• 150MW Solar Farm awarded to 3 companies with no experience in solar installations

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 17th of November, 2016

    150MW Solar Farm awarded to 3 companies with no experience in solar installations

    It was announced on the 3rd of November, 2016 that Tenaga Nasional Bhd had signed Power Purchase Agreements (PPAs) with three Special Purpose Companies (SPCs) – Quantum Solar Park (Melaka), Quantum Solar Park (Kedah) and Quantum Solar Park (Terengganu) – that were set up by a consortium of three private companies to build three 50MW solar farms in Jasin in Melaka, Gurun in Kedah and Merchang in Terengganu. TNB said that these solar farm projects were awarded to this consortium by the Ministry of Energy, Green Technology and Water (KeTTHA).

    I had asked in February this year for the Minister to reveal the identity of the consortium which was awarded the right to build a 150MW solar farm.[1] The Minister was not willing to divulge this information even when I asked him directly during a parliamentary sitting. We had to wait until TNB’s bourse filing earlier this month to find out the identity of the consortium.

    None of the three companies in the consortium – Maltech Pro Sdn Bhd, Cam-Lite Sdn Bhd and ItraMAS Technology – seems to have any experience in solar installations.

    Maltech Pro Sdn Bhd, which was incorporated in April 2012, is in the business of ‘mobile applications, devices and equipment’, according to its company profile. It was in the news in 2012 for selling the first Malaysian made tablet – 1 Malaysia Pad – at RM999.[2] At the time of writing, it is unsure if any of these tablets were ever delivered to buyers, especially since Maltech Pro’s website is no longer functioning (http://www.maltechpro.com/).

    In addition, the shareholders of Maltechpro Sdn Bhd also raises concerns. Sohaimi bin Shahadan, who owns 35% of the company and is its executive chairman, is also a member of the UMNO Supreme Council.[3] Ahmad Zaffry bin Sulaiman, who owns 20% of the company, is an UMNO leader in Shah Alam.[4]

    Was this one of the considerations when this 150MW solar farm award was given to this consortium?

    Cam-Lite Sdn Bhd was established in 2007 and is in the business of ‘trading in electronic products’. Its two shareholders are Zainoor bin Sulaiman (90%) and Zeliza Binti Zainoor (10%). It does not have any website and in its last filing to the Companies Commission of Malaysia, its revenue for financial year ending in 2012 was RM131,359 with a profit of RM1,397.

    The third company in the consortium, Itramas, has a website (http://www.itramas.com/about.aspx) and has three core areas of business namely Intelligent Transportation System (ITS), Security and Surveillance, and LED lighting products. Its revenues in 2014 was RM44million and it made an after-tax profit of RM413,189. But there is no record of this company having any experience in solar installations.

    Given the lack of any track record of these companies in the consortium, why were they awarded this contract? Especially when there are many other more qualified companies who are bidding for these solar farm projects in Malaysia? What is the value of the PPA which they signed with TNB? I call upon KeTTHA to allow the Sustainable Energy Development Authority (SEDA) to conduct open tenders for these solar farm projects to ensure transparency.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang


  • Reveal the consortium which was awarded the right to build 150MW solar scale utility farm

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 27th of February, 2016

    Reveal the consortium which was awarded the right to build 150MW solar scale utility farm

    The decision to award the contract to build a 50MW utility scale solar farm without any tender process to 1MDB Solar Sdn Bhd in May 2014 was highly questionable given that 1MDB did not have any experience in building and operating any solar power plants.[1] This 50MW solar power plant would be the biggest in the country, at the time of writing. It was also reported that 1MDB had been given the right to develop up to utility scale solar farms with up to a 500MW capacity.[2]

    The manner in which the contracts to build these utility scale solar farms is totally inconsistent with the manner in which the Feed-in-Tariff (FiT) quotas for small scale solar installations (less than 425kwh) are given out – via open balloting – through the Sustainable Energy Development Authority (SEDA).

