Two IPPs get 10-year extension; TNB to build Prai plant


Enlightening: Tajuddin announcing the power deals. Genting Sanyen is one of two IPPs awarded 10-year extension.

PUTRAJAYA: The energy sector saw major announcements yesterday as the Energy Commission (EC) announced the extension of first-generation independent power producers' (IPPs) power purchase agreements (PPAs) and also awarded Tenaga Nasional Bhd (TNB) a contract to build and operate a RM3bil combined-cycle gas turbine (CCGT) Prai power plant.

First generation IPPs that have been awarded with an extension of 10 years to their PPAs are Genting Sanyen Power Sdn Bhd and Segari Energy Ventures Sdn Bhd (a subsidiary of Malakoff). TNB Pasir Gudang has been awarded a five-year extension to its PPA. TNB Pasir Gudang, which is currently operating under an agreement, will operate as an IPP after 2017.

Energy Commission chairman Tan Sri Dr Ahmad Tajuddin Ali said extension for PPAs and Prai power plant bidding was done concurrently to meet the requirement of generation capacity in Peninsular Malaysia for 2016/2017.

“Malaysia's electricity demand keeps increasing every year. The new plant is to meet the requirement of generation capacity in the peninsula,” Tajuddin said in a briefing.

He said the CCGT power plant would use two units of Siemens H-class gas turbines that can achieve plant efficiency of around 60% when commissioned in 2016 compared with the efficiency of F-class combined cycle plant in the system of around 55%.

The new 1,071 MW Prai power plant is expected to commence operation by March 1, 2016 and the tariff for the Prai plant was 34.7 sen per kWh.

Tajuddin said the estimated cost of RM3bil for the Prai power plant was a “good and competitive price for a gas plant”.

Meanwhile, the rate for Genting Sanyen's 675 MW plant is 35.3 sen per kWh, while the rate for Segari's 1,303 MW plant is 36.3 sen per kWh. The rate for TNB Pasir Gudang's 275 MW plant is 37.4 sen per kWh. Additionally, gas used to power up these stations will no longer be subsidised.

He said the new rates for IPPs would be effective 48 months from the existing PPAs.

“The tariff for both bidding exercises was based on projected market price of RM42.24 per gigajoule in 2016,” Tajuddin said, adding that the PPAs were expected to be signed in about three weeks.

He noted that the bidding exercise was done in a transparent and open manner with eight parties initially selected with six coming up with final offers for evaluation.

The first-generation IPPs' PPAs, which will expire between 2016 and 2017, are not being renegotiated and the competitive tender exercise will replace these as the country plans for future energy demand.

Tajuddin said the EC was in the midst of preparing papers for a decision on further planting of power plants to cater for the rising energy demand beyond 2016. “We have taken the needs (with the extension of PPAs and new power plant) up to 2016, but also we need to cater for 2017, 2018 and beyond.”

“We hope to finalise this (preparing papers) soon for bidding process for plants to be commission in 2017 onwards,” he added.

At present, the peak demand for electricity in Peninsular Malaysia stands at 15,826 MW, as recorded on June 20.

By 2020, the peak electricity demand will likely exceed 20,000 MW based on an expected growth rate of 3.5%, or 550 MW to 600 MW, per year.

Meanwhile, TNB said it had been selected as the preferred bidder for the Prai power plant but the letter of award for the said project would only be issued upon successful completion of negotiations.

The utility giant said negotiations would commence from Oct 15 and were expected to be completed within 21 days. The power plant would be gas fired and has a capacity of 2x535 MW.

A local bank-backed analyst said the new contract would bring new business to TNB with the additional capacity. He said TNB had the ability to borrow money at lower cost and had a strong balance sheet to boot.

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