Tenaga cuts tariffs

From the Edge:

UR: TNB Nasional Bhd (TNB) ( Financial Dashboard) saw its market value shrink by RM2.6 billion yesterday as investors offloaded its shares on the government’s announcement of a new, lower electricity tariff.

TNB’s counter, which opened at RM14.94 yesterday, was stable up until the moment when the Energy, Green Technology and Water Ministry (KeTTHA) announced that electricity tariff in Peninsula Malaysia had been revised downward by 2.25 sen per kilo watt hour (kWh).

 Tenaga just cut its tariffs....ouch.  A lot of investors were banking on the fact that Najib stated no tariff cuts would be instituted.  Likely that froth will come out of the market.  At the end of the day, Tenaga is still a government entity which will cater to the government whims.

Seeing as how unpopular the profits for Tenaga is, Najib has a bit of a sore spot whenever politicians raise the question on enriching Tenaga's shareholder's pockets at the expense of the common Malaysian folk.

Government entities will usually have their upside capped due to the fact that if profits are too large, people will start to complain.  Most economics books will tell you these companies which operate in a government regulated monopoly will earn a decent return for shareholders but not outlandish due to public and government meddling.  This seems to be the case for Tenaga.

So where does that leave us?

Probably an attempt to target the gap at around 10 Ringgit a share.  Let's see what happens.  Already analysts are calling for more tariff cuts.