Tuesday, February 18, 2014

People's hero or corporate champion?

While we continue to wait and speculate on who will win the 2000 MW coal fired power plant Project 3B, Tony Pua the people’s hero has decided to wade in today and champion the “real winner” YTL Corp.

Mr Pua, in his blog, is worried that if project 3B end in the hands of YTL’s closest competitor, 1MDB, it will be because of an unfair decision colored by political influence, and the rakyat will be paying the price. YTL must therefore win.

Really Mr Pua? Isn’t the rakyat already paying the price all these years precisely because YTL won?

Maybe we need to refresh Mr Pua’s memory a little, what with age catching up on him and all. YTL was the first among the blood sucking first generation IPPs to sign the punishing, lopsided PPAs with TNB in 1995 that guaranteed its power plants returns of 20% for a period of 21-year.

Do you remember what you were doing in 1995? Because you are still paying the price for the agreement YTL signed during that time today, and will continue to pay all the way up till next year.

With its concession finally ending in 2015, YTL is desperate to get Project 3B in the bag. They brought in the lowest bid at 25.12 sen/kwh, and 1MDB’s bid stood at 25.33sen/kwh, a difference of 0.21 sen or just 1 per cent. (This is a lot closer than 0.42 sen difference that Mr Pua quoted from the Edge who quoted from “some” documents??).

TNB and Malakoff put in around 28 sen/kwh and 26 sen/kw respectively.

It is an open secret in the industry that YTL managed to get this lower price by bringing in an inferior boiler maker. How far off is the standard? Well, on paper, Doosan from South Korea did not qualify for the main requirements lined up in the RFP documents issued by the EC.

Do Doosan’s boilers have a proven track record in ultra supercritical (USC) category? Nope. Its first ever USC boiler will only be completed and commencing in 2017. That’s two years away.

Do Doosan boilers have adequate track record for the supercritical category? Nope. For it to be adequate, it has to have five or more units operating for at least three years. Doosan falls short both in number of units as well as number of years in operations.

But I reiterate, this is on paper. How YTL’s bid got through is a question we need to ask the EC.

Mr Pua keeps harping on lower bid price though. That should be the main contention for choosing a winner, right? If we go by his argument, 1MDB would have won Track 3A, the 1,000 MW coal fired plant awarded to TNB in 2013. But it didn’t, despite having the lowest bid, because there is always a wider consideration.

For Project 3B, YTL is unfortunate to choose a plant site that is much further away from the major load center in Klang Valley. Most electricity consumers are in the central region. The electricity supply has to travel 160km from Tanjong Tohor to get to its main consumers, at least three times the journey from any other proposed plants, all of which are in the central region.

The transmission losses occurring during the journey, even at estimated conservative 2 per cent loss, would have already bumped up YTL’s bid to more than what 1MDB’s bids are.

On top of that, new transmission line to be built all the way to Tanjung Tohor is going to cost TNB some pretty penny. How pretty? Cost of transmission line ONLY, not accounting for transmission losses that is sure to happen, can break RM700 million.

Now 1MDB is not without criticism – who really knows what’s going on in there. For this particular bid though, when you look at the overall picture, that 1 per cent difference in bid price between YTL and 1MDB would have been more than completely erased. The “real” price that would have to be borne by TNB and the Government, and ultimately the people, is much higher if YTL win.

Over the years YTL have also secured, with varying degree of controversy:

· a 30 year concession to finance, build, maintain and control the operations of the ERL in 1997 at an estimated RM2.4billion. You’ll be glad to know that you are still subsidizing this operation via a RM2 and RM6 tax for every domestic and international passenger respectively. YTL is also doing ERL extension for KLIA2

· a RM1 billion river cleaning contract in 2007.

· and most recently, the 1Bestarinet project to wire up schools costing RM1.5billion, which have been criticised for being utilized as a means of expansion for YTL’s 4G network.

· Many, many more. Mostly awarded due to their close relationship to the powers that be.

Do we really need to reward YTL with even more? Let me spell it out to Mr Pua – YTL brings in a nominally lower bid for 3B – but with an additional cost in hundred millions ringgits to be borne by Tenaga and the Government, for a plant that will have inferior machinery (thus higher risk of breaking down), at the expense of the Rakyat.

So why is Mr Pua championing YTL?

YTL, long the favoured corporate behemoth for big ticket contracts. Don’t suddenly clothe them as doing service to the rakyat – it is lazy and hypocritical.

'Awarding coal-powered plant to 1MDB a burden'