Monday, February 26, 2007

TNB & SIME DARBY BHD for RM10 Billion 680km Undersea Cable - Channel Power Sarawak to Peninsula with MRCB/ Sime Engineering as the Main Contractor?

Tenaga Nasional Bhd and conglomerate Sime Darby Bhd have joined hands to undertake preliminary work on the undersea cable that would link the Bakun hydro-electric dam in Sarawak with the peninsula. The utility giant's president and chief executive officer, Datuk Seri Che Khalib Mohamad Nor said among other things, the two parties were looking at locations to install the cables that would cover a distance of 670 kilometres from the Bakun power plant which was still under construction.

With the rising oil prices, it is now economically viable for the power to be transmitted to peninsula with TNB paying 15 sen and 18 sen per kilowatt-hour and so the government is considering reviving the undersea cable project to transfer electricity from Bakun to Yong Peng, Johor, where it would join TNB's national grid. Datuk Seri Che Khalib however said the government has yet to decide on the undersea transmission project. There is no choice but for the government to act NOW. If the award is not made now when the Bakun dam is completed; all its power will be wasted.
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Friday February 9, 2007; STAR

TNB and Sime in talks on Bakun dam submarine cable; By Suraj Raj

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) and Sime Darby Bhd are in preliminary discussions over the technical requirements for the submarine cable project linking Sarawak's Bakun hydroelectric dam to Peninsula Malaysia. "We have started talking to Sime Darby but no formal decision has been given to us by the Government yet," TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh told reporters after the launch of TNB's 2007 Chinese New Year advertisement campaign on Friday. He said TNB was keen to assist interested parties in undertaking the power transmission project. "TNB has the technical knowledge. It is also our role to ensure that the technical requirements are clearly spelled out to them, " he said adding that many areas needed to be studied carefully with regards to the laying of the under sea cables.

"We need to determine the route and exact coordinates. Because this is a 680km undersea cable, we also need to analyse whether (tectonic) plate movements would affect it," he said citing the recent undersea earthquake in Taiwan, which severed several major under sea telecommunication lines. Rising consumer demand and decreasing power reserve margins have led the government to consider reviving the undersea cable project to transfer electricity from Bakun to Yong Peng, Johor where it would join TNB's national grid.

On the progress of the tariff increase with Thailand's Electricity Generating Authority (EGAT), Che Khalib said discussions were still ongoing.

"The review for the selling price to Thailand is due this year and we are still negotiating with them. No price has been agreed yet," he said adding that an increase would be definite
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MRCB lead contender for Bakun cable job; Jan 19 07; STAR

PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) is expected to be appointed the contractor for the RM9bil undersea cable that would link the Bakun hydro-electric power plant in Sarawak with the peninsula, sources said yesterday. "The structure would be for MRCB to be the contractor for the undersea cable project and Sime Darby would own it," they added. Currently, Sarawak Hidro Sdn Bhd, a unit in the Finance Ministry, owns the Bakun project.

Sime Darby Bhd told Bursa Malaysia yesterday it had not received “official approval” on its plan to acquire a stake in Sarawak Hidro and to lead a consortium for the undersea cable project. MRCB, which is 28.3%-owned by Employees Provident Fund, has a sizeable division that installs transmission lines for Tenaga Nasional Bhd (TNB). These activities are managed by Transmission Technology Sdn Bhd, a subsidiary of MRCB. The company's completed projects include the 500kV transmission development system in the peninsula and the Sabah East-West 275kV grid interconnection project.

Market talk of the structure of ownership and construction contracts for the undersea cable led to active trading of MRCB shares which rose 2 sen to RM1.22 on a volume of 12.07 million shares traded yesterday. The stock had moved up from RM1.09 early this month. Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik told the media last week the Government was considering reviving the undersea cable project to transfer electricity from Bakun to Yong Peng, Johor, where it would join TNB's national grid.

This would cover a distance of about 670km from the Bakun power plant that is still under construction. It is understood an undersea transmission of hydro-generated electricity from Bakun to the peninsula has become economically viable now that oil prices are much higher than several years ago. In earlier years, there was much criticism from non-governmental organisations of such transmission of electricity across the South China Sea as it would not be economically feasible and impractical to do so. Overseas, there are several undersea cable networks for the transmission of electricity and more are being planned.

