Awer: Call new tender for Track 4A

PETALING JAYA: The Association of Water and Energy Research Malaysia (Awer) has called on the government to cancel direct negotiations for the Track 4A power project and carry out a fasttracked competitive bidding exercise, as the Energy Commission (ST) warned of a potential one-year delay in the project.

Recall that Tenaga Nasional Bhd (TNB) had on Oct 16 backed out of a consortium which includes Johor royalty-linked SIPP Energy Sdn Bhd as its levelised tariff could not meet the terms in the ST’s letter of award.

Awer president S. Piarapakaran opined that the high levelised tariff submissions were due to higher financing cost arising from the participation of SIPP Energy, which does not have much of a track record in the power industry.

“The risk factor for the financing has increased because you’re partnering, so that might have contributed to why the consortium submitted a rate that was higher than the benchmark set by the Energy Commission,” he told SunBiz.

It is understood that the levelised tariff for Track 4A was based on the 1,000MW Prai power plant of 34.7 sen per kilowatt-hour (kWh), while TNB is believed to have submitted rates of 39.19 sen the first time, and then 36.7 sen.

The project is in limbo as the ST has said it will consult SIPP Energy before it decides on the next course of action.

Piarapakaran said in a statement yesterday the bidding process should and can be completed within nine to 12 months and financial close can be achieved in six months.

“This will take 15 to 18 months. If CCGT (combined cycle gas turbines) construction is completed without major issue, it will take 32 months.

“Therefore, if competitive bidding is called in November 2015, the expected Commercial Operation Date (COD) for Track 4A via competitive bidding will be between September 2019 and December 2019,” he added.

In May last year, the ST awarded Track 4A to a consortium that included YTL Power Corp Bhd, SIPP Energy and TNB via direct negotiations, to build, own and operate the 1,000MW1,400MW power plant in Pasir Gudang, Johor. However, YTL Power pulled out from the consortium in June last year.

Piarapakaran said the commission previously justified the award of the project that was worth between RM11 billion and RM13 billion had to be done on a fast-track basis to ensure it can be completed quickly to fix the “uncomfortable” electricity reserve margin.

“Surprisingly, the electricity reserve margin is manageable now as claimed by the Energy Commission recently,” he said, noting the latest average tariff consists of 36.8% fuel cost and 29.74% capacity charges.

Meanwhile, Hong Leong Investment Bank Research analyst Daniel Wong expects power supply in the country to continue undisrupted given the recent short-term power contract extensions to a few power players.

“It (the extensions) will be able to offset the likely one-year delay for the completion of Track 4A power plant,” he told SunBiz.