Friday, December 16, 2011

No renegotiations on power purchase agreements

FIRST generation power purchase agreements (PPAs) expiring in 2014 and 2015 will not be renegotiated, Tenaga Nasional Bhd (TNB) president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said.

Instead, the Energy Commission will call for tenders for the supply of power beyond 2016.

The tender for 4,500 megawatt (MW) of new capacity will be called for by the first half of 2012, Che Khalib told reporters after its annual general meeting yesterday,

About 3,500MW will be to replace retiring capacity, while the other 1,000MW is additional capacity for the future.

There are five first-generation PPAs for a period of 21 years signed in 1993.

The IPPs are YTL Power Generation Sdn Bhd, Genting Sanyen Power Sdn Bhd, Segari Energy Ventures Sdn Bhd, Powertek Bhd and Port Dickson Power Sdn Bhd.

According to Che Khalib, even the recent award to a Malakoff Corp Bhd subsidiary for a 1,000MW electricity generating facility at Tanjung Bin, Johor, was the result of competitive bidding.

Its Tanjung Bin and Manjung plants are to cater to future demand.

"I'm very happy with the latest tender exercise (Tanjung Bin). The price that we agreed on is very competitive. I think we are going towards a very healthy environment now, this is what we should continue to do because the benefit can be seen immediately," he said.

On the fuel cost-sharing mechanism announced earlier this week, Che Khalib said TNB is be going back to the government to come up with a more "holistic" solution to the problem brought about by the shortage of
On Monday, TNB announced that it, the government and Petronas will each equally share the differential cost incurred by the company due to usage of alternative fuels and also imports in the wake of a shortage in gas.

This mechanism, however, is only for the period of January 1 2011 until October 31 2011.

This would lead to a compensation of about RM2 billion to TNB from both the government and Petronas.

On whether the more "holistic" solution would mean a possible hike in tariffs, Che Khalib said it is not the only option.

He expects the gas shortage problem likely to continue until Petronas' liquefied natural gas (LNG) regasification unit in Malacca is up and running.

"We have to go back to the government to find a solution on how to overcome this (gas shortage) problem because we can't keep on having an ad-hoc kind of solution. We need a permanent solution," Che Khalib said.

While there have been incidences of gas shortage in the past, the current scenario is deemed the worst TNB has experienced.

"Before the highest (additional cost) recorded because of gas shortage problem was RM400 million in a year, but now in a month it can be as high as RM500 million," Che Khalib said.

TNB hopes that part of its compensation will come in by the time it reports its first quarter results in January, so that it can avoid another quarter of losses.

Che Khalib also said the company is in talks with Royal Dutch Shell plc, Total SA and other private traders to buy natural gas.

Read more: No renegotiations on power purchase agreements

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