EC seeks players with lowest cost for 4,500MW capacity

The Energy Commission (EC) says it expects the competitive bidding process for the 4,500 megawatt (MW) power-generation capacity to involve a combination of new and existing power plants.

An EC official told StarBiz that the competitive bidding process was still in its early stage of inviting prospective bidders to register their interest, and that the power regulator was still working on the details of the plan.

Nevertheless, he confirmed reports that the EC was targeting to have a total of 4,500MW power-generation capacity to come in through the bidding process. This, he said, was to replace the capacity of the first generation power-purchase agreements (PPAs) and to cater to future demand.

“Basically, what we're looking for are players who can offer us the least cost,” he said, in response to queries about EC's notice on Tuesday calling for prospective bidders for the development of a gas-fired power plant in Peninsular Malaysia.
Chin says more energy needed to meet future demand.

The EC had said in the notice that the power plant was to sell its capacity and energy to Tenaga Nasional Bhd (TNB) under a new PPA. The site or sites would be made available by the EC, or alternatively, prospective bidders could propose new sites for EC's consideration.

According to Energy, Green Technology and Water Minister Datuk Seri Peter Chin, 4,500MW more of gas-based power generation would be required by 2017 to replace retired capacities and meet future energy demand in the peninsula.

The first generation PPAs, accounting for around 4,100MW of gas-based generation capacity, would be expiring in 2015 or 2016.

TNB had in recent weeks announced that the first generation PPAs, involving YTL Power Generation Sdn Bhd, Segari Energy Ventures Sdn Bhd, Port Dickson Power Sdn Bhd, Powertek Bhd and Genting Sanyen Power Sdn Bhd, would not be renegotiated and would be allowed to lapse.

Adding to the future power supply pressure in the country was the expected growth of electricity demand by an average of 4% per year in the next five to 10 years.

While the independent power producers (IPPs) under the first generation PPAs would see their contracts lapse, TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh had recently said they could still participate in the bidding process for new licences that would be held by way of open tender.

TNB, which had been facing an increasing challenge of rising fuel costs that ate into its profit margin in recent years, had for years been subject to high-capacity payments to IPPs under the existing PPAs, especially the first generation ones that were signed in the mid-1990s.

Under the deal, the national power company was obliged to pay relatively “high” fixed charges to IPPs for the supply of their power-generation capacity, regardless of whether it was fully utilised. It appeared, therefore, the terms and conditions of the PPAs had always tilted strongly in the IPPs' favour.

“The idea to allow the first generation PPAs to lapse is to pave the way for an open-tender process and more competitive pricing for TNB,” an analyst said.

“It is clear why TNB prefers to have an open-tender process. For one thing, it would push players towards greater efficiency and result in lower input prices for the supply of power, both of which would benefit TNB, and ultimately, consumers,” he explained, while noting the fact that it was very difficult for TNB to increase the selling price of electricity to end-users, as the prices were currently controlled by the Government.


here