POWER (NEUTRAL) - Shortlisted Prai Power Candidates

Stock Name: YTLPOWR
Company Name: YTL POWER INTERNATIONAL BHD

Research House: HLG

Price Call: BUY

Target Price: 2.23

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: HLG

Price Call: HOLD

Target Price: 6.54

POWER (NEUTRAL)

Shortlisted Prai Power Candidates

• Malaysia EC (Energy Comission) had shortlisted 9 candidates for the1,000-1,400MW Prai Combined Cycle Gas Power Plant.
• The final decision on the winner is likely to be announced by Oct-Nov2012 with final approval from the government.
• Separately, first generation IPPs are also welcomed to submit bids toextend their PPAs for another 10 years, which will be subjected to someconditions including reducing capacity payments for 4 years from now until endof the existing PPAs.
• Prai PPA is likely to be priced with IRRs of 7-8%, which issubstantially lower than first generation PPAs of more than 15%.
• Tenaga will benefit from the tendering out of new PPAs, ensuringcompetitive PPA rates (lower than the existing first generation PPAs).
• YTL Power have to compete with other contenders whichinclude international utility players (i.e. Mitsubishi, Mitsui, etc), loweringits existing ROEs.
• Maintain BUY on YTL Power with TP of RM2.23 and HOLDon Tenaga with TP of RM6.54.

Source: HLIB Research 19 March 2012