    It appears that the Ministry for Energy, Green Technology and Water (KeTTHA) has not learned from past lessons. At the end of last month, January 2016, KeTTHA secretary-general Datuk Lo Took Gee, announced that a 150MW utility scale solar farm had been awarded to a “consortium that is financially and technically strong” without disclosing the name of the consortium.[3] This is highly unacceptable from the perspective of disclosure and transparency especially for what a solar farm that is three times the size that was awarded to 1MDB.

    One cannot help but wonder if the consortium which was given this 150MW solar farm contract has anything to do with the sale of Edra Global Energy by 1MDB at the end of 2015.

    What is equally disappointing is that the SEDA seems to be completely cut off from the process of awarding these utility scale solar farm contracts even though it has the power under the Sustainable Energy Development Authority Act 2011 to advise the Minister on and to implement policies related to renewable energy.[4]

    In the interest of transparency, I call upon the Dr. Maximus Ongkili, the Minister for Energy, Green Technology and Water to publicly disclose the identity of the consortium which was awarded the 150MW utility scale solar farm and to ensure that all future utility scale solar farms are awarded via an open tender.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.thestar.com.my/business/business-news/2014/05/05/1mdb-plans-giant-solar-farm-it-is-believed-to-have-formed-a-joint-venture-with-tnb-and-a-us-firm-fo/

    [2] http://www.themalaymailonline.com/what-you-think/article/factual-clarification-on-50mw-solar-power-plant-in-kedah-1mdb-dusable-capit

    [3] http://www.thestar.com.my/business/business-news/2016/01/27/call-for-more-solar-power-plants/

    [4] See Sections 16 & 17 of the SEDA Act 2011

  • Are we heading towards an energy crisis in 2018 with the delay of Project 4A?

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 22nd of June, 2015

    Are we heading towards an energy crisis in 2018 with the delay of Project 4A?

    It was reported in last weekend’s The Edge Weekly that SIPP Energy was seeking a new partner for Project 4A, after the Energy Commission rejected the proposed tariff submission by the SIPP Energy-TNB consortium which had been awarded this contract via direct negotiation. Without any obvious willing partners for SIPP Energy and with the likely delay of the Project 3B power plants due to 1MDB’s inability to raise the necessary finances to build these plants, it is possible that our country will face a serious energy shortage by 2018.

    Recall that on May 31, 2014, the Energy Commission awarded Project 4A, via direct negotiation, to a consortium led by SIPP Energy (51%) with YTL Power and TNB to build a new 1000MW-1400MW combined cycle gas turbine (CCGT) power plant in Johor which is supposed to be operational in June 2018. According to the EC as well as the Ministry for Energy, Green Technology and Water, the fast tracking of this project without a competitive tender was justified because of the impending energy shortage which the country will face by 2018 as reserve margins continue to fall.[1] This project was criticized from the beginning not just because of the lack of an open tender but also the fact that SIPP Energy has no prior track record in the building of power plants. YTL pulled out of this deal on the 19th of June, 2015 leaving SIPP Energy and TNB as the two remaining partners.

    It was reported that the SIPP-Energy and TNB consortium submitted a bid of RM39 sen / kWH for the proposed CCGT power plant, which is 12% higher than the RM34 sen / kWH for the 1071MW TNB CCGT power plant in Prai, Penang that recently began operations.[2] Recall that the 1071MW TNB CCGT power plant contract was awarded via open tender which is an important reason for the lower tariff is offered by TNB.

    With the latest failed tariff bid by SIPP Energy and TNB, the Edge Weekly reports that SIPP Energy may sell of its 51% stake in Project 4A for as much as RM300 million. This cost, presumably, will be factored into the new proposed tariff rate for Project 4A likely making the proposed tariff higher than if Project 4A was awarded via open tender.

    The manner in which the Energy Commission and the Ministry of Energy, Green Technology and Water have handled Project 4A is disgraceful. What was supposed to have been a fast-track project to build a CCGT power plant that would be up and running by the 1st of June, 2018 (before 1MDB’s Project 3B which is due in Nov 2018 for the first 1000MW and Nov 2019 for the second 1000MW) will now almost certainly be delayed since it would take some time before SIPP finds another partner or sells its stake to another party which would then have to put in a new revised tariff to the Energy Commission.

