MALAKOF: Power Producer Navigates Operational Headwinds, Future Outlook Under Scrutiny

A prominent independent power producer recently reported a mixed financial performance for the third quarter of fiscal year 2025 (3QFY25), with core net profit after minority interests (PATAMI) experiencing a significant quarter-on-quarter decline. Despite the quarterly dip, the company’s nine-month core PATAMI largely met full-year estimates, though its operational outlook remains challenged by a series of unplanned shutdowns.

Performance Overview

The company recorded a core PATAMI of RM28.2 million in 3QFY25, marking a 55.1% decline from the previous quarter. This reduction was primarily attributed to lower energy despatch and capacity income from its Tanjung Bin Energy (TBE) and Tanjung Bin Power (TBP) plants, stemming from unscheduled outages. However, on a year-on-year basis, core PATAMI increased by 67.1%, largely driven by the reversal of coal net realisable value provisions. For the first nine months of FY25, core PATAMI reached RM125 million, successfully meeting 95.1% of the full-year estimate and 54.0% of consensus projections. The power generation segment saw its revenue decline by 17.2% quarter-on-quarter and 25.1% year-on-year, reflecting the combined impact of operational disruptions and weaker market conditions.

Operational Challenges

Key operational setbacks primarily originated from the TBE plant. A steam turbine crossover pipe leakage incident, which commenced on September 8 and was rectified on October 16, caused TBE’s Unplanned Outage Rate (UOR) to exceed the PPA’s initial threshold of 6%. This breach triggered a suspension of capacity income throughout the forced outage period. The situation was further exacerbated by a subsequent flue-gas fire incident on October 2, which kept the unit offline longer and pushed the UOR to approximately 12%, intensifying the capacity payment suspension. Additionally, the company’s gas power plant, Segari Energy Ventures (SEV), experienced lower energy payments due to a reduced despatch factor amid softer demand within the grid’s merit order.

Future Outlook and Financial Impact

Management expects the TBE plant to be restored to operation by end-December, utilizing a flue-gas desulphurisation (FGD) bypass mode, which maintains environmental compliance. The total financial impact from the unplanned shutdown is estimated at RM100 million, with restoration costs ranging from RM25 million to RM30 million, which will be capitalized. The company’s insurance policy is expected to cover both physical property damage and business interruption (BI). However, a BI deductible of 45 days means the company will bear the losses for the initial 45 days of the outage before claims can be made for the remaining period of the estimated 91-day shutdown. The deductible for property damage is significantly lower at RM2 million, allowing the company to claim almost the entire restoration cost under its insurance policy. In light of these incidents and revised energy payment expectations, the investment bank has revised its FY25F/26F/27F core PATAMI estimates downward by 86.7%, 41.3%, and 33.4% respectively.