By Khairul Khalid
S.Piapakaran
The government should cancel state investment fund 1Malaysia Development Bhd’s (1MDB) RM11 billion Jimah East power plant project due to likely delays in its completion, said Association of Water and Energy Research Malaysia (AWER) president S Piarapakaran.
“To avoid a serious electricity supply security breach, the federal government should cancel the award of the Jimah East Coal Power Plant project to 1MDB and call for a new competitive bidding for construction of a Combined Cycle Gas Turbine (CCGT) power plant which takes only 32 – 36 months to complete,” said Piarapakaran in a statement.
Last December, 1MDB made a request with the Energy Commission to delay by six months the construction and completion of Jimah East, which means that it will only begin to supply power from May 2019 instead of Nov 2018.
Jimah East’s request for extension came alongside Malakoff Corporation’s 1,000MW Tanjung Bin power plant that is also requesting for a 6-12 month extension.
AWER estimates that the six month delay of completion for Jimah East will add RM644 million in fuel cost. It says that a new CCGT would result in a “more balanced electricity generation mix” and does not pose a higher risk as claimed by certain parties.
It also estimates that Malakoff’s Tanjung Bin extension could result in additional fuel cost of between RM322 million to RM644 million.
“The Energy Commission must ensure that incompetent electricity generation companies be harshly punished (due to delay in completion of power plants) and no additional cost should be passed to electricity tariff,” said Piarapakaran.
“AWER strongly believes that a fresh tender process must be called soon to ensure electricity supply security is achieved.”
AWER also says that the quicker construction time of a CCGT (it takes about three years and compared to four years for construction of a coal power plant) will prevent old gas power plants that are non-efficient from being extended and passing on additional cost (fuel cost and capacity charges) to electricity tariff.
Alternatively, says AWER, if the award of the Jimah East project to 1MDB is not revoked, all the additional cost due to the delay in completion of Jimah East should be borne fully by 1MDB or by the cabinet and ministry officials who allow 1MDB’s Jimah East extension.
“Delays in deciding Jimah East’s extension application will cause insufficient time to call for open bidding for CCGT. Imagine every time a Power Purchase Agreement (PPA) is signed, the company that wins the award walks away with only a tiny penalty when the company fails to complete the project within stipulated time frame,” said Piarapakaran.
AWER is calling the Energy Commission to deliver its verdict by 23rd January 2015 for both Tanjung Bin and Jimah East delay issues to ensure electricity supply security are not jeopardised and consumers’ interest are protected.
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 2013, beating close competition from YTL Power International.
Codenamed Track 3B, the levelised tariff for the concession is 25.33 sen/kWh and the power plant was originally slated to be commissioned in two stages — by October 1, 2018 and April 1, 2019.
Previously, Pandan MP (member of parliament) Rafizi Ramli said that this maybe the first of many delays to the Jimah East project because its 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.
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