Commercial users to pay more for gas from July 15

gas

KUALA LUMPUR: Gas Malaysia is raising its natural gas tariff for heavy consumers and commercial users by 6.0 per cent to RM27.05 per one million British thermal unit from July 15.

However, selling prices for most residential customers remain unchanged.

Gas Malaysia, partly owned by infrastructure company MMC Corp, said this in a stock exchange filing.

A report in the Nikkei Asian Review quoted Fitch Ratings as saying the increase in the piped-gas tariff would be “positive” in generating cash for national oil and gas producer Petronas, and that the impact on state-run power producer Tenaga Nasional was “likely to be neutral.”

Natural gas in Malaysia is largely regulated under the so-called Gas Cost Pass Through mechanism that calls for a review of prices every six months, helping to shield consumers from volatile fluctuations in global prices.

Since January 2014, gas tariff for commercial and industrial customers has increased by about 68 per cent through five revisions while Petronas’s piped-gas tariff for the power generation sector had increased by about 44 per cent over four revisions, said the report.

The latest increase might cut earnings between 2.0 per cent and 3.0 per cent of rubber glove makers, such as Top Glove Corp and Hartalega Holdings, where natural gas accounts for an average of 7 per cent of production cost, according to Kenanga Investment Bank analyst Raymond Choo.

“However, we are not overly concerned, since rubber gloves players have generally been able to pass on the cost increase judging from past experiences,” he was quoted as saying in the Nikkei report.

Tenaga Nasional, on its part, said that it would keep the current electricity rebate between July and December despite an earlier increase in prices thanks to lower use of gas to produce power and cheaper coal prices.

Gas Malaysia, which mainly distributes natural gas and liquefied petroleum gas, said the higher gas tariff was expected to “contribute positively towards the financial position” for the year ending December 31.

The company is 31 per cent owned by Malakoff Corp, which in turn is 38 per cent owned by the Malaysian tycoon Syed Mokhtar Albukhary-controlled MMC Corp.

“The smooth implementation of the mechanism has effectively insulated utilities players from fuel-cost volatility,” said AllianceDBS Research analyst Quah He Wei. “Therefore, this offers strong earnings visibility for both Tenaga and Gas Malaysia going forward as earnings growth will be mainly driven by sales volume and operational efficiency.”

The report said shares of Gas Malaysia rose 0.4 per cent to RM2.40 while MMC Corp was 0.5 per cent higher at RM2.00 on Monday.