Prai project shortlist surprises analysts
Non-traditional power players expected to be dropped
PETALING JAYA: The nine consortia and sole bidders shortlisted for the Prai Combined Cycle Gas Turbine (CCGT) power project, announced last Friday, came as a surprise to analysts.
“Among the surprises from the latest announcement is that nine bidders were shortlisted instead of the earlier expected five or six. Also, some of the names that made it to the list are non-traditional power players such as CI Holdings Bhd and Petronas Power Sdn Bhd,” OSK Research said, adding that it expected the non-traditional power players to be dropped.
Nonetheless, OSK Research said these players were teaming up with traditional power players.
“CI Holding’s participation is also a surprise as the company had earlier indicated that it intended to take over an ailing business which it would turn around instead of entering a green field business,” it said.
Last week, Starbizweek reported that the Energy Commission had announced that the consortia comprised 1Malaysia Development Bhd (1MDB), which has teamed up with South Korean Hyundai Engineering & Construction; YTL Power International Bhd with Marubeni Corp of Japan; CI Holdings Bhd and Teknologi Tenaga Perlis Consortium Sdn Bhd with Daelim Industrial Co Ltd of South Korea; Amcorp Power Sdn Bhd with Mitsui & Co Ltd; and Malakoff Corp Bhd and Petronas Power Sdn Bhd with Mitsubishi Corp of Japan.
The sole bidders shortlisted are Pendekar Power Sdn Bhd, a whollyowned subsidiary of Powertek Bhd; Mastika Lagenda Sdn Bhd, an indirect 97.7%-owned subsidiary of Genting Bhd and the holding company of Genting Sanyen Power Sdn Bhd; Tenaga Nasional Bhd (TNB); and Sime Darby Power Sdn Bhd.
The tender process this round would be for a capacity of 1,000 megawatts (MW) to 1,400 MW, out of the total of 4,500 MW of power capacity that would be up for bidding in stages.
The final decision on the winner is likely to be announced by November with final approval from the Government.
OSK Research said the award of the CCGT in the fourth quarter came as a surprise as well as it had expected it to be out in July.
“As such, it will take some time before the winner of this power plant is identified,” it said.
“Also, while another 1000 MW of new capacity should be tendered out, we are uncertain of the rest of the 4500 MW as this would depend on whether or not any first-generation power-purchase agreements (PPAS) are re-negotiated.”
Hong Leong Investment Bank Research said it understood that the new Prai project PPA was likely to be priced with an internal rate of return (IRR) of 7% to 8%, which was substantially lower than first-generation PPAS of more than 15%.
“TNB will benefit from the tendering out of new PPAS, ensuring competitive PPA rates (lower than the existing first generation PPAS). On the other hand, YTL Power has to compete with other contenders which include international utility players, which will lower its existing return on equities,” Hong Leong said.
OSK Research said given that the first-generation independent power producers had to compete with both the new Prai power plant as well as against each other, it did not expect any renegotiated PPAS to be lucrative.
“Hence, IRRS may be in the high single-digits, or just over 10%. As such, we do not expect the 10-year extension on PPAS to be particularly value enhancing for the IPPS, especially given that the upfront profit will drop with the cut in capacity payments,” it said.
OSK Research opined that MMC had a good chance of securing the Prai power plant given its proximity to MMC’S existing 350 MW plant, and its partnership with Mitsubishi Corp would ensure Japanese financing for the new plant.