OREANDA-NEWS. Fitch Ratings says in a new report that Malaysia's state-controlled power utility Tenaga Nasional Berhad (Tenaga, BBB+/Stable) continued the over-recovery of its fuel costs in 2H15, driven by improved utilisation of coal-fired plants and lower liquefied natural gas (LNG) costs. Still, higher coal and piped gas prices contained the over-recovery compared with 1H15, and will lead to lower rebates to consumers in 1H16.

The regulator says it will keep the blended electricity tariff in Peninsular Malaysia at MYR0.3853/kWh in 1H16, but rebates will be cut to MYR0.0152/kWh from the existing MYR0.0225/kWh.

Fitch's rating for Tenaga reflects the company's strong market position and solid financial profile, and benefits from the government's support for cost under-recoveries in the fiscal year ended 31 August 2014 (FY14) through the savings from renegotiated power purchase agreements. The recently implemented fuel cost pass-through mechanism has worked in an environment of falling energy prices, but an upgrade of Tenaga's rating would require the mechanism to work in an environment of rising generation costs.

The report "Malaysia Power Dashboard 2H15" is available at www.fitchratings.com.