Saturday, August 28, 2010

Sarawak Energy may again seek lower tariffs


PETALING JAYA: Sarawak Energy Bhd, the state utility firm that will buy power from the Bakun dam, is expected to put in a fresh proposal for lower tariffs during the ramp-up period between 2011 and 2015, sources said.

Bearing in mind that power usage in Sarawak is likely to take off only in 2015, it is asking for lower tariffs probably to mitigate the situation while trying to cement some of the investment deals from heavy users such as aluminium smelters.

“It is a chicken and egg situation,’’ an industry observer said. “The state should be encouraged to make a commitment to its end users and to take the next step to negotiate with the power guzzlers.”

“Looking at the situation, they have gone nowhere close to cementing the deals although they have identified the large players,’’ a source told StarBizWeek.

The smelters are said to be willing to buy power at 12 to 13 sen per kilowatt-hour (KwH). Sarawak Energy is offering six to seven sen per KwH while Sarawak Hidro had asked for nine sen per KwH.

Industry observers indicated that even if Sarawak Energy were to buy from Bakun at nine sen per KwH, pay an additional two sen per KwH for transmission costs, it can still earn one or two sen more.

“Sarawak Energy should be realistic – a one sen profit allows it to make RM150mil per year at full load of 15.5 gigawatt hours. But it looks like it is aiming for a bit more,’’ a source indicated.

At this juncture, the view at Sarawak Hidro Sdn Bhd, the developer and owner of the RM7.3bil dam, is that it must assess the situation over the 30-year concession period, where ultimately it will need to get to a market-driven scenario, be able to service its debts and obtain a reasonable rate of return.

If Sarawak Hidro agrees to the proposal for lower tariffs for the first five years, it will then have to assess the future tariff levels against its projected costs.

“It looks like the Federal Government will have to support the Bakun dam for the next few years while trying to recover its costs,’’ an industry observer opined.

The power purchase agreement (PPA) talks between Sarawak Hidro and Sarawak Energy recommenced early this week amid the ongoing tussle over tariff rates.

Sarawak Energy is believed to be sticking to the original offer of six to seven sen per KwH and is not giving up the water levy of one sen per KwH of electricity generated.

In earlier talks, Sarawak Hidro had asked the state to drop the water levy, on the argument that dams like Pergau and Kenyir pay only 0.5 sen per KwH.

Sarawak Hidro had indicated it could charge a bit lower than nine sen per KwH provided it did not have to pay the water levy.

The state’s power usage, for which the current peak demand is around 1,100 MW, is expected to pick up in 2015 when the Sarawak Corridor of Renewable Energy (Score) projects come onstream.

In fact, power demand from Score is initially projected at 500 MW in 2012, rising to about 2,600 MW by 2015.

Industries using smaller amounts of power, as in the poly silicon, ferro silicon and solar panel industries, are expected to be coming up under the Score project.

Most of the large, energy-intensive industries may materialise only in three to five years.

The state’s current capacity is 1,300 MW with an additional 1,770 MW of firm power available from the Bakun dam and 650 MW from the Murum dam by the end of 2013.

Organic demand growth is projected at 5%–7% with a 20% reserve margin.

Although Sarawak Energy is confident of attracting the heavy users, it faces the problem of not being able to commit a proper tariff rate to them.

Hence the urgency of finalising the PPA which will allow Sarawak Energy to sell the power to the aluminium smelters that have asked for slightly less than four US cents per KwH.

These PPA talks are held against a statement by Sarawak Chief Minister Tan Sri Taib Mahmud on Thursday that the state would approach the Federal Government to buy over the RM7.3bil hydro-electric dam.

Earlier reports have indicated that Sarawak Energy was looking to lease or buy the dam, which it tagged at RM6bil minus the RM950mil compensation paid for a previously botched job at the dam and resettlement costs.

The Federal Government has borrowed RM5.75bil from the Employees Provident Fund and Pensions Fund for the Bakun dam project.

Development costs for the six to seven packages of the Bakun dam have hit RM4.4bil and interest payments during the construction period is estimated to be RM1.1bil.

With the delay in the impoundment of the dam and full power offtake, revenue loss at Sarawak Hidro is projected at RM10mil per month starting from next year.

It is estimated that by 2015, the cost of the Bakun dam project would have escalated to RM8bil.

No comments:

Post a Comment