1MDB’s failed power project another worry

DAP's Tony Pua says TNB takeover may result in higher electricity tariffs for consumers.

KUALA LUMPUR: The people are concerned that Tenaga Nasional Berhad (TNB) will be arm-twisted into paying a premium for a 2000 MW coal-fired power plant which was controversially won by 1Malaysia Development Bhd (1MDB) despite the latter failing to fulfill the terms of the concession. 1MDB failed to secure the necessary funding to finance the RM11 billion project which resulted in at least an eight-month delay.

If TNB were to pay a “premium” on the concession, warns Petaling Jaya Utara MP Tony Pua, it would not only constitute a bailout of 1MDB by TNB, but also the consequential increase in electricity tariffs for Malaysians as a result of increased costs to TNB.

“We wholly support Tenaga Nasional Berhad’s position not to pay 1MDB any premium in the event that TNB was to take over the project from the latter,” added Pua who is also DAP National Publicity Secretary.

He was stressing that “it came as a massive relief to Malaysians when TNB CEO Azman Mohd announced on May 12 that TNB ‘will not pay a premium for the project. We will just pay them (1MDB) for costs incurred. If anything, we will ask for a discount. They (1MDB) are not in a position to dictate the terms.”

The Minister of Energy, Green Technology and Water Maximus Ongkili, he noted, confirmed on the same day that TNB was in discussion with 1MDB over acquiring the biggest equity in the 2000 MW coal-fired power plant, known as Project 3B.

In the event that TNB was to acquire 1MDB’s interest in Project 3B, continued Pua, “then we are in full support for the position taken by Azman Mohd to rightly seek a discount on the cost incurred by 1MDB, instead of paying an unjustifiable “premium” to bail out the latter”.

However, he stressed, “we are also concerned that Azman Mohd will be seeking ‘a revision in the tariff’ in the event TNB takes over, claiming that the project may not otherwise ‘be commercially viable’.”

As the project was awarded via an open tender, he said, the Energy Commission (EC) must not approve any transfer in the rights of the power plant concession if it will involve any changes in the tariff agreed. “Such a revision will make a complete mockery of the ‘open tender’ exercise to seek the lowest possible tariffs among qualified bidders.”

In fact, said Pua, 1MDB only managed to win the concession as the lowest bidder after another consortium led by YTL Power was disqualified at the last minute on controversial technical grounds despite submitting the lowest price.

In the event that the sale of the 2000 MW power plant concession involves a potential change in tariffs or any “premium” payout, he said, then the EC must reject the transfer, terminate the concession and re-open a new tender exercise for the power plant. “In fact, the EC must also financially penalise 1MDB for failing to fulfill their obligations in the concession contract and jeopardising Malaysia’s energy cost and security.”

“In fact, the TNB CEO rightly pointed out that the EC ‘can take it back and do a rebidding. It was up to the government to decide’.”

However, to protect the independence, integrity and good governance of the Government and the regulating authority, said Pua, the EC must immediately prepare to call for a new open tender exercise for Project 3B to ensure that the power producer with the lowest possible tariffs are given the right to carry out the project. “Otherwise, ordinary Malaysians will be faced with the inevitable burden of having to pay for higher electricity costs.”