WORLD’S LARGEST WHITE ELEPHANT– RM7.6 Billion BAKUN DAM; RM 9 Billion LONGEST POWER LINK (Dam To PENINSULA MALAYSIA) Or RM8 Billion Aluminum Smelter

ABOVE & BELOW: The Bakun Dam still under construction and scheduled to finish in 2010

White Elephant - A rare, expensive Dam that is a financial burden (RM 7.6 billion) to build, maintain & utilize (RM 9 billion –undersea cable or RM8 Billion – aluminum smelter). Something of dubious or limited value - an endeavor or venture that finally proves to be a conspicuous failure.

The controversial Bakun hydroelectric dam project will be completed at an estimated cost of RM7.6 billion, the Dewan Rakyat was told today (June 11 06) .The figure was revealed by Parliamentary Secretary in the Finance Ministry Hilmi Yahya in a reply to Dr Wan Azizah Wan Ismail (PKR-Permatang Pauh) in an oral question session.

With the undersea power cable to Peninsular to cost (RM9 billion, from NST (below, Nov 28 06) or an aluminium smelter costing RM8 billion (The Edge, Sep 16 03, below); whichever way you look at it; it is a damned dam no longer wanted by its owner.

The government is in a real dilemma now and a decision must be made now as time is needed to lay the cables or to build the smelter. And where would the government get the funds (except from Petronas oil)? Even the Minister in charge, Datuk Dr Lim Keng Yaik said: “ It is all economics, so we have to work out whether it is worthwhile…” No wonder the EPU cancelled the RM 3 Billion West Coast Highway but it was reconsider the next day as some cronies felt it was too good a mega project to miss. See previous post h e r e.
= = = = = == == = = =

World's Largest undersea power link; 28 Nov 2006; Azlan Abu Bakar; NST

PETALING JAYA: One of the country’s most ambitious projects — to lay undersea power cables from Sarawak to Peninsular Malaysia — may be revived. Costing RM9 billion, the cables will transport up to 5,000 kilowatts of electricity from the Bakun hydroelectric dam and two other new proposed plants in Sarawak from 2014. Stretching from the tip of Sarawak to Ulu Sedili in Johor, the 670km-long network of cables would be the longest in the world, longer than the 580km line between Norway and the Netherlands. But this plan to lay cables under the South China Sea hinges on Cabinet approval and a feasibility study. The project was taken off the table after the financial crisis in 1997. It is being revived amid concerns about excess capacity from Bakun dam, which is due for completion by 2009.

Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik said: "Coming so far from Sarawak, that means we have to invest in big cables. ”It is all economics, so we have to work out whether it is worthwhile but most certainly it would be after 2014 and beyond. "We will seek approval from the prime minister to invest RM9 billion on the cables." The minister, who chairs the Electricity and Tariff Planning Development Committee, will seek approval from the Cabinet for the investment needed to lay out the cables. "The committee will meet on Dec 8 to discuss, among others, the two proposed hydro plants in Sarawak. "We will also look into ways to solve the Bakun issue which is scheduled to be completed by 2009 and a request made by Sarawak to set up an aluminium smelting plant," he said.

The two proposed hydro plants are in Murum and Baleh. Other members of the committee include the Finance Ministry, Petroliam Nasional Bhd, Energy Commission and Tenaga Nasional Bhd. Malaysia faces the tough question of how to secure future power supply for Peninsular Malaysia, amidst rising costs of gas and coal. Hydro plants are an alternative, but there is limited hydro plant potential in the peninsular. One option has been to import power from Sarawak. "While rivers in Peninsula Malaysia are capable of producing about 1,000 megawatts of electricity, the Rejang River can produce about 20,000MW," Dr Lim said. He added that the ministry will try to keep the cost at below 20 sen per kilowatt per hour. Dr Lim told this to reporters after opening the International Energy Conference For Sustainable Energy 2006, and introducing the National Suria 1000 Programme here yesterday.

"The cables will have to travel almost 700km from Bakun (Bintulu) to the tip of Sarawak and another 670km under sea crossing Indonesian territory to Ulu Sedili before it is channelled to Yong Peng, Johor, where the national grid is located," he said.

= = = = = = = = = = = And the Background to this BAKUN Dam
ANALYSIS - Key Questions for Malaysia's Bakun Dam Project

MALAYSIA: September 13, 2006

KUALA LUMPUR - Malaysia's huge Bakun hydro-electric dam is three-quarters complete and within four years it will drown an area of jungle the size of Singapore. The trouble is, there is still no customer for its power, suggesting the project has only a matter of months to find one or risk sitting idle on completion in 2010. Malaysia gave the go-ahead for the dam 12 years ago, in the face of fierce environmental opposition, when the country was looking at a power shortage. Now, there is a power surplus. "The problem is timeframe," Niklas Olausson, research head of brokerage CLSA, adding that it would take around 10 more years for demand in Malaysian to catch up with supply.

