PETALING JAYA: The coronavirus (Covid-19) pandemic may result in a dip in overall power demand but Tenaga Nasional Bhd’s (TNB) earnings are expected to remain unaffected.

Hong Leong Investment Bank (HLIB) Research said the energy giant is shielded by the regulated asset base (RAB) structure, based on the revenue cap for its transmission and distribution segment and purchasing power agreement as well as its service level agreement, based on capacity payments for its power generation segment.

The group will be compensated in the upcoming imbalance cost-pass-through review in order to address the shortfall of earnings due to lower-than-assumed power demand of +2% year-on-year (y-o-y).

The research house said there would be minimal impact on its income statement but a delay in terms of cashflow into the second half of 2020.

It added that TNB’s operations remained as usual with minimal disruption to ensure no interruption of power supply to the nation during the movement control order period.

“TNB’s earnings are expected to be sustainable at current levels with stable cashflow and dividend payout.

“Management is committed to its dividend payout policy of 40% to 60% of its adjusted earnings and we are imputing 60 sen payout for financial year 2020-2021, ” HLIB said.

It maintained its “buy” rating on TNB with a target price of RM13.50.

HLIB also noted that TNB would only contribute RM150mil to fund the government’s Covid-19 stimulus.

This is on top of the group’s RM10mil commitment for corporate social responsibility activities related to Covid-19.

TNB intended to claim tax relief for the RM160mil commitment, indicating a minimal impact of RM120mil to net profit.

HLIB pointed out that TNB’s accelerated investment of RM2bil on top of the existing RM11bil commitment in 2020 would be covered under the RAB structure, so it would not be materially impacted by the announced stimulus.

Meanwhile, TNB’s associate company India GMR would be affected by slowing power demand while its ongoing asset monetisation restructuring exercises may also be affected.

TNB’s investment value of around RM450mil may be subject to further impairment.

As for its two subsidiaries in the United Kingdom - UK Vortex and Wind Ventures - they are expected to remain stable under the country’s renewable energy tariff structure.

TNB’s share price rose 10 sen to close at RM12.04 yesterday.