SKS Power Sdn Bhd has awarded a contract worth US$1.3bil to Japan's Sumitomo Corp to build a 2,100-megawatt coal-fired power plant, industry sources said.
Sumitomo won the engineering, procurement and construction job for the power station in Tanjung Bin in Johor against stiff competition from rivals Mitsubishi Corp and Germany's Siemens AG.
Work is expected to start in the middle of August with the first 700MW unit to come online by end-2006, a source said.
Officials from Sumitomo and SKS Power, controlled by businessman Syed Mokhtar Albukhary, met yesterday to sign the contract agreement.
Zelan Construction, a firm linked to Syed Mokhtar, would undertake a small part of the work through its partnership with the Japanese company, the source added.
The long-delayed contract award comes after SKS Power called for a second tender among contractors in April due to unsatisfactory bids.
This deal is also expected to pave the way for a RM5bil bond sale by SKS Power Malaysia's largest ringgit bond issue this year to help finance the plant's construction.
The plant's development comes at a time when Tenaga Nasional Bhd (TNB) wants power producers to reduce their dependence on gas as fuel. TNB is the sole buyer of electricity from independent power producers like Malakoff Bhd and YTL POWER INTERNATIONAL BHD.
As at end-February, gas made up some 65% of TNB's fuel for electricity generation while coal accounted for 31% of its fuel mix.
Syed Mokhtar also controls infrastructure group Malaysia Mining Corp Bhd (MMC), parent of fast-growing transhipment hub Port of Tanjung Pelepas (PTP), and Pernas International Holdings Bhd.
SKS Power's plant, next to PTP, will cost RM7bil. Sumitomo's contract forms some 70% of the project cost. The remaining expenditure is for civil works.
Syed Mokhtar is planning to sell at least 60% of SKS Power to Malakoff, Malaysia's second largest power producer, which is also an associate of MMC. Reuters