What are the problems at Bakun Dam?

Source:http://biz.thestar.com.my/news/story.asp?file=/2010/8/11/business/6832427&sec=business

by Thestar - Yap Leng Kuen

FROM musical chairs to the waiting game ... the Bakun Dam story does not seem to have an ending.

With the current delays in impoundment and possibly supply of a huge amount of power to Sarawak, the million-dollar question is how can the Federal Government recover the money it has sunk into the project?

Another question is how long can the staff hold on as the 2,400MW dam, which is 96% completed, has yet to receive state approval for flooding?

“I have been extending my contract which was initially for six months,” said Manja Khamis, manager (civil engineering). “I just want to see the impoundment through and make sure that everything runs well before I leave. After two years, it is time to move on to other projects.”

There should be more political will to make it happen at the Bakun Dam project which should be turned into a vibrant commercial enterprise instead of allowing it to potentially drift into an expensive white elephant.
Marred by too many disagreements, the RM7.3bil project could very well turn out to be a non-starter as the Federal Government may not be able to decide whether to charge Sarawak in full or take a loss.


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 (which takes into account all the possible delays), Sarawak Energy Bhd is looking at just RM6bil.

On the part of Sarawak Energy, there are a few elements that it feels should be excluded such as compensation for work done by Tan Sri Ting Pek Khing’s companies on the Bakun Dam, resettlement costs as it believes this is a moral obligation of the Federal Government and holding costs for the 10-year delay in the project.

The issue of tariffs has also become contentious. On talk that Sarawak Energy may be prepared to buy power at eight sen per kWh, industry sources said it was asking for a bit less, possibly in the range of six-seven sen per kWh. This is substantially lower than the 10 to 15 sen per kWh range that is envisaged at the Federal Government 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$1) but apparently, they could do with a slightly cheaper rate, depending on the terms of the power-purchase agreement.

So far, a total of RM5.75bil has been borrowed from the Employees Provident Fund and Kumpulan Wang Persaraan.

In 2008, Tenaga Nasional Bhd and Sarawak Energy stepped in to finish the construction of the dam after Sime Darby Bhd pulled out, citing rising costs.

The job was awarded to Ting’s Ekran Bhd in January 1994; by the end of 1998, the Federal Government had taken over the project which had hit a major funding problem following the 1997 Asian financial crisis.

Reports also indicate that along the way, there have been changes in plans, for example, to scale down and subsequently to revert to the original size of the dam as well as to revive the project at first, without, and later with, the construction of undersea cables to the peninsula.

The latest news is that the undersea cable proposal is off again.

The Sarawak state government should show its sincerity by cooperating and compromising to help ease the situation. It should also be realistic in the sense that its negotiating power may not be very strong in the absence of firm commitments from investors.

It should give the green light for impoundment soon and cooperate to see how the power can be sold at a reasonable price so that some costs can be recovered, at least to pay staff salaries and continue operations.

It would be unfair for any party to think that they can delay the impoundment pending the Federal Government’s agreement to lower tariffs.

No doubt this is a federal project and the state is not directly responsible for it but it was a mammoth project that had to be completed.

Debate may be still raging as to whether such a gigantic dam is necessary when the organic demand in the state is less than 1,000MW.

It is no use crying over spilt milk and all parties should look towards solving the matter at hand.

The Federal Government should also try to see the state’s point of view and find ways to accommodate its requirements.

Directions and instructions should be clearly spelled out for talks to proceed smoothly and fruitfully.

Above all, everything should be conducted in a transparent manner with full accountability to the public that is funding the project.