There are two options for the 2,400 megawatts (MW) to be produced by the turbines at Bakun dam, at 205 metres high, under construction among the cleared rainforest of Sarawak state, on Borneo island. Originally, Bakun's power was to be taken by an undersea cable more than 500 km (300 miles) long to peninsular Malaysia, which accounts the vast majority of population and industry. Later, that option lost favour to a plan to use Bakun's power to develop an aluminium smelter in Sarawak. Now, the government is toying with both, not totally convinced of either proposal. As Energy Minister Lim Keng Yaik concedes, the cost of each plan is huge and the stakes are high. "This is because it takes four years to build whatever facilities. Even if the smelter plant project is on, it takes years to build. Even if you bring the electricity to the peninsula, it would take years to lay the cables," he said in July. Lim's comments followed media reports that the government might call off the smelter project. Firms including Rio Tinto, Alcoa, BHP Billiton and China's State Grid Corp. are reported to have expressed interest in setting up a smelter in Sarawak to exploit Bakun's abundant, reliable and cheap power. Newspaper reports said a smelter could use about 2,000 MW, or over 80 percent of Bakun's power, but the government felt the proposals lacked sufficient local participation or had failed to make a strong economic case. Instead, they added, the undersea cable would pump most of the power to the peninsula -- though the reports failed to point out that the peninsula was already awash with electricity.
POWER TO BURN

About 40 percent of Malaysia's total generation capacity of 18,000 MW is not used. The excess power, known as the reserve margin, is equivalent to three Bakun dams. "We don't need it now, but by 2012 we may need new power plants, because by then the reserve margin would have dropped to under 20 percent," said a power-sector analyst with a Malaysian brokerage. He declined to be named because of company policy. That is still a long way off, and in the meantime the government is being urged to consider exporting Bakun's power, once it has been brought ashore via the undersea cable. "Assuming that the power loss (in transmission) is low, the cost is low, and assuming that the energy price environment is a long-term trend ... it offers an avenue for power exports to places like Singapore, Indonesia and Thailand," said Olausson. Swiss engineer ABB and local firms Eden Enterprises and Malaysian Resources Corp. are among those vying to build an undersea cable, media reports have said. They say it could cost up to US$2 billion to lay the cable between sparsely populated Sarawak and the peninsula. The Bakun project, originally set for completion in 2002, was approved in 1994 by then premier Mahathir Mohamad amidst an outcry that it would inundate 69,000 hectares (170,000 acres) of rainforest and displace thousands of indigenous people.

The original plan was to channel 70 percent of the dam's power across the South China Sea to peninsular Malaysia by laying 670 km (416 miles) of submarine cables, creating reputedly the world's longest undersea transmission line.

A local company, Ekran Bhd., was awarded the concession to build and operate the dam. But construction was derailed by the 1997-1998 Asian financial crisis and debt problems at Ekran, forcing the government to take over the project. In 2000, the government scrapped the idea of an undersea cable but maintained the dam's planned generating capacity of 2,400 MW, confident that there would be a ready customer.

A new contract to complete the dam was awarded to a seven-member consortium led by Malaysian conglomerate Sime Darby. The project still faces problems, with construction running behind schedule and incurring hefty cost overruns.
Story by Syed Azman
= = = = = = = = = =

Malaysian state says still pursuing Bakun smelter
Thu Sep 7, 2006 7:47am ET
KUALA LUMPUR, Sept 7 (Reuters) - Malaysia's Sarawak state is still pursuing plans for an aluminium smelter, a government minister said on Thursday, despite media reports that the proposal was close to being scrapped.

Malaysian newspapers reported in July that the federal government might call off the smelter project, which was to be powered by Sarawak's 2,400-megawatt Bakun hydro-electric dam. The dam is jointly owned by state and federal governments and is under construction in the jungles of Sarawak, on Borneo island. Sarawak wants to use Bakun's abundant, reliable and competitively priced power to lure industry to the state. A federal government official could not be reached for comment. "As far as I know, the aluminium smelter project in still on," Sarawak's deputy chief minister George Chan told Reuters, adding the project was important for the state's development. "The only way for Sarawak to move on is to bring heavy industries to the state. We have great source of power supply. Otherwise we have no
comparative advantage over the other states," he said.

