‘Competitive bidding cuts costs by RM4b’
WIDER RANGE: Transparent bidding will lead to greater efficiency and lower input prices for power supply, say observer
THE implementation of open tender system to build new power plants since late-2012 has reduced generation-related costs by more than RM4 billion, people familiar with the matter said.
This has helped addres the relatively “high” returns enjoyed by independent power producers (IPPs) at the expense of Tenaga Nasional Bhd (Tenaga), which must buy electricity from them.
The sources said the average returns for the first-generation IPPs were 17.8 per cent, while the second- and third-generation boasted average returns of 14.4 per cent and 11.7 per cent, respectively.
The first-generation IPPs, accounting for around 4,100 megawatts of gas-based generation capacity, will be expiring in 2015 or 2016.
“The implementation of competitive bidding for the fourth-generation IPPs is expected to reduce the average returns to 9.1 per cent, thereby substantially reducing generation related-costs and benefitting the rakyat,” one of the sources said.
“Competitive bidding allows for the local and international companies to bid for each power plant,” the source added.
The Energy Commission (EC) introduced a competitive and transparent tender system in commissioning new power plants in late October 2012 in order to achieve a more efficient energy sector.
Industry observers said open bidding will push players towards greater efficiency and result in lower input prices for the power supply.
They welcomed the recent statement by EC chairman Datuk Abdul Razak Abdul Majid to award the new multi-billion ringgit power plant projects under the Track 4A and 4B via open tender.
So far, the commission has awarded contracts to build Track 1, 2, 3A and 3B through competitive bidding.
A total of 37 bidders participated in the tenders for Track 1 and 3, of which 23 were local and the remaining global players.
They included Tenaga, 1Malaysia Development Bhd, Malakoff Corp Bhd, YTL Power International Bhd, Sime Darby Energy Bhd, Hyundai Engineering & Construction Co Ltd, Daelim Industrial Co Ltd, Ssangyong Engineering & Construction Co Ltd and Mitsui & Co Ltd.
Track 1 was awarded to Tenaga, following its proposal to sell electricity at 34.7 sen per kiloWatt hour, which was the lowest price.
Tenaga’s vice-president for regulatory economics and planning division Datin Roslina Zainal said the group is waiting for the EC to issue the request for proposal notice for the two coal-fired power plants coded Track 4A and 4B.
“Tenaga is now ready to bid for the tenders. We have been in the industry for a long time … We think we have got a very good advantage. For example, we got our sites in Pasir Gudang and Paka, and those sites are near to the infrastructure and transmission facilities. So we think we can offer a very good price to the public too,” she said.
Read more: ‘Competitive bidding cuts costs by RM4b’ New Straits Times
