TNB tender for submarine line to be issued by year-end

  • Business
  • Thursday, 28 May 2009

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) is expected to issue the tender document for the submarine transmission line by year-end, said chief financial officer Datuk Izzaddin Idris.

“We expect bids to be very competitive given that metal prices are at their lows in the current times. Aluminium and copper, which are the main metals used, are much cheaper than before,” he told StarBiz in an interview yesterday.

If the engineering, procurement and construction portion were cost effective, the savings would be passed on and consumers in Peninsular Malaysia would get to enjoy “fairly cheap” electricity, he said.

The cable project, whose cost is yet to be finalised, comprises a 730km high-voltage direct current transmission line and a 670km undersea cable for the 2,400-megawatt (MW) RM6bil Bakun hydroelectric dam.

Electricity will be carried via transmission towers from the dam in the Kapit division in central Sarawak to the Bintulu division along the coastal belt, and then southwards to the Kuching division.

From the southernmost tip of Kuching, the last transmission tower will join the undersea cable that will carry the electricity across the South China Sea to Johor, and then to the rest of the peninsula. At least 10,000 MW would be exported to Peninsular Malaysia.

The undersea transmission cable, upon completion, will be the longest in the world. Currently the longest undersea high voltage direct current cable is the 580km NorNed that connects Norway and the Netherlands.

The shareholding structure between TNB, the Finance Ministry and Sarawak Energy, a unit of the state government is still under discussion.

Izzaddin said hydroelectricity was more cost effective in the long run than coal-fuelled plants as the “useful life” of the former was twice that of the latter.

For example, assuming a coal plant with a shell life of 15 years costs RM7bil and a 30-year hydro dam with the same capacity is priced at RM10bil. While it might seem the hydro dam is more expensive, considering the lifespan of both, it would take two coal plants to serve the same number of years as the hydro dam, hence putting the total price tag at RM14bil.

TNB currently has some RM4bil cash and does not expect any need to raise more funds this year.

“Even though liquidity is available, it’s not a good time to raise financing because of the wider credit spread,” Izzaddin said, adding that the utility company might look for fresh funds next year.

It was earlier reported that TNB might consider raising ringgit-denominated bonds in the next 12 months to fund its portion of investment for the cable project.

Meanwhile, its capital expenditure this year has reduced to RM3.75bil to RM4bil from RM4.5bil in previous years.

Izzaddin said this was because no new plants would be set up in the next five to six years after the commissioning of the Jimah plant in July.

Last month, TNB repurchased and planned to cancel US$39.1mil nominal value of the US$150mil 7.5% debentures due 2096, reducing its total debt by almost 1% to RM23.2bil while foreign currency exposure, in US-denominated debt, fell to 25.4% from 26.1% previously, based on total borrowings and exchange rates as at end-February.

“We have the cash and the pricing was right, hence it made sense for us to buy back the bonds,” Izzaddin said.

RAM Ratings Services Bhd has reaffirmed the AA1 rating of TNB’s RM500mil Murabahah medium-term notes programme (2005/2025) with a stable outlook for long-term rating.

In a recent statement, RAM said the rating reflected TNB’s position as the national utility company, which had maintained dominant position over the transmission and distribution of electricity in the peninsula and Sabah, as well as the power-generating business.

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