MALAKOF: Power Producer Faces Capacity Payment Hit After Major Plant Fire
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A significant incident at a major power plant is expected to severely impact a prominent independent power producer’s (IPP) capacity payment revenue and earnings. PublicInvest Research has downgraded its rating on the company to “Underperform” from “Trading Sell,” while maintaining its target price at RM0.82.
Incident Overview
On October 2, 2025, a fire broke out at the 1,000MW Tanjung Bin Energy (TBE) plant, causing damage to the flue-gas desulphurisation (FGD) system and 70% of the 200-meter chimney. Fortunately, no injuries were reported. The Fire & Rescue Department is conducting a forensic investigation, and the affected area has been cordoned off for a detailed site assessment. The adjacent Tanjung Bin Power (2,100MW) complex remains operational.
Operational and Financial Impact
The investment bank prudently assumes a 10-week forced shutdown for the TBE plant, which is the company’s largest single unit and a critical provider of baseload reliability to Peninsular Malaysia under a long-term power purchase agreement. This prolonged outage is projected to result in an estimated RM100 million reduction in capacity-payment revenue for FY2025. After accounting for variable costs, the net earnings impact is anticipated to be RM60 million, representing a substantial 44% decline in FY2025 core net profit after tax and sukuk.
TBE has a history of significant forced outages, including a major incident in November 2021 due to low-pressure turbine blade damage, which pushed the rolling Unplanned Outage Rate (UOR) to 31.5%. Full repairs from that incident were completed during a scheduled outage in October 2022. The bank’s current estimate for ACP reduction for a 10-week shutdown is based on extrapolation from historical data, valuing a full outage day’s ACP haircut at RM1.4 million. This back-of-envelope calculation is considered conservative, pending further details on the repair timeline and potential business-interruption insurance recovery.
Revised Outlook
Given the substantial anticipated earnings impact from the TBE plant fire, PublicInvest Research has downgraded its recommendation to “Underperform”. The target price is maintained at RM0.82, pegged to a DCF valuation based on FY26F. The incident highlights the company’s vulnerability to unplanned outages at its key assets, which materially affect group earnings linked to availability-based capacity payments.
