TNB denies unfair advantage in power plant bids

TNB denies unfair advantage in power plant bids
Business & Markets 2013
Written by Afiq Isa of theedgemalaysia.com
Tuesday, 06 August 2013 09:40

KUALA LUMPUR: TENAGA NASIONAL BHD [] (TNB) has denied accusations of having an unfair advantage in the bidding for new power plant projects and insisted that its participation is in the interests of consumers.

In a statement yesterday, TNB vice-president of new business and major projects Datuk Mohd Nazri Shahruddin said the bidding process is crucial as it keeps prices at reasonable levels and encourages healthy competition.

“Calls for TNB to be exempted from the bidding process would be counterproductive to the fundamental objective of bringing value to customers by offering competitive electricity prices. It is in this spirit that TNB entered the bidding process,” he said.

Nazri said all bids offered by TNB are based on financial projections on which it expects a reasonable return on its investment.

“We bid in the same terms and would definitely not take negative or zero returns.”

He said to win bids, participants must ensure returns are not excessive. He also assured that customers are not unduly burdened by high electricity prices.

Last Friday, an English daily reported that PenjanaBebas, an association of independent power producers (IPPs), has called for TNB’s exclusion in future bids for new power plants to create a level playing field among competitors.

PenjanaBebas president Zainal Abidin Jalil was quoted by the daily as saying that the association has proposed alternative solutions, including awarding one project to TNB and the remaining ones to be contested among other IPPs.

Zainal, CEO of Malakoff Corp Bhd, said international consortium members have raised concerns over perceived unfairness and the erosion of confidence in the bidding process.

The dispute came after the Energy Commission (EC) awarded two lucrative power plant development contracts over the past year to TNB through a competitive bidding process.

Last year, the utility giant won a contract for the development of a 1,071mw combined cycle gas turbine power plant in Seberang Prai, Penang.

In July, TNB was selected as the preferred bidder to develop a 1,000mw coal-fired power plant (Project 3A) in Manjung, Perak.

Following the selection, TNB was allowed to proceed with negotiations in respect of the bid and project documents involved. A letter of award for the project will be issued once negotiations are successfully completed.

Nazri applauded the EC for its transparency over the competitive bidding process, calling it a “game changer” in the Malaysian energy industry.

“We have played fair and followed the rules. This process is a big shift from the past where IPPs were awarded direct contracts,” he said.

Cash-rich TNB is embarking on a RM9.7 billion five-year capital expenditure drive to meet the growing electricity demand, which is expected to grow by 3.5% to 4.6% per year.

At the moment five consortia are bidding for a new 2,000mw coal-fired power plant (Project 3B) with TNB seen as a front runner by analysts.

The EC is expected to announce the winner of the Project 3B tender by the end of this year.



This article first appeared in The Edge Financial Daily, on August 06, 2013.