Are SMEs “Forced” To Raise Prices?

Small and medium enterprises (SMEs) are struggling after being hit by the Covid-19 pandemic, and the 11-18.4% hike in electricity rates from February which will surely hamper recovery.

A hike of up to 18.4% in utility bills could mean a reduction of between 20% to 40% in profits (as reported by FMT, January 30, 2022). According to the Energy Commission, the increase will affect more than 1.6 million commercial and industrial users. Commercial and industrial users, besides losing the 2 sen/kWHh rebate given previously, would be imposed a surcharge of 3.70 sen/kWh in their electricity bills.

Source: https://www.malaysiatrend.com

How is TNB doing? Tenaga Nasional Bhd (TNB) posted higher net profit at RM1 billion for the third financial quarter ended Sept 30, 2021 (3QFY21), up 22% from RM821.5 million in the immediate preceding quarter (The EdgeMarkets, Nov 25, 2021). 

Revenue grew 4.3% to RM12.97 billion in the quarter under review against RM12.44 billion in 2QFY21. The utility group did not declare any dividend for the quarter.

The higher quarterly earnings against the preceding quarter were mainly due to lower net loss on impairment of financial instruments and current taxation in 3QFY21. On a yearly basis, TNB’s net profit was flat compared with RM1.01 billion recorded in 3QFY20. However, its revenue was 16.8% higher versus RM11.11 billion a year ago. 

For the cumulative nine-month period ended Sept 30, TNB’s net profit expanded nearly 17% to RM2.78 billion from RM2.38 billion a year ago, while revenue increased 9.64% to RM36.89 billion from RM33.65 billion. On an annualised basis, it may close with a net profit of RM3.6 billion, better than in 2020.

TNB’s profit was RM3.4 billion in December 2020, a drop from RM4.5 billion in 2019. This drop was mainly due to lower revenue, arising from Covid-19 – lower tempo in commercial activities.

With over RM3 billion annual net profit (over last 3 years), is there a need to raise tariffs? What is TNB trying to prove? Higher profit for analysts or bonuses? Meanwhile, if this increase is passed through by SMEs and others, the rakyat will face a higher CPI, and the measure to defer residential tariff increase comes to naught! Why? The price increase by SMEs maybe equivalent to the original tariff increase by TNB for residential users. Anyway, why increase when recovery is tepid and TNB already reports decent profits which translated to dividends goes to Khazanah Nasional, amongst others. And if the PM thinks SMEs should absorb the new tariffs, why can’t TNB do the same and not burden the rakyat or the SMEs?

References:

We’ll be forced to raise prices due to steep hike in power rates, warn SMEs, FMT Reporters, January 30, 2022 (https://www.freemalaysiatoday.com)

TNB sees RM1b net profit for 3QFY21 as electricity demand recovers, Shazi Ong, TheEdgeMarkets, November 25, 2021