Malakoff, Edra Power among 4 IPP projects scrapped in July

If these projects are allowed to continue, it will increase the nation’s reserve margin to a far higher level from what is needed, says minister


The 700MW gas power plant project by Malakoff Corp Bhd and Tenaga Nasional Bhd (TNB) in Kapar, Selangor, is among the four Independent Power Producers (IPP) projects that were terminated by the government in July.

Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin said the other projects are Aman Majestic Sdn Bhd and TNB’s 1,400MW plant in Terengganu, Sabah Development Energy (Sandakan) Sdn Bhd and SM Hydro Energy Sdn Bhd hydropower plant in Sabah, and a quota of 400MW to Edra Power Holdings Sdn Bhd for the utilisation of a proposed solar power plant.

“Around 30% of the electric bill we pay today is for capacity payment and the capacity payment depends on electricity supply reserve margin and the terms in the power purchase agreement with the IPP.

“The nation’s electricity reserve margin is still at an optimum level of 32%. If these projects are allowed to continue, it will increase our reserve margin to a far higher level from what is needed and it will increase our capacity payment,” she told the Dewan Rakyat yesterday.

She was responding to query from MP Wong Kah Woh (Pakatan Harapan-Ipoh Timor), who asked the government to reveal the four IPP projects which had been cancelled since the historic 14th General Election.

Yeo said the decision to terminate the contracts allowed savings of up to RM1.26 billion in electricity tariffs for consumers.

The minister also assured that the government is free from any legal or financial implications from terminating these projects since the IPPs have breached the terms and conditions in the offer letter.

She added that the government is committed to ensure future power generation projects, either fossil fuel or renewable energy-based, will be awarded through open tenders.

In July, the government announced the termination of four directly negotiated IPP deals concluded by the previous government, while other similar agreements will be put under scrutiny.

Yeo said the deals are to be terminated as they were approved through direct negotiations, as opposed to a competitive tender process.

She did not disclose the deals or names of the companies, except that one of the IPPs is related to a public-listed firm.

She also said their terminations would not result in any financial compensation from the government or any legal action by the IPPs, and will not affect the country’s electricity supply.

Yeo said the cancellation is based on three aspects — financial, technical and legal.

Previously, The Malaysian Reserve reported that the government is reviewing several power plant deals awarded under the previous administration as the new authority in Putrajaya intensifies reviews of lopsided and unfeasible deals.

Citing an industry insider, the review covers power plants, as well as hydro and solar projects in several states, how the deals were hatched, the beneficiary of these projects and the country’s energy security.

Meanwhile, Malakoff’s shares closed four sen, or 4.65%, lower to 82 sen yesterday.