KUALA LUMPUR (NewsRise) -- Gas Malaysia, partly owned by infrastructure company MMC Corp., is raising natural gas tariff in a move that analysts say will spare utilities from higher costs but may weigh on earnings of manufacturers which uses gas as an input.
The average gas tariff for heavy consumers and commercial users will rise by 6.0% to 27.05 ringgit per one million British thermal unit from July 15, Gas Malaysia said in a stock exchange filing. Selling prices for most residential customers meanwhile remained unchanged.
The increase in the piped-gas tariff will be "positive" in generating cash for national oil and gas producer Petroliam Nasional, or Petronas, while the impact on state-run power producer Tenaga Nasional is "likely to be neutral," said Fitch Ratings.
Natural gas in Malaysia is largely regulated under the so-called Gas Cost Pass Through mechanism that calls for a review of prices every six months, helping to shield consumers from volatile fluctuations in global prices.
Since January 2014, gas tariff for commercial and industrial customers has increased by about 68% through five revisions while Petronas' piped-gas tariff for the power generation sector has increased by about 44% over four revisions.
The latest increase may cut earnings between 2.0% and 3.0% of rubber glove makers, such as Top Glove Corp and Hartalega Holdings, where natural gas accounts for an average of 7% of production cost, according to Kenanga Investment Bank analyst Raymond Choo.
"However, we are not overly concerned, since rubber gloves players have generally been able to pass on the cost increase judging from past experiences," he said.
Tenaga Nasional, on its part, said that it would keep the current electricity rebate between July and December despite earlier increase in prices thanks to lower use of gas to produce power and cheaper coal prices.
Gas Malaysia, which mainly distributes natural gas and liquefied petroleum gas, said the higher gas tariff is expected to "contribute positively towards the financial position" for the year ending December 31. The company is 31%-owned by Malakoff Corp, which in turn is 38% owned by the reclusive Malaysian tycoon Syed Mokhtar Albukhary-controlled MMC Corp.
"The smooth implementation of the mechanism has effectively insulated utilities players from fuel-cost volatility," said AllianceDBS Research analyst Quah He Wei. "Therefore, this offers strong earnings visibility for both Tenaga and Gas Malaysia going forward as earnings growth will be mainly driven by sales volume and operational efficiency.
Shares of Gas Malaysia rose 0.4% to 2.40 ringgit while MMC Corp was 0.5% higher at 2.00 ringgit. The benchmark FTSE Bursa Malaysia KLCI ended 0.5% higher on Monday.