KUALA LUMPUR: Coal-fired power producers may continue to see an impact on their bottomline from fuel margins in the coming quarters, albeit at a more moderate level.
Both Tenaga Nasional Bhd (TNB) and Malakoff Corporation Bhd missed expectations, with unexpected losses from substantial negative fuel margins in the second quarter ended June 30, 2023, brought about by volatility in applicable coal prices.
RHB Research said in the recent reporting period, of the eight companies under its coverage which released 2Q23 results, four booked dissapointing results, namely Malakoff Corp, Taliworks Corp, Ranhill Utilities, and TNB.
For Ranhill Utilities, the negative deviation was due to a weaker-than-expected water segment, while Taliworks Corporation disappointed on higher-than-expected costs and the slow progress of its Sungai Rasau projects.
"Electricity demand is set to remain fairly resilient in 2H23. With core prices expected to normalise in the upcoming quarters, the impact of fuel margins may still affect coal-fired power plant players' bottomlines – albeit to a moderate extent," RHB Research said in its research note.
Electricity demand rose in tandem with gross domestic product growth in 2Q23 (+3.3 per cent year-on-year), with new peak demand of 19,716MW recorded in May. During the quarter there was a rise in the coal generation mix to 60.1 per cent (1Q23: 53.7 per cent) at the expense of the gas mix which, in turn, dropped to 34 per cent (1Q23: 39.5 per cent).
HLIB Research maintains an overweight call on the power sector, with top picks TNB, YTL Power Bhd and Solarvest Holdings Bhd.