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Goverment may announce soon plan for power plant up

The Star Online, May 1, 2010 by Jagdev Singh Sidhu

KUALA LUMPUR: The Government is expected to announce soon the plant up for new power stations to avoid reserve margin of electricity dipping below 20% in 2015 but analysts say there is a bigger problem over the horizon.

The expiry of first-generation power purchase agreements (PPAs) would take place around the same time and analysts feel a solution to address that situation would be critical.

“Going by the rate of electricity demand, there is a need for more planting up,'' said an analyst.

The general view is that 700MW to 1,000MW would need to be added to the national grid by 2015 to preserve the reserve margin buffer.

The need for additional power for Peninsular Malaysia comes after plans to receive power from Bakun dam was scrapped in view of Sarawak's own demand for energy to be used by heavy industries that will be built in the state.

Tenaga Nasional Bhd (TNB), in a briefing last week, said it would expand its coal-fired power plant in Manjung, Perak, to meet future energy demand.

“Manjung is the preferred option based on its location, the target for the plant to be operational by 2015 and the minimum cost involved for transmission,'' TNB chairman Tan Sri Leo Moggie said at the briefing.

He said without new sources of energy, TNB's power reserve margin would drop below the critical 20% by 2016.

MMC Corp Bhd on Thursday threw its name into the hat of power players that will be willing to build additional power plant by saying that it would be interested in spending up to US$1.2bil to build an additional 800MW plant at its Tanjung Bin complex in Johor.

Analysts said should the additional 1,000MW be built by 2015, it would push the reserve margin back up to around 30% but there were also other issues to be considered.

First, the 1,000MW would represent additional capacity to meet the demand in the immediate future and does not take into account the country's long-term energy demand.

For that, more is needed and the number that is being talked about is 4,000MW up to 2020.

To meet that demand, analysts believe the type of power plants to be built would move away from gas-fired due to supply constraints.

Unless the price of gas is liberalised to reflect global commercial rates, Petroliam Nasional Bhd might not be interested in supplying gas at subsidied prices beyond its current obligation.

“We don't have much choice but to go for coal-fired plants,'' said TA Securities analyst James Ratnam.

TNB and MMC Corp's unit Malakoff Bhd would be the obvious candidates for the new plant ups, given their involvement in coal-fired plants, but analysts expect other IPPs to voice their interest too.

While there might be a consideration for renewable energy to meet future demand, James said cost to the consumers could prove prohibitive. “Would Malaysians have the stomach to bear that additional cost?'' he asked.

Another issue that the Government needs to grapple with would be the expiry of first-generation IPPs.

Maybank Investment Bank Bhd analyst Teh Chi Chang said if the concessions of existing IPPs were not extended, the country might be looking at a razor-thin reserve margin after 2015.

By then, the concession of IPPs will expire, starting with YTL Power International Bhd, Tanjong plc and Malakoff. These three plants have a combined generation capacity of 2900MW.