Highlight: YTL Power leads the pack

KUALA LUMPUR: Independent power producer (IPP) YTL Power International Bhd is said to have submitted the lowest price for the 2,000 Megawatt (mw) coal-fired power plant project under a tender called by the Energy Commission (EC).

If it is successful in its bid, it would mark the comeback of YTL Power into the national electricity scene after two decades.

According to industry sources, YTL Power’s bid of just over 25 sen per kilowatt hour (KwH) was the lowest in the tender called under programme Track 3B.

Competing bidders include heavyweights such as 1Malaysia Development Bhd (1MDB), Malakoff Corp Bhd and Tenaga Nasional Bhd (TNB).

The next closest bid is said to have come from 1MDB which needs to win the job to boost the proposed listing of its energy division. But its bid is said to be marginally more expensive than YTL Power’s proposal.

For now, YTL Power is not in the clear yet as the EC would evaluate other factors, sources said.

“There are other factors to be evaluated but having the lowest price is an advantage,” said a source.

YTL Power’s bid may have some compliance issues with its engineering procurement and construction (EPC) partner, some industry players said, without elaborating.

For YTL Power, the country’s first IPP, a new power purchase agreement (PPA) would be extremely timely.

The group’s bid to renew both its first-generation PPAs as part of the Track 2 tender programme called by the EC was unsuccessful, and they will expire in September 2015.

Returns for the IPPs from the latest generation of power projects are not as lucrative as their earlier ones.

Coupled with the competitiveness of the tender, the returns from the 2,000mw plant are unlikely to be as rewarding as YTL Power’s earlier projects.

Nonetheless, it will change the profile of the group which has been earning almost 80% of its revenue overseas.

From a broader perspective, if YTL Power wins this tender, it will also be a paradigm shift for the industry that has seemingly been dominated by TNB.

The IPPs, through their association — PenjanaBebas — have been vocal in their criticisms of TNB’s presence in the open tender for new power projects as it is the sole off-taker of electricity in the country.

In a surprising turn of events, industry sources said TNB put in the most expensive bid for the 2,000mw coal-fired power plant at about 28 sen per kwH, despite decisively outbidding the IPPs in earlier tenders.

Earlier this year, TNB was announced as the preferred bidder for Track 3A, to build and operate a 1,000mw coal-fired plant project. TNB had put in the lowest bid for Track 3A at around 22 sen per KwH, outbidding 1MDB.

The rate for Track 3A is expected to be lower than Track 3B, because the tender for Track 3A was to build a plant next to an existing coal-fired plant.

This means that infrastructure costs such as jetty will be lower since it can share facilities with the existing plant.

For the 2,000mw coal-fired power plant, YTL Power has proposed Tanjung Tohor in Johor as its site.

Industry sources said 1MDB which has the second lowest bid, also has its own compliance issues.

1MDB has proposed Jimah in Negeri Sembilan as its site, where it recently acquired 75% of Jimah Energy Ventures, a 1,400mw coal-fired power plant. It is said that an issue with 1MDB’s bid is that it has proposed a brownfield site for a project that calls for greenfield specifications.

Furthermore, the industry players said 1MDB will have to undertake expensive land reclamation to accommodate a 2,000mw plant at their proposed site.
Malakoff, which recently allowed its approval to go for listing to lapse, is said to have put in a bid of around 26 sen per kwH.


This article first appeared in The Edge Financial Daily, on October 31, 2013.



Written by Ben Shane Lim of theedgemalaysia.com