PETALING JAYA: The quantum of losses posted by Tenaga Nasional Bhd (TNB) is larger than expected although analysts had expected it to announce a weak third quarter.

On Thursday, TNB revealed a net loss of RM440.2mil for its third quarter ended May 31 compared with a net profit of RM1.1bil in the previous corresponding period as it was severely impacted by gas curtailment resulting in an additional RM1.3bil in fuel costs. Its revenue was marginally higher at RM7.76bil in the third quarter against RM7.72bil a year earlier.

Analysts said TNB's third-quarter results were below market expectation and they were surprised by the huge quantum of losses. Some analysts have gone further to revise their forecast for TNB earnings for the coming quarters. Nevertheless, some analysts are still upbeat on TNB's prospects despite the massive loss.

“Although TNB was expected to deliver a weak set of nine-month results, we were surprised by the large quantum of losses, which therefore rendered the results below our and consensus expectations,” ECM Libra said.

It said the key variance in TNB results was due to ECM Libra's underestimated the impact of the cost incurred in burning oil and distillate. “This was attributable to half of the quarter (45 days) being negatively impacted by unscheduled shutdown of Petronas's gas plants, which was unexpected and caused the availability of gas supply to fall to only 850 to 900 million standard cu ft per day (mmscfd).”

TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh had said the worst may be over for TNB but cautioned that the following quarters would be “challenging”.

ECM Libra said although the worst was over, the “key negative surprise was further maintenance shutdown of Petronas's gas plants” in the coming quarters.

OSK Research said that while TNB's results were disappointing and came in below market expectations, 2012 contained a silver lining for TNB as it could find raising tariffs much easier post-general election.

“It could also see the importation of LNG via the new Malacca LNG plant alleviate the gas shortage and coal prices ease off if economic conditions worsen,” said OSK Research.

The research house said with gas platform maintenance continuing into fourth quarter and FY12, it expects fuel costs to continue to drag down TNB's prospects and earnings, leading it to slash its forecasts by 47% for FY11 and 8% for FY12 on higher oil and distillate fuel cost and lower demand. Furthermore, clarity on the power purchase agreements renegotiations and coal cost pass through remains murky for now.

HwangDBS Vickers Research said it had expected a weak third-quarter results from TNB but the gas curtailment cost came in larger than expected due to additional losses of RM1.3bil from using oil and distillate in the third quarter.

“As there have been delays in plant repairs and maintenance at Petronas' plants, we reduce our FY11, FY12 and FY13 forecast earnings by 22%, 8% and 1% respectively to factor in the curtailment costs.

“We expect the gas curtailment problem to be resolved by the first quarter of 2012. TNB has initiated efforts to recover the losses with plans to share the cost with Petronas and IPPs (independent power producers), but we have excluded the write-back in our forecast due to uncertainty in timing of the subsidy rollback,” HwangDBS said.

The research house expects TNB's earnings to recover from the fourth quarter onwards after the 7% average tariff hike effective June 1. The recently approved cost-pass-through mechanism will also allow higher fuel cost to be passed on to the end users under the next tariff review, which is due in late December.