Tenaga Shares Drop on Concerns Over Costs, Politics

By Soraya Permatasari

Sept. 15 (Bloomberg) -- Tenaga Nasional Bhd., Malaysia's state power utility, headed for the lowest close in four months in Kuala Lumpur trading after talks aimed at reducing its costs ended and doubts over political stability deterred some investors.

Tenaga, the exchange's fifth-biggest company by market value, tumbled 6.3 percent to 6.75 ringgit at 10:16 a.m. on the Malaysian stock exchange, taking the decline to almost 14 percent in the past two trading days. The benchmark Kuala Lumpur Composite Index dropped 1.2 percent to 1,031.14, headed for its lowest close since November 2006.

The Malaysian government last week halted talks that may cut Tenaga's cost of buying electricity from independent power producers. Opposition leader Anwar Ibrahim last week reiterated his confidence that his People's Alliance will attract enough lawmakers from the ruling coalition to cross over to his side to form a new government.

``Tenaga fell because of a combination of factors, including last week's decision by the government, as well as political concerns,'' said Ong Chee Ting, an analyst at Aseambankers Malaysia Bhd., who has a ``hold'' call on Tenaga's stock. ``The weaker ringgit is also negative for Tenaga because it buys coal in U.S. dollars.''

The Malaysian ringgit has fallen 4.04 percent against the dollar this year, Bloomberg data shows.

A report in the Edge today that Tenaga aims to buy as much as 40 percent of the Bakun hydroelectric dam ``had been expected,'' said Ong. It's better for Tenaga not to own a majority stake in the project, which could otherwise affect its financial position, he said.

Tenaga has no intention of having a controlling stake in Bakun as its priority is getting the right price for the electricity it will buy from the power plant, the Edge daily reported, citing Izzaddin Idris, chief financial officer of the company.

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net