By Chan Quan Min
State investment fund 1Malaysia Development Bhd’s (1MDB) request to delay the completion of a recently won contract to build a power plant in Negeri Sembilan spells financial trouble for the strategic investment fund, said a PKR politician.
The 1MDB subsidiary in charge of the Jimah East project in a meeting on Dec 4 last year made a request with the Energy Commission to delay by six months the construction and completion of a coal-fired power plant, according to Pandan MP Rafizi Ramli.
This means that Jimah East will only begin to supply power from May 2019 instead of Nov 2018.
Jimah East’s request for extension came alongside that of Malakoff Corporation’s 1,000MW Tanjung Bin power plant, said the Association of Water and Energy Research Malaysia (Awer) in a statement early last month. The think tank raised concern that these delays will in turn prolong the life of older gas plants due for retirement.
“If the old gas plants are generating electricity at average efficiency below 30% compared to the new coal plants that are supposed to generate electricity at 55% efficiency, the additional fuel cost and capacity charges that will be passed on to consumers are substantially high,” said AWER president S Piarapakaran in a statement last month.
Speaking to reporters today, Rafizi believed that this will be the first of many delays to the power plant project because the Jimah East construction site needs to be reclaimed from swampland before construction can begin.
1MDB is relying on the strength of its power generation assets in an upcoming listing slated for mid-year, which has been repeatedly delayed.
Opposition politicians warn that any delays to its power plant projects could affect its value to intended investors leading to financial trouble.
A 1MDB-Mitsui Co joint venture, the 2,000 Jimah East power plant project is a 25-year concession awarded to the consortium in end-February last year, beating close competition from YTL Power International.
“The proposed coal-fired power plant will consist of two units of IHI ultra-supercritical technology steam generator and two units of Toshiba turbo generator with proven operational track records,” said the EC in announcing the award. “The proposed plant will incorporate the latest emissions control technologies to meet the environmental requirements, as well as reduction in coal consumption for every unit of energy generated.”
Codenamed Track 3B, the project was estimated to be worth about RM11 billion and the levelised tariff for the concession is 25.33 sen/kWh. The power plant was originally slated to be commissioned in two stages — by Oct 1, 2018 and April 1, 2019.
While YTL Power reportedly had submitted a lower levelised tariff in its bid, the EC later stated that YTL Power’s bid lost because it was using an unproven technology.
In addition 1MDB’s proposed site for the power plant is much closer to an injection point into the national grid, located next to its existing 1,400MW coal-fired power plant in Jimah, Negeri Sembilan.
By contrast YTL Power’s proposed site in Tanjung, Johor is reportedly three times the distance which would translate into more power lost during transmission over a greater distance.
However, YTL Power would later go on to win Track 4A power project through direct award based on its disqualified bid for Track 3B in partnership with Tenaga Nasional Bhd and the Sultan of Johor’s vehicle SIPP Energy Sdn Bhd, although YTL Power later dropped out following a controversy over “crony capitalism” remarks made by YTL group chief Francis Yeoh.
Tenaga Nasional and SIPP proceeded to sign a heads of agreement for Track 4A without YTL Power, a decision that surprised analysts.
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