TNB to bid for EC’s tender for two coal power plants

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) said yesterday it intends to bid for the Energy Commission’s (EC) tenders for two new coal power plants totalling 3,000MW in capacity.

This is despite earlier concerns raised by Penjanabebas, the association of Malaysian independent power producers (IPPs), that TNB bidding against IPPs on new power projects would result in a non-level playing field, as the company is also the sole off-taker of electricity in the country.

After the TNB AGM yesterday, non-executive chairman Tan Sri Leo Moggie told the press TNB will be bidding, though the group has yet to receive details of the tenders.

“Yes, we will be bidding, we don’t know [the cost and the full details] offhand, but we will be bidding,” he said.

On Monday, the EC announced it is currently inviting prospective bidders to participate in the pre-qualification process by identifying suitable partners as well as project sites.

There are two projects that are open for bidding. The first, with a capacity of 1,000MW, will be for a coal-fired power plant on a fast-track basis and slated for operation by October 2017. The second is for a 2,000MW coal-fired plant to be built on a greenfield site to be commissioned by 2018 or 2019.

Chief financial officer Fazlur Rahman Zainuddin said TNB’s gearing is at a comfortable level and it would have no problem taking on the two new power projects.

“For now, our gearing is at a manageable level [of] 38%. So, we have some room to ‘gear up’. Typically for utility companies, we are talking about a 55% to 60% level of gearing. So we still have some comfort to increase the level,” he said.

In the interim, TNB is investing RM9.7 billion in new capacity for the next five years by building two hydroelectric projects in Hulu Terengganu and Pahang. Part of the budget is to also build a biomass plant in Jengka, Pahang, and a coal-fired power plant in Manjung, Perak.

Fazlur said financing these projects will raise group’s debt-to-equity ratio by a miniscule amount, and they will be financed via debt and equity.

“The projects ... will probably increase gearing by about 1%, so we’re not really overly concerned at this point in time ... Gearing is something we have to evaluate according to the economic situation. But in times of economic growth, we can be a bit more aggressive with increasing gearing,” he said.

TNB is also looking at expanding its presence in Asean and the Middle East by providing operations and management (O&M) expertise to other power providers.

“From the board of directors’ point of view, we see the need for TNB to seriously to look for potential investments outside the country,” said Moggie.

“While we’re looking at opportunities abroad, we are also very sensitive to the fact that we will only consider investing where we have done all the due diligence that is needed and the risk and return components must be well judged.”

Moggie did not reveal any potential new projects or acquisitions as discussions are still in the preliminary stages.

“We are looking at one or two opportunities overseas, with other partners, investing in similar projects as we did in Saudi Arabia a few years ago. But these have yet to be formalised, so it would be premature to reveal the specifics,” he told newsmen.

TNB, said Moggie, is interested in holding stakes in power-related projects outside the country.

“We have been successful in the O&M sector in some countries. We have been encouraging our O&M arm to look at opportunities outside of Malaysia,” he said, adding that O&M is a very good step towards growing TNB.

Within the country, Moggie said the demand for electricity is rising by 4% per year. The group projects demand to reach 20,699MW by 2020, from 15,826MW in its financial year ended Aug 31, 2012 (FY12).

Also, the group projects coal prices to remain stable at below US$100 (RM306) per tonne throughout FY13.

While the group is encouraging renewable energy initiatives, Moggie said he does not see renewable energy becoming the main provider of energy in Malaysia in the immediate run.

“But we will support and participate in renewable energy programmes. For the moment, we are doing the feed-in tariff to encourage renewable energy resources, particularly solar and biomass,” he said.

This article first appeared in The Edge Financial Daily, on Dec 19, 2012.

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