Firms including Rio Tinto (RIO.L: Quote, Profile, Research)(RIO.AX: Quote, Profile, Research), Alcoa (AA.N: Quote, Profile, Research), BHP Billiton (BLT.L: Quote, Profile, Research)(BHP.AX: Quote, Profile, Research) and China's State Grid Corp are reported to have expressed interest in building the smelter in Sarawak.But July's newspaper reports said the federal government felt the proposals lacked sufficient local participation or had failed to make a strong economic case. Instead, the government was looking at an alternative use for Bakun's electricity -- an undersea cable feeding power from Sarawak to peninsular Malaysia, the newspapers said. Second Finance Minister Nor Mohamed Yakcop said last month the government had not decided on how best to use the power to be generated by the Bakun dam. A source familiar with the Bakun project said the proposed smelter would take up at least 800 megawatts of the dam's power. The Business Times newspaper said in July that Swiss engineer ABB (ABBN.VX: Quote, Profile, Research) and local firms Eden Enterprises (EDEN.KL: Quote, Profile, Research) and Malaysian Resources Corp (MYRS.KL: Quote, Profile, Research) were among those vying to build an undersea cable.

= = = = = =
Big Money: Power decisions; by P Gunasegaram, The Edge Daily (Malaysia) ;September 16th, 2003

As compelling as the logic seems to be at first glance, there are many complications on second thoughts. When the Bakun hydroelectric plant is completed, there will be 2400mw of power coming onstream, more than Sabah and Sarawak can use. And there is no undersea cable to the peninsula. So why not set up an energy-guzzling aluminium smelter, Smelter Asia, to absorb the tremendous power surge just as it comes onstream, which will provide some 3,000 jobs as well? There's a huge investment outlay of US$2.1 billion, or RM8 billion, and production of 500,000 tonnes of aluminium a year eventually, of which half will be exported and the other half will meet local needs. Sales could be as much as RM2.5 billion, about half for export, gaining valuable foreign exchange through exports and reducing imports.

As sexy as the proposals look, there are complications - serious ones. First, is it really desirable to have that aluminium smelter here? Second, even if it is, should Tan Sri Syed Mokhtar Al-Bukhary be the key person pushing both Bakun and Smelter Asia? And third, is the government giving away too much? The cost of building Bakun is expensive at RM4.5 billion. Electricity generated costs little but the increase in supply comes in large spurts. Other ways of doing it, instead of taking capacity rapidly up to 2,400mw, may be to go for smaller capacity with provision to increase later. That could have avoided the current situation where it is necessary to find a huge energy user to justify the dam.

Alternatives would be not to develop Bakun at all, or to scale it down to a number of smaller hydroelectric projects. That would have been more acceptable in terms of environmental and other considerations. Putting up a smelter would mean that a substantial portion of capacity (up to 1,000mw) goes to it or over 40 per cent of capacity. The smelter becomes so important that there might be further bending backwards to make sure it is profitable. That's not an unlikely situation, given that steel producers set up in the 1980s industrialisation drive still enjoy tariff protection. A single aluminium smelter, which absorbs over 40 per cent of Bakun's capacity and produces twice the nation's requirements for aluminium, is perhaps too much dependence. What happens if this project fails as so many heavy industrialisation projects have in the past? Aluminium is, after all, a commodity-like product and it is entirely possible there can be gluts in the future. We all know what happens then: local consumers of aluminium will have to pay higher prices. Perhaps it may be better to leave it to others to produce aluminium and for us to buy from the cheapest producers. That's what lessons we have had with steel seem to indicate. To protect local steel producers, tariff barriers have been placed to the detriment of steel users, needlessly raising the cost of raw materials for industry. Why Syed Mokhtar? With the latest agreement, he becomes by far the largest power (as in electricity) broker in the country besides having a slew of other interests in construction and ports, and now a massive aluminium-smelting venture. Isn't that too much for one man to handle? And isn't there a conflict when he is both purchaser and producer of electricity? Heaping some more on an already full plate just means that the food spills on to the floor - wastage in other words. By now, we should have learnt our lesson on that. Remember Tan Sri Halim Saad, remember Tan Sri Tajudin Ramli? And Syed Mokhtar has amassed more in lesser time than these two. Clearly, concessions have been given. For just 1.0 per cent of the purchase price of RM945 million for a 60 per cent stake in Sarawak Hidro, the company undertaking the Bakun project, Syed Mokhtar gains control of the company. And he has favourable terms (see story on Page 1) to pay for his equity stake in stages.

