the recovering economy.

In general, ECM Libra said after numerous disappointments over base tariff and fuel cost adjustment tariff reviews in first half of this year, the third quarter will be centred on constructing capacity for the future in light of strong unit demand growth.

It said 4,000 megawatt of coal plants will be up for tender.

"We understand that it will be split 50:50 between Tenaga Nasional and the independent power producers (IPPs)," ECM Libra said.

Of the IPPs, it believed MMC Corporation will be best positioned to secure coal IPPs due to their experience operating them while YTL Power may be a dark horse thanks to their experience in operating 35 per cent owned coal-fired PT Jawa Power in Indonesia.