    With our actual operating reserve touching a mere 9% at the peak demand period in June 2014, it is a distinct possibility that we would be facing an electricity crisis by 2018.[3] The original decision to award Project 4A via direct negotiation is now coming back to haunt the Energy Commission and the Ministry of Energy, Green Technology and Water. The EC should have opened up the bidding for Project 4A for a competitive tender so that the most experienced party with the lowest price would have received this contract. Instead, what we are left with is yet another delay in the construction of a much needed power plant that may push our country towards an electricity crisis in 3 years’ time or less. The EC and the Ministry must to be held to account for its actions.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.thestar.com.my/Business/Business-News/2014/07/25/TNB-SIPP-Energy-sign-agreement-for-power-plant-project-in-Johor/?style=biz

    [2] http://www.tnb.com.my/tnb/application/uploads/newsclips/c40e44dc9475b32ee4778167cb94c7c8.pdf

    [3] http://www.thestar.com.my/Business/Business-News/2015/04/11/Its-the-rakyat-who-will-pay-for-power-plant-delays/?style=biz

  • The Minister of Energy, Green Technology and Water, Datuk Seri Maximus Ongkili, must compel the full disclosure of Tenaga’s takeover of Project 3B from 1MDB

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 20th of June, 2015

    The Minister of Energy, Green Technology and Water, Datuk Seri Maximus Ongkili, must compel the full disclosure of Tenaga’s takeover of Project 3B from 1MDB

    During last Thursday’s debate to amend the Electricity Supply Act (1990), I asked Minister of Energy, Green Technology and Water, Datuk Seri Maximus Ongkili, on the latest update on Project 3B, a 2000MW coal fired power plant project which was awarded to 1MDB (70%) and Mitsui (30%). The Energy Commission was supposed to announce the decision sometime in February but no updates had been forthcoming until the Minister’s statement on Thursday.

    In his reply, the Minister confirmed that the cabinet had indeed given the approval for TNB to take over Project 3B from 1MDB. He also confirmed that there would be a “small revision” to the power tariff given that the project was already six months late and the exchange rate has changed since the project was first awarded to 1MDB.[1] The Minister did not disclose the terms of purchase of Project 3B by TNB from 1MDB, citing that it was on a “willing-buyer-willing-seller” basis.

    The Minister’s reply is totally unacceptable for the following reasons:

    Firstly, since 1MDB is a 100% Ministry of Finance owned company and has been the subject of national and international headlines and since TNB is a Government Linked Company (GLC) which is one of the largest listed entities on the KL Stock Exchange, there is public interest at stake in terms of the terms which TNB offered to 1MDB in exchange for Project 3B.

    The haphazard fashion in which the Minister made this announcement – the government had not even notified TNB of its decision – created massive uncertainty in the stock market and caused TNB’s share price to drop by 50 sen from RM13.10 toRM12.60 on the day of the announcement, because of fears that TNB was being asked to “bail-out” 1MDB. Only after TNB CEO, Azman Mohd, came out with a statement reassuring the public that TNB would not pay a premium for 1MDB’s 70% stake in Project 3B did the share price of TNB recover to RM12.86 the next day.[2]

    For the sake of transparency and in order to reassure the markets, the Minister must disclose or ask TNB to disclose the terms of the agreement between TNB and 1MDB over the sale of Project 3B.

    Secondly, the Minister cannot wash his hands of the TNB-1MDB Project 3B agreement using the “willing-buyer-willing-seller” excuse since the Project 3B license is under the Energy Commission. The Energy Commission has the right to fine 1MDB for not being able to start Project 3B on time and it has the right to transfer the license to TNB. In fact, one of the reasons for the amendments to the Electricity Supply Act (Section 9B in particular) is to increase the power of the Energy Commission over those who have been awarded the license to generate electricity.

