Win-win solution proposed for smelting plant electricity usage dispute

KUCHING: Sarawak Energy Bhd says it has proposed a “win-win” solution to Pertama Ferroalloys Sdn Bhd (PFA) over the latter’s request not to be charged for unconsumed electricity at its manganese alloys smelting plant in Samalaju Industrial Park, Bintulu.

Sarawak Energy’s corporate communication head Peing Tajang said the win-win solution had been proposed under the general principle that PFA could reduce its financial obligation to an acceptable extent or within a target that is not totally at Syarikat Sesco Bhd’s expense.

Sesco, which is a subsidiary of Sawarak Energy, is involved in the generation, transmission and distribution of electricity in Sarawak.

“In 2011, PFA signed a 20-year power purchase agreement (PPA) with Sesco to secure its long-term power supply with a committed volume proposed by PFA for a total of 270MW — phase 1 (170MW) and phase 2 (100MW) — at a preferential tariff.

“Both parties agreed on the commercial term for the supply of power, taking into account that Sarawak Energy would need to invest in, fund and build the infrastructure needed to supply electricity under the contractual obligation to PFA.

“When PFA encountered construction and financial challenges in the initial stages of their venture, Sesco agreed to reduce PFA’s obligation to 170MW and deferred the payment arrangement to ease PFA’s cash-flow issues. This initial assistance was provided as part of Sarawak Energy’s overall commitment to ensure the success of SCORE (Sarawak Corridor of Renewable Energy) investors,” Tajang said in a press statement in response to Pertama executive chairman Hirotaka Suzuki’s remarks.

Suzuki had said that as Pertama’s smelting plant currently only consumed 145MW, it was unfair for the company to be billed for the other unconsumed 25MW. He said the company had to pay about RM2mil a month for that 25MW.

Last Monday, Suzuki said Regional Corridor Development Authority (Recoda) chief executive officer Datuk Ismawi Ismuni had agreed in their meeting to mediate in the Pertama-Sarawak Energy dispute over the company having to pay the unconsumed 25MW.

He said Recoda would look into the PPA and try to help find an amicable solution to the dispute.

Suzuki had also met with Sarawak Energy executive vice-president (planning, strategy and corporate development) Ting Ching Zung over the matter.

According to Suzuki, Sesco had agreed to take back the unconsumed 25MW from Pertama on condition that it had to adjust upward the power tariff for the 145MW to make up for the loss.

Tajang said Sesco sold electricity via PPAs to large SCORE customers at agreed volumes, tariffs and “take-or-pay” structure, representing a contractual obligation between both parties.

She said the number of SCORE investors, especially in Samalaju Industrial Park, was a testament to the success of this strategy, with continued expressions of interest from potential investors.

“It is to be noted that renegotiation regarding contractual volumes (of power) and terms are held directly between Sarawak Energy/ Sesco and the customer on strictly confidential terms and are not to be disclosed to any external parties,” she added.

Tajang said Sarawak Energy provided electricity at globally competitive rates to keep Sarawak attractive to investors for industrial development opportunities made available by SCORE.

“Sarawak Energy continues to support Sarawak’s development strategy of SCORE in Samalaju through mutually beneficial agreements to all customers.

“In selecting the right customers, Sarawak Energy together with the relevant government agencies evaluates and assesses potential candidates and the right industries with care and diligence for the overall development of SCORE,” she added.

Pertama Ferroalloys, which is among the pioneer investors in Samalaju, is 60% owned by Hong Kong-based Asia Minerals Ltd (AML).

Its other joint-venture partners are Japanese firms Nippon Denko Co Ltd (25%) and Shinsho Corporation (7%) as well as Carbon Capital Corporation Sdn Bhd (8%).

The company’s US$400mil smelting plant is currently operating at 85% of its installed capacity. Pertama Ferroalloys hopes to raise the output of manganese alloy products to 22,000 tonnes per month in the next four months when it is ramped up to full production.

Pertama Ferroalloys currently produces three standard grade products — ferrosilicon, silico-manganese and ferro-manganese for the export markets.

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