Malaysia sees soft power sector growth in 2018
KUALA LUMPUR: Due to adequate reserve margin at 30 per cent and flat economic fundamentals, the power sector does not see much growth in 2018 even though the distribution side is still keeping pace with supply connections to new areas and new demands.
Structural changes in the economy, depreciation of the ringgit, as well as increases in electricity tariff, have dragged electricity demand and capped earnings.
To recap, for the first nine months ended Sept 30, 2018, utility giant Tenaga Nasional Bhd (TNB) made a net profit of RM3.86 billion or 68.01 sen per share, on the back of RM37.85 billion in revenue.
It has proposed a dividend of 30.27 sen per share.
While the world’s economy is projected to grow 3.9 per cent in 2018, growth on the home front has been revised downwards with the World Bank and International Monetary Fund projecting Malaysia’s real gross domestic product at 4.7 per cent compared with a higher forecast earlier.
Hence, for the power sector to enter the new year with changes in policies and regulations, as well as newlyintroducedprogrammesand schemes, just to ensure Malaysia is kept safe environmentally and economically, will be something monumental moving forward.
While the government aims to accomplish three agendas via the Malaysia Energy Supply Industry ( MESI) 2.0, most of the power companies are embarking on expanding their plans or continuing with existing strategies to produce more renewable energy.
The three agendas, namely to increase industry efficiency; future-proof the industry structure, regulations and key processes, and empower consumers, democratise and decentralise the electricity supply industry, are to be undertaken by a special-purpose agency MyPower ( Malaysia Programme Office for Power Electricity Reform).
MyPower,with12to20employees, is tasked with engaging with industry players, as well as stakeholders for the industry reforms, and the company is expected to close once it completes its mission.
Energy, Technology, Science, Climate Change and Environment Minister Yeo Bee Yin said the government was confident that the electricity supply industry transformation programme in areas such as future generation, which included green energy and electricity energy efficiency and grid for the future, would enhance the customers’ experience, as well as propel the country forward.
Besides the reforms agenda, the year also saw the new government pushing the reset button on the country’s power industry and returned the sector to the blackand-white period by scrapping all the bad seeds in the industry.
Among the biggest being highlighted was the termination of four new independent power producer ( IPP) contracts in Oct 25, awarded by the previous administration through direct negotiations.
If no action were taken on the IPP issue, Yeo said there would be overcapacity of electricity in the future, leading to increased reserve margin and imbalanced demand and supply.
On that note, she pointed out that future power generation projects were to be awarded through open tenders only, where the bidders would have to compete against each other.
Meanwhile, the government decision to continue implementing the balance- cost- pass- through ( ICPT) mechanism throughout this year to adjust tariffs based on the changing fuel prices required for electricity generation every six months in the form of rebate or surcharge was a welcome move.
This has helped power producers, who rely mostly on fossil fuel, primarily coal and gas to generate electricity, to remain flexible against any price changes besides being able to cushion the price impact and provide a reliable energy supply.
The ICPT, which kicked off with its first regulatory period ( RP) starting from January 2015 to December 2017, is now in the second regulatory period ( RP2) for another three years starting 2018 to 2020.
Eight cycles of the ICPT were announced for the March 2015December 2018 period, with the first seven ICPT cycles involving rebates.
The rebate of 2.25 sen/kWh was announced in 2015 and 1.52 sen/ kWh in 2016, 2017 and January to June 2018. Turn to Page B2, Col 1