Monday January 7, 2008

Sime appoints financial adviser for Bakun transmission


A FINANCIAL adviser and an owner's engineer are believed to have been appointed by Sime Darby Bhd to advise it on the multibillion ringgit transmission system.

StarBiz learnt that these were among the latest developments for the mega project, which included the two 700km undersea cables of the Bakun hydroelectric plant project in Sarawak.

Sime Darby had, in mid-December, called for the pre-qualification tenders for the system, which included the design, manufacture, testing, delivery, installation and commissioning for the high-voltage direct-current link for Bakun dam's future transmission of power to the peninsula.

It is believed that the tender is now closed.

When completed, the undersea cables would be able to transmit up to 1,600MW out of a total 2,400MW that could be generated, if capacity is fully utilised.

The first cable would be completed in 2013 and the second in 2015.

Meanwhile, analysts are of the view that the tariff issue should be settled first before any speculation is made on the cost of the entire project, which was estimated at RM9bil for the transmission system, according to earlier reports.

The project has two main components – the dam and the transmission system.

The discussion on the tariff rates would take the better part of this year and held under the aegis of the Electricity Supply and Tariff Planning Committee.

The viability of the project would ultimately rest on the rates, an analyst said.

“The commercial viability of the project will depend on the return the project can achieve and that depends on the rates, which should be between 18 sen and 20 sen per kwh,” he said.

Earlier reports have noted that the rate might be fixed at 17 sen per kwh with a review every four years over a 35-year period.

Analysts said hydropower was a cheap and reliable source of power since crude oil had recently traded over US$100 per barrel and coal was also getting expensive. This is due to more demand as a consequence of high oil prices, especially from countries such as China.

Tenaga Nasional Bhd (TNB) has to pay to coal-based independent power producers around 25 sen per kwh based on current market prices. For gas, TNB is said to be paying 12 sen to 15 sen but at a subsidised gas price of RM6.40 per mmbtu (million British thermal unit).

Analysts said TNB would have liked to plant-up more combined cycle gas turbines but there was no additional gas supply coming from offshore Terengganu.

In fact, of the total production of about 2,000 million standard cubic foot per day (mmscfd), only 1,350 mmscfd is allocated for the power sector.

“The question now is how many more years can Petronas sustain this rate of production of 2,000 mmscfd? We would have to import liquefied natural gas (LNG) unless the country wants to sacrifice its LNG exports, which have been contracted overseas.

“We are in a precarious situation and the new plant-up needs to come from the country's natural resources. We need to balance up with hydropower. Policymakers need to implement the four fuel policy – oil, gas, coal and hydro.

“There is also the matter of the interests of the stakeholders and the Finance Ministry will also like to recuperate what it has spent on the dam component,” the analyst said.

SIME : [Stock Watch] [News]

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