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[January 24, 2007]

Power cable venture: Sime, TNB seen as key stakeholders

(Business Times (Malaysia) Via Thomson Dialog NewsEdge) PREPARATIONS for the creation of an entity to undertake a RM10 billion project to build submarine cables linking power supply from Sarawak's Bakun hydroelectric dam to Peninsular Malaysia are fast gaining momentum. Tenaga Nasional Bhd (TNB), South-East Asia's biggest publicly traded power producer, is proposing to have a 20 per cent stake in the planned transmission company, people who attended a special briefing yesterday told Business Times. The special briefing was chaired by TNB's chief executive Datuk Seri Che Khalib Mohamad Noh. Sources also said that under the plan laid out at the briefing,apart from Tenaga, the Minister of Finance Inc will also have a 20 per cent stake in the project. The remaining 60 per cent will be held by Sime Darby Bhd, one of Malaysia's oldest conglomerates. Sime Darby's engineering unit Sime Engineering Bhd will undertake the bulk of the construction works on behalf of its parent. Sime Engineering is leading a seven-member consortium to complete the building of the 2,400 megawatt Bakun hydroelectric power dam on the Balui river in Sarawak by next year. Business Times had reported last week that Sime Darby will win the project, said to be the single biggest infrastructure project in the country since the 1997 economic crisis. Sime susbsequently told Bursa Malaysia that it has yet to be officially informed by the Government.

Financing for the project could come from the Employees Provident Fund, some sources said. It is believed that cable laying for the project is set to start around 2009 and last until 2011 and it is expected to be operational from 2012. Work to prepare for the cable laying is likely to start late this year or early next year. Business Times had previously also reported that Tenaga will likely pay between 15 sen and 18 sen per kilowatt-hour for power generated by the dam. Sime previously said that it is interested in undertaking the project as well as acquiring a stake in government-owned Sarawak Hidro Sdn Bhd, the owner of the RM10 billion Bakun dam project. It is also possible that Sime Darby may be allowed to acquire a 60 per cent stake in the dam project with the Sarawak interest being reduced to 20 per cent and the Finance Ministry taking up the remaining 20 per cent, sources familiar with the project details said.

The foreign contractor for the submarine cabling project will likely be Asea Brown Boveri (ABB) Ltd, a unit of Switzerland's ABB Group, the world's biggest maker of power transformers. The undersea transmission of power supply from Sarawak to Yong Peng in Johor in the peninsula will help Malaysia cut reliance on expensive oil, gas or coal-fired means of generating power, analysts said. There will also be opportunities for Malaysia to sell excess power to neighbouring countries, thereby generating revenue, they added. The proposed undersea cable will be expanded to help transport liquefied natural gas from Sabah and Sarawak to Peninsular Malaysia.
Copyright 2007 The New Straits Times Press (Malaysia) Berhad. Source: Financial Times Information Limited - Asia Intelligence Wire

Sime believed to have won RM15b undersea cable job

By Francis Fernandez;; January 17 2007
CONGLOMERATE SIME Darby Bhd is believed to have won a contract valued as much as RM15 billion to build submarine cables linking Sarawak's Bakun hydroelectric dam to Peninsular Malaysia, sources involved in the negotiations say. They told Business Times yesterday that a decision to award Sime the contract was made very recently and that Sime will be informed officially soon. Top executives of power producer Tenaga Nasional Bhd (TNB) also met with policy- and decision-makers from the Energy Ministry late last week and early this week to discuss how much TNB would pay for power from Bakun. State-controlled TNB is likely to pay between 15 sen and 18 sen per kilowatt-hour, sources said. TNB officials did not respond for comments on the matter.

Meanwhile, Sime will partner Asea Brown Boveri (ABB) Ltd, a unit of Switzerland's ABB Group, the world's biggest maker of power transformers to undertake the undersea cable project. "It is a two-member joint venture, with no other local companies involved," said one of the sources. Sime, which currently leads a seven-member group that took over the construction of the dam, said in December that it wants to build the undersea cable as well as buy a stake in Bakun from government-owned Sarawak Hidro Sdn Bhd.

Last year, Business Times reported that Eden Enterprises (M) Bhd and Malaysian Resources Corp Bhd (MRCB) had signed rival agreements with ABB to bid for the project. ABB, which operates in around 100 countries and employs about 107,000 people, is an expert in building transmission systems for undersea cables. Its links to the RM10 billion Bakun dam date back as early as June 1996 when it won a US$5 billion (RM17.5 billion) contract to construct a 2,400-megawatt hydroelectric power plant and transmission system at Bakun on Balui River in Sarawak. However, in 1997, the Government terminated ABB's contract to focus on a fresh plan to build an aluminium smelter to take up the power generated from the yet-to-be completed dam. Early this year, the Government decided to revisit the undersea cable plan.

= = == = = ==BACKGROUND to the Bakun Dam

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.

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

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.


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; Date: 13/9/2006


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