The government has sunk RM1.2 billion into the project already and converted over RM500 million of this into a very long-term soft loan, which benefits Sarawak Hidro. For the amount injected, the government could have continued to fully own Sarawak Hidro and obtain financing to complete the project. Power purchase contracts could be negotiated on an arm's length basis, not necessarily to Smelter Asia but to any other aluminium smelter or power user. It must be remembered that Syed Mokhtar recently sold his private interests in an independent power project to listed Malakoff at over RM800 million, most of which will have translated into almost pure profit for him because not much capital expenditure had been undertaken yet - essentially, Syed Mokhtar was selling a franchise. But now, Syed Mokhtar has the privilege of buying into Sarawak Hidro, based on project cost and the debt-equity split. He is not paying for the franchise - all he is doing is buying into equity at par. The government, the owner of Sarawak Hidro, gets no premium for the project and is effectively helping to fund Syed Mokhtar's equity purchase by deferring payment while effectively handing over control. What's more, it continues to bear the risk for the project through guarantees for financing. All told, the arrangements are a good deal for Syed Mokhtar, but not for the rest of us.

= = = = = =

FEATURE-Forest-dwellers count cost of Borneo's Bakun dam

23 Oct 2006 18:03:19 GMT; Source: Reuters; By Syed Azman

BAKUN, Malaysia, Oct 23 (Reuters) - The wall of Malaysia's huge Bakun dam is almost finished, a towering symbol of the nation's drive to develop. But it represents little more than broken promises to many of the tribal people it displaced. Eight years after the government forced thousands of tribal people from their homes in the jungles of Borneo island, many of them still find it difficult to adapt to a cash economy, a world away from their former life of farming, fishing and hunting. "It's tough to make a living here," said Okang Lepun, a Kenyah tribesman and father of seven who lives in the dusty resettlement camp of Sungai Asap, 30 km away from the dam wall. The 45-year-old is one of the lucky ones. He earns an income from selling vegetables to the dam's construction workers. But he, too, would prefer to have his old life back. "Over here, you have to buy everything -- rice, meat, fish. There's no hunting ground, there's no river to fish," he said. "We even have to pay for water and electricity." Large tracts of rainforests, where the Kenyah, Kayan and Penan people once lived, have been cleared to make way for the Bakun dam, which is set to flood an area the size of Singapore. To peer into the cleared land slated to be flooded and see the dam wall, visitors must drive for half an hour along a bumpy logging trail until they reach a security post. Inside, lines of dump trucks rumble along dirt roads, hauling boulders up steep slopes to feed construction of the 220-metre high rockfill dam on the Balui river in central Sarawak state. Some 16 million cubic metres of rock will be used to build the Bakun dam, one of Asia's largest hydro-electric projects outside of China. "The dam wall is now about 190 to 195 metres high, and should reach its full height in six months. Work is progressing well," said a source at one of the firms building the dam.

STRANGERS IN THEIR OWN LAND

Malaysia defied fierce environmental opposition in the 1990s to go ahead with the Bakun project, saying its cheap power would lure industry to Sarawak, one of its least developed states. But a decade later, the much-delayed project is still up to four years away from completion. There is still no major customer lined up to take a slice of the 2,400 megawatts of power the dam will be capable of generating and some of the local tribal people feel let down.

Indigenous people from the area account for only five percent of the project's total workforce of over 2,000, made up of mostly Bangladeshis, Pakistanis and Chinese. Displaced families -- about 11,000 people in all -- received 1.2 hectares (three acres) each under the resettlement deal. Some say the land is not enough, too far away or infertile.

"We are used to cultivating rice, but we can't do that here as the land is not suitable," said Nyurang Ului, a Kenyah headman, sipping tea in a traditional Borneo longhouse, a row of timber homes built side by side, as one, and raised on stilts. Ului, 70, is grateful for closer schools and clinics since the move, but he is worried about the future awaiting the small children capering along the longhouse's communal verandah. "Five years from now, life will be even more difficult. Some may return to the old place," he said, adding that many had exhausted their compensation paid for abandoned ancestral land. Several years ago, about 400 people moved back to their ancestral land above the Bakun dam site, joining many others who had refused to leave the forests, according to environmental group Friends of the Earth Malaysia.

GOVERNMENT PROMISES A BETTER FUTURE Sarawak Land Development Minister James Masing, formerly chairman of Bakun resettlement committee, said it was just a matter of time until people adjusted.

