©Business Times
(Used by permission)
By Rajan Moses
SIME Darby Bhd is gearing up to spark a paradigm shift in
power generation in Malaysia with a planned mega RM16 billion to RM17 billion
project.
The conglomerate is preparing to blaze the trail by undertaking to generate
hydroelectric power from Sarawak's Bakun Dam and transmitting it via undersea
cables to Peninsular Malaysia, industry sources said.
The massive transmission project, for which government approval is awaited and
that will become a reality in late 2012, involves moving power generated at the
Bakun Dam by submarine cables to Yong Peng in Johor.
Tenaga Nasional Bhd (TNB) has been earmarked as a partner in the transmission
project with a 20 per cent stake and will be the buyer of the relatively
cheaper–priced power, the sources told Business Times.
Sime Darby would hold a 60 per cent stake in the project and the Ministry of
Finance the remaining 20 per cent.
The conglomerate is exploring financing facilities of up to 80 per cent for the
planned project.
The Bakun Dam project has capacity to generate 2400 megawatts (MW) of power of
which 1600MW would be supplied via submarine cables to TNB in Peninsular
Malaysia, they added.
Around 670km of submarine cables would be contracted out on a turnkey basis by a
contractor to be found by Sime Darby. Another 600km of cables would be laid
overland.
For the project to bear fruit in 2012–2013, work would have to start later this
year, the source said.
The foray into greater hydroelectric power generation and use, although
involving heavy initial capital outlay, is aimed at helping Malaysia reduce
overdependence on subsidised gas to make power, the sources said.
In Malaysia, 64 per cent of total power is generated by using gas–fired
turbines, about 20 per cent using a scarce resource coal and about 5 per cent
via hydroelectric means. Some power is also generated using diesel.
Gas used by power generators in Malaysia, mainly TNB, is heavily subsidised by
the Government through supplier Petroliam Nasional Bhd (Petronas).
The price of subsidised gas is at around a third of the current world price.
Government subsidies paid for the gas in the period between 1997 and 2005
amounted to nearly RM43 billion.
To make matters worse, Petronas has had to import some of the gas supplies for
power generators because its own gas mined from mainly Sabah and Sarawak has
been contracted out on long–term pacts with foreign consumers.
As for coal, which is also quite popular, the sources said it was an expensive
depleting resource, and supply is dwindling worldwide.
If Sime Darby bags the project, power from Bakun will be sold at a relatively
cheaper initial price of 17 sen per kilowatt hour to TNB with a 4 per cent
increase every four years over 35 years. Analysts estimate that the same power
could cost 22 sen per kilowatt hour if unsubsidised gas is used to generate it.
"You now have a strong case for looking at alternative means of power
generation, and hydroelectric means from Bakun stands out as the viable
alternative," said one source.
"After you recover capital costs, the hydroelectric power is free for a long
time to come," the source added.
The sources said the Sime Darby project was a "bankable one" because it is
expected to yield returns of up to 12 per cent on investment.
"At the end of the day, if the project goes through, TNB will get relatively
cheaper–priced electricity, Sime Darby and Permodalan Nasional Bhd (its majority
owner) will get steady income over a long term of 35 years," said the source.
While the planned Sime Darby hydroelectric power supply project will reduce
Malaysia's dependence on gas somewhat, it won't overtake gas as the key raw
material in power generation in the years to come.
And with rising oil and gas prices, power costs to consumers are surely set to
increase in time.
So the Sime Darby project will be a pioneering effort at making greater use of
natural giant rivers like the Rejang River in Sarawak to meet growing Malaysian
power needs, the sources said.