MalaysiaKini
June 13, 2011

‘Why are IPPs hiding behind the non-disclosure clauses? Their position however is comprehensible – they are only protecting their own self-interests.’

IPPs do not benefit from gas subsidy

DannyLoH: What the Association of Independent Power Producers (Penjanabebas) need to explain is why, despite the gas subsidies, our electricity tariff is higher than Thailand, whose producers are purchasing gas at market price?

Paul Warren Penjanabebas, by this letter, you surely have succeeded in ensuring that people only look at the subsidies on the fuel consumed by you. But you did say that your compensation is in two components – fuel and capacity.

And just in case you wish to feign ignorance or lack of understanding, let me put it this way – if one of your members’ capacity is 1,200 megawatts, he gets paid for that 1,200 megawatts.

However, it is maybe that, on average, the take-off may only be 60 percent of that capacity for which you incur the cost of the fuel used. Can you detail for us the total capacity of each of your members for which you are paid this component?

And then against that, tell us the average weekly capacity utilised. I would reckon 60 percent utilisation would be about average. Or am I being a little generous here? If that is true, then really, we should close down at least two of your members and save all that money.

Anonymous_3f15: Penjanabebas doesn’t explain how TNB (Tenaga Nasional Berhad) has to mop up all supply of electricity generated. By the way, electricity cannot be stored. TNB has to pay the excess capacity even if there is no demand for extra electricity.

I wish I had such a contract where I don’t have to worry about demand.

El Nino: If you feel so strongly about this, Penjanabebas, it would be your corporate social responsibility to open the contracts you signed to public scrutiny.

IPPs deny benefitting from gas subsidy

Cala: The more the IPPs (independent power producers) explained, the more we see their greediness. Three issues need answers.

First, they are two types of contracts. One which is drawn up through arms-length open tender – the way Malaysians are taught by the British about procurements many years ago. The other, made ‘famous’ by Dr Mahathir Mohamad, who preferred that contracts be drawn up based on direct negotiation, all done in darkness and very much detrimental to the interests of people.

The IPP contracts belong to the second category. If such is the case, why talk about fairness to people? At any rate, the Umno-led BN regime is known to have put the people’s interest last.

Second, now that the IPPs concede that the gas prices and coal prices have also been pre-fixed by the government and TNB respectively, clearly there are elements of unfair practices. Is that the way business is done? Is it not a case of rent-seeking by the IPPs?

Third, why are IPPs hiding behind non-disclosure clauses for their unwillingness to bare all? Their position however is comprehensible – they are only protecting their own self-interests. If IPPs are not exploiting the situation, how can you explain their mind-boggling profits in the region of RM400 to RM800 million per IPP per year?

In sum hence, instead of given counter arguments, IPPs can only defend their position when comparisons are made between them and those IPPs in America. Anything less is not worth listening to.

This topic, I am sure, is high in the agenda list of Pakatan Rakyat coalition for action within the first 100 days of their victory in the 13th GE. Guess what, it shall be the people who get to dictate the new terms of contracts for the IPPs.

Joker: I think it is the truth when the IPPs say they do not benefit from any gas subsidies. However, they are surely playing with words when they say that they are contractually to sell all their output to TNB rather than the other way round, i.e. TNB is forced to buy the IPPs’ output regardless of whether TNB needs the power or not.

They are also silent on their billing rates to TNB. It is rich for them to call Malaysians to be rational and objective and to engage them through dialogue while at the same time avoiding disclosing the PPAs to the public.

Francis Yeoh, if you are sincere in your Christian faith, announce that YTL is willing to disclose its PPA with TNB if the government/TNB has no objection to it.

Quigonbond: I thank the IPPs for wanting engagement with the people. Certainly, engagement can only start with full and frank disclosure. It would appear thus that the IPPs must prepared to open their contracts for public scrutiny to know whether Penjanabebas is telling the whole truth.

SusahKes: Simple. Make public the contract and let the public determine whether the deals are lopsided or otherwise. Since Penjanabebas wishes to engage the public, isn’t that the least that their members could do?

In any event, can Penjanabebas deny what former TNB chairman Ani Arope had disclosed in his interview with the Star – that basically the IPPs are selling at a rate that is higher than that which TNB produces? Can the IPPs also deny that TNB was strong-armed into the deal by the EPU (Economic Planning Unit)?

Let me remind Penjanabebas that Energy Minister Peter Chin had already stated that Petronas sells gas a lower than market price to the IPPs, and that is how the RM19 billion figure comes into play. What Petronas forgoes, the IPPs end up pocketing.

So where is your corporate social responsibility when you keep selling excess capacity to TNB, and which is now a causal factor for the tariff increase?

Kgen: The PPAs are drawn up in such a way as to guarantee the IPPs hefty profits irrespective of gas prices. The gas subsidy does not benefit consumers because the IPPs charge TNB at rates of three or four times more than TNB’s generation cost, irrespective of the subsidised gas. The IPPs are protected from any fuel increase.

One would think that such no risk business would mean low returns but the IPPs enjoy a profit margin of 22 percent, which is astounding in the power generation industry worldwide.

Rakyat Malaysia: Why the PPAs (power purchase agreements) could not be disclosed? What kind of terror will it unleash?