Negotiations for the purchase of the 2,400MW Bakun Dam project have come to a dispute over what its cost should entail.
While the Federal Government is said to be eyeing an indicative price of RM8bil, Sarawak Energy Bhd (SEB) is looking at just RM6bil.
“Nothing is in writing yet,’’ said an industry source. “The parties are just looking at an indicative price to build the models for negotiations under both the purchase and leasing scenarios.’’
Ministry of Finance (MOF) officials could not be contacted for comment.
On the part of SEB, there are a few elements that they feel should be excluded such as compensation for work done by Tan Sri Ting Pek Khing’s companies on the Bakun Dam, resettlement costs as they believe this is a moral obligation of the Federal Government and holding costs for the 10-year delay in the project.
Reports in 2001 indicated that the Federal Government had agreed to pay RM950mil in compensation for work done by Ting’s companies, which, led by Ekran Bhd, was awarded the mammoth project in 1994.
In the wake of the Asian financial crisis in 1997, the job was soon taken over by the MOF.
Sarawak Hidro Sdn Bhd, the owner of Bakun Dam, has estimated the final cost of the project at RM7bil. In fact, the model studies may use the indicative price of RM8bil if capital and many other costs are included; it can be just RM5bil if certain costs are excluded.
SEB has spent RM500mil to build the first package of the transmission line from Bakun to Similajau, which is due for completion in July next year.
Although SEB is keener to buy than to lease, it is looking at a possible leasing arrangement that is based on power usage at least until 2015 when all the investors have started production.
Leasing is not a favourable arrangement as it involves paying interest over 20 to 25 years, at the end of which SEB will still not be the owner of the project.
In the eventuality that both options fail, the Federal Government would end up owning the dam and selling the power to SEB based on an agreed set of tariffs.
On talk that SEB may be prepared to buy power at 8 sen per kWh, industry sources said SEB was asking for a bit less, possibly in the range of 6 to 7 sen per kWh. This is substantially lower than the 10 to 15 sen per kWh range that is envisaged at the MOF level, taking into account the various costs, interest and compensation.
Different industries in Sarawak are likely to be charged different rates as their usage patterns differ.
Smelters are said to be eyeing a tariff of four US cents (13.6 sen based on RM3.40 per US dollar) but apparently, they could do with a slightly cheaper rate, depending on the terms of the power purchase agreement.
For instance, this depends on the kind of liquidated damages to be imposed in the event of power failure and in case the smelters cannot take up all the power.
“They are heavy consumers running on 24-hour power usage,’’ said an industry source. Their payment is on a “take or pay’’ basis where there is a percentage of capacity to be paid even if they reduce their production.
Compared with tariffs in Australia, the United States, Europe and China, the tariff of four US cents per kWh is considered cheap.
In Australia, the base price may be lower but that was set many years ago. In places like Tasmania, Victoria and New South Wales, there is a debate on these old prices as well as the new carbon tax.
It is possible to get cheaper tariffs in some places in Africa, the Middle East, Kazakhstan and Russia but it may not be so easy to set up ventures there. In South Africa, local investors are offered discounted equity participation.
By YAP LENG KUEN
lengkuen@thestar.com.my
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