1MDB’s power woes

Azman (second from left), TNB chairman Tan Sri Leo Moggie (fourth from left), Deputy Energy, Green Technology and Water Minister Datuk Seri Mahdzir Khalid (middle) at TNB

KUALA LUMPUR: The fate of the controversial 3B power plant project that was awarded to 1Malaysia Development Bhd (1MDB) would be known next week.

The project that was supposed to be commissioned in stages beginning Oct 1, 2018 is bogged down by delays and so far there has not been any news of its financing being firmed up.

Energy Commission chairman Datuk Abdul Razak Abdul Majid said the commission was in constant contact with 1MDB on Project 3B.

“Discussions are still ongoing. We should know by next week on the prospect of them (1MDB) continuing or not continuing (with Project 3B),” he said when met at Tenaga Nasional Bhd’s (TNB) Chinese New Year open house here.

To a question on whether the EC would call for fresh tenders should 1MDB withdraw from undertaking the project, Razak said: “We will look into it.”

Last March, 1MDB won a controversial bid to build a 2,000MW power plant at a levelised tariff of 25.33sen/kWh for a concession period of 25 years. Its partner was Mitsui Co Ltd.

The closest contender was a joint venture of YTL Power International Bhd and SIPP Power Consortium that offered a lower levelised tariff of 25.12 sen/Kwh but was not awarded based on technical grounds.

In relation to the Project 3B, it was reported recently that 1MDB had called off an RM8.4bil Islamic bond issue that was to finance the project. The withdrawal was seen as a signal that things were not going as planned for the project.

1MDB also planned to list the energy arm - Edra Global Energy Bhd - in the first quarter of this year but the application could not muster past the authorities. (See related story)

Meanwhile, TNB has expressed interest in the delayed Project 3B, a 2,000MW coal-fired plant in Jimah, Negri Sembilan.

“We are interested in any project, but of course before we proceed on any project, we will do a proper due diligence. We will make sure that whatever we do we have the customers’ interest at heart,” president and chief executive officer Datuk Seri Azman Mohd said at the open house.

Azman said if somebody were to come up to TNB and requested the utility company to be a partner, then it would look into it.

“We are open. That’s our business. Our business is in power supply. We will look into it if anybody come to us and if it makes sense we will participate,” he said when asked if TNB had expressed its interest with the Energy Commission (EC) for Project 3B.

Separately, Razak said EC had given an extension to TNB to submit its documents on Project 4A.

The EC had in June 2014 announced that a consortium comprising SIPP Energy, YTL Power International Bhd and TNB had been conditionally awarded the development of Project 4A, a new 1,000MW-1,400MW combined cycle gas turbine (CCGT) power plant in Johor. YTL Power has pulled out from the project.

Azman explained that the extension was up till March 15.

“We still have time. We are conducting our due diligence before March 15,” he said, adding that the shareholding structure of Project 4A with SIPP had yet to be decided.

Also, Azman said the recent reduction in tariff was “neutral” for the utility giant.

He explained that under the incentive base regulation, any changes in fuel cost would be a pass through for TNB.

“If fuel costs go down, then the customers will benefit. They will get the savings. But if fuel costs were to rise, then the tariff might be revised accordingly.

“There is always a misconception that whenever crude oil prices go down, generation costs will go down. We generate using coal and gas. We don’t generate any significant amount using oil and distillate,” Azman said.

Last month, the Government caught the market by surprise when it announced that electricity tariffs would be cut by 2.25 sen or 5.8% in Peninsular Malaysia, while power rates would go down by 1.20 sen or 3.5% in Sabah and Labuan.