"If you look at five to 10 years down the road from today, they will be in a better position. There are better education and better facilities here," he told Reuters. Last month, a delegation from the Human Rights Commission of Malaysia visited Sungai Asap and found that the absence of documentation, such as birth certificates and identity cards, had created bureaucratic headaches for the relocated tribal people. "Without documentation they are not only denied the right to modern health care, education and land title, but risk arrest and detention as illegals," said delegation leader Denison Jayasooria. Bakun was built with the promise of a new era of investment, industrialisation and jobs for the young people of Sarawak. When completed, its reservoir will cover 695 square kilometres (268 sq mile) and power eight turbines. But its owner, the federal government, has yet to find a major buyer for its power. The government could either approve a power-guzzling aluminium smelter plant in Sarawak or channel Bakun's power to the more industrialised Malaysian peninsula via submarine cables. Environmentalists say the option to lay cables would be expensive, fraught with technical uncertainties and could raise sovereignty issues if they passed through Indonesian waters. In any case, the peninsula currently has a glut of power. State-controlled utility Sarawak Enterprise Corp said this month it planned to build a 900-megawatt dam in Murum, 40 km upstream of Bakun and home to thousands of Penans, a tribe of forest-dwellers who traditionally hunt with blow-pipes. "The Penans there will face the same fate as us, if not worse. They can only survive in the forest," said Lepun, the Kenyah tribesman turned vegetable-seller.
= = = = == = = = == = = =

From Turkish Daily News H E R E , datelined Nov 10 1999

Anwar Ibrahim says Malaysia PM had role in dam deal
Kuala Lumpur - Reuters
Jailed former Malaysian finance minister Anwar Ibrahim told his sex trial on Tuesday that Prime Minister Mahathir Mohamad had intervened to have a multi-billion dollar dam project shelved using public funds. Anwar, returning to the capital's High Court from hospital where he spent three days, said Mahathir had ordered him to compensate developers of the 15 billion ringgit ($3.9 billion) Bakun Dam using public funds, but without proper audit and account. "I was instructed by the prime minister to use Treasury funds to compensate the company without going through proper audit and account," said Anwar, testifying for the 11th day at his sodomy trial. "That is not the duty of the finance minister. I'm referring specifically to Tan Sri Ting and Ekran," he said. Businessman Ting Phek Khiing controls construction firm Ekran Bhd, one of the developers of the dam project, which was shelved in 1997. "The official Treasury view is that it must have been properly audited. When I refused it was seen as a challenge to the prime minister," Anwar said.
Anwar discharged from hospital

Anwar, standing trial on one of five sodomy charges, was taken to hospital on Friday for the third time last week after he complained of persistent headaches. Anwar told reporters he was discharged on Sunday. "They keep popping pills into me. I feel that I'm some kind of an addict," he said. He said he was angry that his family had not been allowed to visit him in hospital. "I was so furious, I made so much noise that they discharged me the following day". Anwar recently spent three and a half weeks in hospital after alleging opponents poisoned him with arsenic. A panel of local and foreign doctors later said he showed no signs of poisoning but complained of headaches, numbness and hair and weight loss. Malaysia shelved the Bakun project in Sarawak state on Borneo in October 1997 after the Asian economic crisis erupted. Last year, the government asked power firm Tenaga Nasional Bhd to revive parts of the project by taking over from Ekran. Ekran said last month it had relinquished its rights to the project and that the government would pay total compensation of 950 million ringgit to dam developers, contractors and lenders.

Evidence of 'bad blood,' judge says

Anwar told the court that Finance Minister Daim Zainuddin also had an interest in Bakun through nominees. "Other than Tan Sri Ting who was a major shareholder, Tun Daim Zainuddin also had an interest through nominees in Ekran and PM's son was supposed to get a project in the Bakun project. All this was done with the full awareness of the PM," he said. Anwar, who was sacked from the cabinet and expelled from Mahathir's United Malays National Organization (UMNO) in September last year, said Mahathir's attitude towards him changed. "The PM was convinced by Tun Daim and some of his associates that I would mount an effective challenge against him as UMNO president," he said. "Secondly there were major policy differences in the manner that we both dealt with the economic crisis and financial convulsions. I was no longer seen to be reliable to protect the interest of his family and cronies." Anwar was deputy UMNO chief when he was expelled. Judge Arifin Jaka reminded Anwar that his allegation of conspiracy must be related to the sodomy charge. "It's bad blood you are trying to show. Let me tell you there's enough evidence of bad blood," the judge said. Anwar's lead counsel Christopher Fernando said: "We have to build up the foundation. I can't put the cart before the horse."

= = = = =

For further read:

The Bakun Dam: A Case Study

ABB PULLS OUT AS BAKUN DAM FLOUNDER