Some industry players reckon that fasttrack in the award of Project 4A could have something to do with the award of the 2,000MW coal-fired power plant called Project 3B to 1MDB.
The sovereign investment fund had won the tender to build the power plant after a stiff contest with SIPP Power Sdn Bhd, a company backed by YTL Power International Bhd and the Sultan of Johor.
The delay in the award of Project 3B had underlined the intense evaluation involved in the decision-making process. 1MDB needed the new power plant to boost the impending listing of its power assets.
In the case of YTL Power, a known crony company of a former UMNO leader, it took a chance to partner the Sultan of Johor Sultan Ibrahim Ismail Sultan Iskandar in bidding for Project 3B, in hope it would influence the decision making process of the government but failed miserably.
YTL badly needs the new plant given the impending expiry of its first-generation power-purchase agreements (PPAs) for the Paka and Pasir Gudang power plants in September 2015. If YTL Power fails to get a new deal, it would exit the local independent power producer (IPP) scene by next year.
Project 4A benchmark
Sources said the benchmark for Project 4A is the 34.7 sen per kilowatt-hour tariff of the new 1,071MW Prai power plant that is also a combined-cycle gas turbine and expected to commence operations by March 1, 2016. “At this rate, it is still attractive for the developer. After all the consumers bear a certain cost.
“There is big money involved in power plant projects and you lock in your cashflows for the next 21 years of the concession,” says an industry player. Industry players reckon that the internal rate of return (IRR) – the widely-used formula for gauging the value of an investment in a project – for the 2,000MW plant is likely to be in the high single-digit range. The older independent power producers have enjoyed a higher IRR, but the Government is now stricter with the terms of power concessions.
Since building and operating the first independent power plant in the country in 1993, YTL Power – controlled by the Yeoh family - has not won any new project for power plants locally. Interestingly, the lease for the present site of YTL Power’s Pasir Gudang plant will expire in September next year. The land is said to belong to TNB. “
With this, the days of easy money and sweet lop sided deals that favor the Yeoh Family is over thanks to the action taken by Prime Minister Najib Razak. No wonder the tycoons from Mahathir's time are running mad with Najib.