    Those in the electricity generation business i.e. the license holders must know if the Energy Commission is willing to impose harsh fines on those who fail to live up to the terms in the licensing agreement. Without these details being made public, other license holders may think it can ‘get away’ with delays and shortcuts in the fulfilment of the licensing agreement.

    Hence, for these two reasons, the Minister must compel the full disclosure of the TNB’s takeover of 1MDB’s stake in Project 3B as well as the fines imposed on 1MBD as a result of its inability to deliver on Project 3B.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.themalaysianinsider.com/malaysia/article/tnb-buys-1mdbs-stake-in-project-3b-plant-minister-confirms#sthash.RtrlbeNU.dpbs

    [2] http://www.themalaymailonline.com/malaysia/article/1mdb-power-project-stake-buy-is-not-a-bailout-says-tnb

  • Why was 1MDB given a tariff rate hike of 22% for its yet to be built 50MW Solar Farm?

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 20th of April, 2015

    Why was 1MDB given a tariff rate hike of 22% for its yet to be built 50MW Solar Farm?

    It was reported in the Edge Financial Daily today that the proposed 1MDB Solar Farm has been given a hike it its electricity tariff from 41 sen per kWH to 50 sen per kWH, an increase of 9 sen or 22%.[1] The reason given, according to this report, was that the “previous tariff was deemed simply too low for the project to be feasible. The new tariff was negotiated on the basis that Edra caps its internal rate of return for the project at a maximum of 9%.”

    If this report is true, then the Ministry for Energy, Green Technology and Water (or KeTTHA) has a lot of explaining to do. Firstly, if Edra Global, a subsidiary of 1MDB, felt that the initial tariff rate of 41 sen per kWH was too low, why did KeTTHA not allow for an open tender in the market for the proposed 50MW solar farm, which would be the largest solar farm project in Malaysia? In fact, KeTTHA should have allowed for an open tender in the first place instead of awarding this project to 1MDB, which has no experience of building and operating any solar projects, on a direct negotiation basis. An open tender for this proposed solar farm would have ensured the best pricing for Tenaga Nasional Berhad (TNB) and set the benchmark for future solar farm projects.

    An argument can also be made that the tariff rate of 50 sen per kwH is too high by market standards.

    According to the tariff rates found in the website for the Sustainable Energy Development Authority (SEDA), the minimum feed-in-tariff (FiT) for solar power installations which are more than 10MW but less than 30MW has been dropping steadily over time (Table 1 below). These ‘digression rates’ were introduced because of the rapidly falling installation costs of solar panels due to improvements in technology.

    Table 1: Minimum Tariff per kWH for Solar PV Feed in Tariff for installations >10MW but less than 30MW

    Date of FiT installation 1 Jan 2012 1 Jan 2013 28 March 2013 1 Jan 2014 15 March 2014 1 Jan 2015
    Minimum Tariff per kWH 85 sen 78.2 sen 68 sen 54.4 sen 61.2 sen 49 sen

    Source: www.seda.gov.my

    For installations starting on the 1st of January 2015, the minimum feed in tariff was 49 sen (See graphic below). There are very good reasons to expect a 50MW solar farm to be able to offer a tariff lower than the 49 sen per kWh under SEDA’s Feed-in-Tariff. Firstly, a solar farm of that size will inevitably have greater economies of scale e.g. lower per unit installation costs and lower per unit land acquisition costs. Secondly, the solar farm will only be completed at a later date which means that the costs of the solar PV can drop further because of improved technology. Thirdly, the proposed contract between 1MDB and Tenaga is for 25 years which is longer than the 21 years under the Feed in Tariff. A longer contract means a longer period of guaranteed returns which means that more players would have been willing to accept a lower tariff in exchange for the longer contract.

    Given this information, one cannot help but to think that this tariff hike is an attempt to help ‘bail out’ 1MDB by providing more favourable financial terms for its subsidiary, Edra Global, to be listed.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Graphic 1: Fit Rates for Solar PV (Non Individual) starting from the 1st of January 2015

    [1] http://www.theedgemarkets.com/en/article/1mdb%E2%80%99s-solar-farm-gets-tariff-hike

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