KUALA LUMPUR: The new power purchase agreement (PPA) between Tenaga Nasional Bhd and YTL Power International Bhd saw TNB getting a 'buy' call with a target price of RM17, while YTLP received a 'hold' call with a TP of RM1.47 from HLIB Research.
The research house said it is positive on TNB's long-term growth and strong cash flow.
"TNB has entered into a new PPA and LLA (Land Lease Agreement) with YTLP, pursuant to a new Letter of Award issued by the Energy Commission (EC) for a three-year and 10-month extension (from Sep 2017 to Jun 2021) of the operations of YTLP-owned Paka Power, Terengganu.
"We are positive with the announcement, marking the end of the longstanding land legal tussle between TNB and YTLP for Paka, following a new LLA agreement," HLIB Research said.
The firm, said TNB, is now in a stronger position as the new LLA indicated.
Meanwhile, looking at YTLP, the firm said the new LLA is likely to be negative to YTLP and the company is being compensated with the longer extension period, by an additional one year, under the new PPA.
"However, the earnings accretion of Paka Power is expected to be relatively small at RM20-30 million to YTLP’s earnings base of RM700 million per annum," it said in its report.